Ocado, the British retail technology company, has received a $350 million (£276 million) compensation payment from US grocery giant Kroger, following the cancellation of one of the automated warehouses built using Ocado’s robotic fulfilment technology. The payout provided a rare boost for Ocado, whose shares surged as much as 16% in early trading on Friday before settling nearly 7% higher.
The settlement comes after Kroger scrapped the opening of a fourth Ocado-powered customer fulfilment centre in Charlotte, North Carolina, one of two facilities planned for 2026. This follows the grocer’s recent decision to close three other automated warehouses, citing unmet financial expectations. Kroger will continue with five existing sites, as well as a sixth facility set to open in Phoenix next year, but the retrenchment has raised questions over Ocado’s ability to scale its technology in the US.
Since the partnership began in 2018, Kroger’s initial plan for 20 automated warehouses has produced only eight centres, many of which have struggled to deliver profitable operations amid the logistical challenges of long-distance grocery delivery in the United States.
Despite the setbacks, Ocado chief executive Tim Steiner remained optimistic, saying the company was “excited about the opportunity” in the US and continues to invest heavily in supporting Kroger’s logistics operations. “We remain committed partners and will focus on driving profitable volume through the remaining fulfilment centres,” Steiner said.
However, analysts and investors expressed scepticism. John Hudson of Premier Miton Investors, which holds a short position in Ocado, warned that Kroger’s decision could deter future partners. “It doesn’t look great that Ocado’s biggest partner has started closing warehouses. If you were a potential partner going forward, you might rethink,” he said.
Clive Black of Shore Capital added that Ocado’s reputation for securing future licensing deals had been “absolutely blitzed” by Kroger’s retrenchment. “Any retailer reviewing Ocado’s proposition will read the Kroger report, which flagged the partnership as economically unviable,” Black said.
Ocado, which has struggled to achieve consistent profitability, has produced a full-year pre-tax profit only once in its 25-year history. The company also faces a significant refinancing deadline in 2027, with £350 million in convertible bonds and a £300 million revolving credit facility coming due.
Its joint venture with Marks & Spencer, launched after Ocado ended its partnership with Waitrose, has faced challenges amid missed performance targets and disputes over payments.
Steiner urged investors to maintain a long-term perspective. “Shareholders should only have invested if they believe that in the long term we’re going to be a profitable business,” he said.
While the Kroger payout provides Ocado with an immediate cash injection, the scaling back of its largest US partner and cautious interest from other global clients leaves uncertainty over where the company’s future growth will come from.
