Ocado shares nosedive after US partner warns on robotic warehouses

Ocado shares fell sharply on Friday morning as investors reacted to ‘negative’ comments made by its key US retail partner about its robotic warehouses. 

While Ocado runs an online supermarket via a joint venture with Marks & Spencer in Britain, a large slice of its value is driven by the sale of its cutting-edge warehouse technology to retailers around the world.

Ocado shares have come under pressure over the last year, reflecting market angst at the pace of new site openings for its existing grocery retail partners and a lack of further technology deals.

US retailer Kroger, which operates supermarkets and department stores in the country, has been Ocado’s strategic partner since 2018.

The pair had planned to build 20 robotic customer fulfilment centres across the US. So far just eight are operational, while two more are in the works in North Carolina and Arizona, and the roll-out has been slower than expected.

And Kroger told analysts in an earnings call on Thursday it was ‘taking a hard look’ at its options over the existing sites.

Kroger indicates it could move away from large CFCs provided by Ocado 

Kroger said it would conduct a site-by-site analysis of its automated fulfillment centres, noting that while sites in high-density areas are performing well those in lower-density regions are seeing weaker customer uptake.

In efforts to boost profitability and cut costs, Kroger said it is evaluating all options across its facilities – which could spell closures.

Ocado shares fell 11.3 per cent in early trading to 266p, taking losses since the start of the year to 15.8 per cent. 

Neil Wilson, UK investor strategist at Saxo Markets, said: ‘The comments are clearly a negative for Ocado as Kroger seems likely to move away from the kind of large CFCs provided by the British company and instead seems to be looking to lean on local stores to fill orders.’

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