Shares in Ocado fell more than 17% on Tuesday, wiping approximately £350m off the company's value, after its major US partner Kroger announced the closure of three warehouses using the British firm's technology. The closures mark a significant setback for Ocado's international expansion strategy.
Kroger, the fourth-largest retailer in the US, said it would shut sites in Maryland, Wisconsin and Florida in January, as part of a review to optimise its fulfilment network. The company is moving towards a 'hybrid fulfilment network' that includes store-based automation and partnerships with quick-delivery services like DoorDash, Instacart and Uber Eats.
Ocado had signed a deal in 2018 to build 20 automated warehouses for Kroger, of which eight are currently operational. The closures have raised doubts about the viability of Ocado's centralised automated warehouse model in the US mass market. Retail analyst Clive Black of Shore Capital described the announcement as a 'near knockout punch' for Ocado.
Ocado expects to receive over $250m in compensation for the early closures, but fee revenue will take a $50m hit by 2026. The company said it continues to support Kroger in optimising logistics and expects significant growth in the US market with both warehouse and store-based automation.
