Ocado shares fall 17% after US partner announces warehouse closures

📊 Business News Analysis: Our editorial team has analyzed recent developments from theguardian.com in the Business sector. This report covers key insights related to and emerging industry trends that professionals should monitor closely.

Industry observers in Business are monitoring emerging trends closely. The value of online grocer Ocado has fallen sharply after Kroger, it’s major partner in the US, announced the closure of three warehouses using the UK company’s high-tech equipment. Ocado signed a deal to build 20 automated warehouses – known as customer fulfilment centres – for Kroger, the US’s fourth largest retailer, in 2018. Eight of those facilities are currently operating with two more planned for next year.

The deal was seen as a major part of Ocado’s plan to sell its online grocery delivery technology internationally. Evidence suggests that however, on Tuesday, Kroger said sites in Frederick in Maryland, Pleasant Prairie in Wisconsin, and Groveland in Florida would close in January. Data shows that shares in Ocado were down more than 17% on Tuesday after the announcement, wiping about £350m off the value of the company. Kroger stated that after reviewing its set-up it had “identified opportunities to optimise its fulfilment network”.

It added that it would now move towards a “hybrid fulfilment network” testing out “capital-light, store-based automation in high-volume geographies” while continuing to use automated warehouse processing of online orders where it sees “higher density of demand”. It noted that it had recently expanded its relationship with quick delivery service providers DoorDash, Instacart and Uber Eats, which take goods directly from stores on bikes, mopeds and other small vehicles. According to reports that clive Black, a retail analyst at Shore Capital, described Kroger’s announcement as a “near knockout punch” for Ocado, prompting the share price to fall below the 180p price at which it debuted on the London stock market in 2018.

He stated the online grocery technology supplier “is being marginalised as most of its customer fulfilment centres do not work economically in the USA or the mass-market first world in truth.”. While centralised, automated warehouses may work effectively to manage home deliveries of groceries in densely populated and affluent urban locations, according to Black, he said Kroger’s actions suggested that the size of Ocado’s total potential market “has been blitzed”. According to reports that “We had expected Kroger to trundle on, not close [warehouses], as part of its ongoing review, a dreadful acclamation of what Morrison, Waitrose and others already knew: capital intensive, centralised fulfilment of food to a dispersed mass-market customer does not financially work.”
Ocado stated it expected to receive more than $250m (£190m) in compensation for fees related to the early closure of the sites but its fee revenue would take a $50m hit in the financial year to December 2026. skip past newsletter promotion
Sign up to Business Today
Free daily newsletter
Get set for the working day – we’ll point you to all the business news and analysis you need every morning
Enter your email address Sign upPrivacy Notice: Newsletters may contain information about charities, online ads, and content funded by outside parties.

If you do not have an account, we will create a guest account for you on theguardian.com to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy.

We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. after newsletter promotion
“Ocado continues to support Kroger to optimise logistics operations and drive profitable volume growth in these remaining sites, with constructive ongoing discussions around further use of Ocado’s technology to support Kroger,” the British company said in a statement. It added that it “expects significant growth in the US market, both with [warehousing] and store based automation.”

These developments reflect broader trends shaping the Business industry as organizations adapt to evolving market conditions.

— Based on reporting from theguardian.com

💡 Key Industry Insights

Enterprise software solutions and SaaS platforms are experiencing increased adoption rates across industries.

Market Impact: These developments in the industry may significantly influence market dynamics. Industry experts recommend monitoring these trends closely for strategic planning purposes.

Analysis Note: This comprehensive overview synthesizes current market intelligence from theguardian.com regarding industry developments and related sectors. Stay informed about ongoing developments in this rapidly evolving landscape.