Ocado shares fall as Kroger takes ‘hard look’ at future of US warehouses

Retail technology firm Ocado slid in value on Friday morning after major US partner Kroger said it would take a “hard look” at its automated warehouse technology.

Shares in the London-listed company fell by as much as 11% in early trading as the comments raised concerns among investors.

Ocado launched a significant partnership with Kroger, one of the largest supermarket chains in the US, in 2018.

Initially, the firms agreed to build the equivalent of 20 customer fulfilment centres, where automated robots sort orders, but has so far opened eight sites.

A further two are expected to open in the current financial year.

However, on Thursday evening, bosses at Kroger told investors in the US they are reviewing their use of the automation technology as it seeks to reduce costs and improve profitability.

Ron Sargent, interim chief executive of Kroger, said the business is conducting a “full site-by-site analysis” of its warehouse and distribution operations.

The company said it plans to focus more on fulfilling orders directly from stores to improve speed and efficiency.

“Where we have seen strong demand in high-density areas, these facilities deliver better results than those facilities where density is lower and customer adoption has been slower”, Mr Sargent said.

“We are taking a hard look at some of our automated facilities.”

Neil Wilson, UK investor strategist at Saxo, 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.”

It came as Kroger reported e-commerce was nonetheless up 16% in the latest quarter.