Kroger Shells Out $350M to British Retailer Ocado after Robots Reversal
Kroger is paying $350 million to Ocado after abandoning plans for robotic warehouses, exceeding the expected $250 million. This decision follows Kroger's review of automation technology to cut costs and improve profitability. Ocado had partnered with Kroger since 2018 to build automated fulfillment centers, but Kroger now plans to fulfill orders directly from stores. The payment will be made in January.
U.S. grocery retailer Kroger (KR) is shelling out $350 million, over a third more than expected, to British online grocer Ocado for ditching its robotic warehouse plans.
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Ocado said it had secured the one-off compensation payment from Kroger after the American group's decision last month to shut three warehouses and scrap plans for a site in Charlotte, North Carolina. It was one of two due to launch in 2026.
The payment, which Ocado said is more than the $250 million it had originally expected to receive, will be made in January.
Ocado launched a significant partnership with Kroger in 2018. The plan was to build the equivalent of 20 customer fulfillment centres, where automated robots sort orders, but has so far opened eight sites.
Last year, Ocado announced an enhancement of the partnership, with the U.S. grocery giant ordering a new suite of automated technologies for deployment across its Customer Fulfillment Centers (CFCs). These advanced systems, including the On-Grid Robotic Pick and Automated Frameload, aim to significantly improve efficiency, reduce costs, and bolster the customer service experience.
Kroger Reviewing Plans
But Kroger said earlier this year that they were reviewing their use of the automation technology as part of efforts to reduce costs and improve profitability.
Kroger, which released disappointing Q3 results earlier this week, said it plans to focus more on fulfilling orders directly from stores to improve speed and efficiency.
That is in contrast to rivals such as Walmart (WMT), which is set to spend close to $1 billion over the next decade automating its e-commerce and fulfillment processes. This includes installing numerous AI-powered Ranpak (PACK) AutoFill systems across its five Next Generation Fulfillment Centers. The aim is to speed up the fulfillment process for customers, reduce packaging waste, and simplify work for its staff.
Is KR a Good Stock to Buy Now?
On TipRanks, KR has a Moderate buy consensus based on 9 Buy and 6 Hold ratings. Its highest price target is $85. KR stock's consensus price target is $77.33, implying a 22.47% upside.
