Kroger to Close Three Ocado-Built Warehouses, Causing Ocado Shares to Plunge
Kroger has announced it will close three Ocado-built automated warehouses located in Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida, effective January. This announcement led to a roughly 17% drop in Ocado's shares, wiping approximately £350 million off the company's market value.
The closures mark a shift in Kroger's fulfilment strategy. Following a 2018 agreement to build 20 automated customer fulfilment centres, with eight currently operational and two more planned for next year, Kroger will now transition to a hybrid fulfilment network. This new approach emphasizes capital-light, store-based automation in high-volume areas while maintaining automated processing in regions with higher demand density.
Additionally, Kroger has expanded partnerships with delivery services such as DoorDash, Instacart, and Uber Eats for small-vehicle deliveries directly from stores.
Analyst Clive Black described Kroger's move as a near knockout punch for Ocado, arguing that centralised, automated warehouses are not economically viable in the US mass market and that this development reduces Ocado's potential market.
Ocado expects to receive more than $250 million (£190 million) in compensation for early-closure fees, though it anticipates a $50 million hit to fee revenue in the fiscal year ending December 2026. The company confirmed it will continue to support Kroger in optimising logistics and discussions about further deployment of Ocado's technology, expecting significant growth in the US market encompassing both warehousing and store-based automation.
