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Ocado is set to receive a one-off USD 350 million payment from Kroger after the U.S. retailer decided to close three robotic warehouses and cancel plans for another site. While closures will reduce Ocado's fee revenue in fiscal 2026 by about USD 50 million, the company remains focused on expanding its automation technology and turning cash-flow positive next year. One planned warehouse in Phoenix will continue with new technology. The deal highlights the ongoing importance of Ocado's automation solutions in the U.S. grocery market despite strategic changes by Kroger.
Britain's Ocado will receive a USD 350 million one-off compensation from Kroger following the U.S. grocer's decision to shut three robotic warehouses and cancel another planned facility, the company confirmed. Advertisement
Shares in Ocado rose 6% in early trading, reducing its losses for 2025 to 36%. This comes after the stock had plunged 17% in November, when Kroger reshaped its grocery e-commerce strategy, creating uncertainty for Ocado's growth outlook in the U.S.
The warehouses to be closed are located in Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida, with shutdowns planned for January. Additionally, Kroger will not proceed with a warehouse in Charlotte, North Carolina, originally scheduled to begin operations next year. However, a site in Phoenix, Arizona, will move forward in 2026 and will feature Ocado's new AutoFreezer technology.
Ocado first partnered with Kroger in 2018, identifying 20 potential U.S. locations for robotic warehouses. To date, eight sites have gone live, including the three now slated for closure. Kroger is instead prioritizing faster grocery delivery through partnerships with delivery platforms such as Instacart, DoorDash, and Uber Eats.
The USD 350 million payment, expected in January 2026, is intended to offset lost future capacity fees from the affected sites. Closure of the three active warehouses will cut Ocado's fee revenue by around USD 50 million in fiscal 2026.
Despite the closures, Ocado CEO Tim Steiner emphasized the company's optimism about its technology's potential in the U.S., highlighting store-based automation to support 'pick up' services and immediate delivery needs. Analysts from Peel Hunt noted that the ongoing partnership demonstrates the value of Ocado's technology when implemented strategically.
Ocado also reaffirmed that its main focus for 2026 is achieving positive cash flow, supported by growth at existing and new sites along with disciplined cost and capital management. Peel Hunt analysts described this as a strong signal for the company's future prospects.
Source Reuters
5th Jun, 2025
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