Post by : Badri Ariffin

Shares of the British online grocery and tech company Ocado plummeted sharply on Tuesday following the announcement from its principal U.S. partner, Kroger, regarding the closure of three automated warehouses set for January. This move jeopardizes Ocado’s growth in the U.S. and is expected to slash its revenue by around $50 million.

Ocado, which specializes in robotic fulfillment centers, has been collaborating with Kroger since 2018 to enhance grocery delivery services across the United States. Initially, the goal was to establish 20 automated facilities, yet only eight have become operational; now, closures have been confirmed for three warehouses located in Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida. The five remaining sites will still operate.

These closures represent a significant shift in Kroger’s strategy regarding automation. The retailer previously suggested a reassessment of its network on a "site-by-site" basis, indicating caution following a partial rollout of Ocado’s technology. Nevertheless, in light of the closures, Ocado is anticipated to receive upwards of $250 million in compensation.

This development raises questions about Ocado’s potential for securing new partnerships in the U.S., a vital market for its growth trajectory. Analysts mention that while Ocado is working alongside Kroger to improve logistics at the remaining sites, these challenges underscore the inherent risks tied to large-scale automation initiatives.

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