Ocado shares jump after Kroger agrees $350M payment for warehouse closures

Shares in Ocado rose more than 9.5% on Friday, placing the stock among the top gainers on the FTSE 250, after the British online grocer and technology firm said it would receive a one-off $350 million cash payment from long-time US partner Kroger.

The payment follows Kroger’s decision to close three of the robotic warehouses developed with Ocado and to cancel a planned site in Charlotte, North Carolina.

Ocado said the payment, due in January, compensates for the early shutdown of three customer fulfilment centres (CFCs) scheduled to cease operations in January 2026, and for Kroger’s decision not to open the Charlotte facility next year.

The US retailer is currently cutting costs across its business as it seeks to lower prices for shoppers pressured by inflation.

The restructuring has included nearly 1,000 job cuts at the corporate level.

Kroger's pullback from its automation strategy

Kroger’s move underscores the shifting landscape in online grocery delivery in the United States.

The decision to close three of the eight automated warehouses it built with Ocado follows a reassessment of the financial performance of the facilities, which the US retailer said had fallen short of expectations.

The closures also signal a pivot towards faster delivery options as Kroger expands its partnerships with Instacart, DoorDash and Uber Eats.

These platforms, which rely on a decentralised network of stores and on-demand couriers, have increasingly become the preferred route for US retailers aiming to keep pace with rapid-delivery firms.

Ocado acknowledged that while the one-off payment will broadly replace future capacity fees from the affected sites, the closures will still cut about $50 million from its fee revenue for fiscal 2026.

The company reiterated that it continues to target turning cash-flow positive this year.

How Kroger's move has weighed on Ocado's stock

Ocado’s 2018 agreement with Kroger marked one of the company’s most significant commercial partnerships, with plans for 20 CFCs across the US to build out Kroger’s e-commerce infrastructure.

However, only eight have gone live, and three of those—Frederick in Maryland, Pleasant Prairie in Wisconsin and Groveland in Florida—will now shut.

While the two companies will continue operating the remaining five centres, analysts have warned that Kroger’s retrenchment could limit Ocado’s growth prospects in the US, where the group has long argued its technology has substantial potential.

Last month, Ocado’s shares tumbled 17% after Kroger said it would shut three US delivery facilities, dealing a significant setback to the British online grocer.

JPMorgan last month cut its price target on Ocado to 290 pence from 356 pence following the initial announcement of the closures.

The stock was trading at 201.21 pence on Friday after the upward movement.

Bernstein analysts said last month they expect Kroger to cancel two additional facilities planned for next year, adding that Ocado will face challenges securing further large-scale partnerships in the US.

Shore Capital’s Clive Black, a long-standing critic of Ocado’s economics, called Kroger’s shift “a devastating blow to the credibility of the Ocado Group proposition,” arguing that the capital-intensive model is difficult to justify in less densely populated markets.

Ocado looks to international partners to offset US pressures

Chief executive Tim Steiner maintains that the US remains a major long-term opportunity, but Kroger’s pullback comes at a sensitive moment for Ocado, whose shares have been volatile in recent months.

Ocado said it continues to grow its international portfolio, working with 12 other retail partners, including Aeon in Japan and Lotte Shopping in South Korea.

The company markets its proprietary warehouse robotics and software to global grocers seeking to scale their e-commerce operations.

For now, the $350 million payment provides short-term relief and a cash boost for Ocado.

But it does little to ease concerns over its long-term foothold in the U.S. market, where investor confidence has been shaken by Kroger’s strategic reorientation.