Kroger Scales Back Ocado US Expansion as Share Price Returns to Listing Level
Kroger is closing three of its eight Ocado-enabled warehouses in the US, located in Maryland, Wisconsin, and Florida, signaling a scale-back of its Ocado partnership in the US. The original plan to build 20 Ocado-operated warehouses in the US has not materialized. Kroger also intends to expand its usage of alternative delivery platforms such as DoorDash, Instacart, and Uber Eats, while monitoring the remaining Ocado-integrated facilities.
Ocado's share price has fallen back to around its initial listing level of approximately 180p after reaching a peak near £29 in 2020. Kroger was the catalyst for Ocado's share-price surge in 2018, but its review of operations challenges the initial optimism surrounding the US expansion strategy.
Despite setbacks in the US market, Ocado Retail in the UK continues to be a fast-growing format in partnership with Marks & Spencer. However, Ocado's business model remains capital intensive, relying heavily on automated warehouses, robotics, and refrigerated vans, prompting ongoing debate over the feasibility of mass adoption.
The company will cut around 500 technology and finance jobs as artificial intelligence helps reduce costs. Ocado will receive $250 million (£190 million) in compensation for the early closure of the US warehouses. Clive Black of Shore Capital described the closures as a 'smelling salt moment,' underscoring the high costs of Ocado's engineering for wider rollout.
