Ocado Faces Setback as Kroger Closes U.S. Automated Warehouses

Post by : Bianca Suleiman

Shares of Ocado, the British online grocery and technology firm, plummeted on Tuesday following Kroger’s announcement to shut down three automated warehouses by January. This move jeopardizes Ocado's U.S. growth plans and could diminish its revenue by approximately $50 million.

Since 2018, Ocado has collaborated with Kroger to enhance grocery delivery across the United States. The original strategy aimed for 20 automated centers, yet only eight are currently operational, with closures now announced for sites in Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida. The five remaining locations will persist in their operations.

These closures indicate a strategic pivot for Kroger regarding automation. The retailer suggested a site-by-site review, expressing caution after the initial implementation of Ocado’s technology. Still, Ocado is anticipated to receive compensation exceeding $250 million for the early terminations.

This situation raises alarms about Ocado’s capability to forge new U.S. partnerships, a vital market for its plans. Although Ocado continues to assist Kroger in improving operations at the remaining sites, these developments underscore the challenges associated with large-scale automation initiatives.