Ocado eyes global tech push after US setback
Shares in Ocado slipped two per cent on Tuesday as the online grocery group outlined plans to sell its AI-driven warehouse tech globally, following a turbulent year for its international operations.
Most of Ocado’s exclusivity deals with global partners, including US retail giant Kroger, have now expired, freeing the company to pitch its evolved robotic systems to new retail partners in major markets.
The US remains a cautionary tale, with Kroger scrapping three automated warehouses and shelving plans for a fourth, though Ocado will receive £259m in compensation.
Domestically, the company is expanding capacity, targeting a new fulfilment centre near Manchester to meet rising demand for next-day deliveries across Northern England.
Chief executive Tim Steiner said: “As we continue to support all of our partners to improve and grow their online businesses, we will also now bring the full range of Ocado’s AI-powered and robotic solutions back to multiple markets.”
“In the five years since our first international customer fulfilment centres went live, we have substantially evolved our market-leading solutions and broadened our offering to meet retailers wherever they are on their online journey,” he added.
Global tech pivot begins
Ocado’s robotic warehouses allow retailers to pick and fulfil online grocery orders with AI.
With exclusivity agreements ending, the company is free to sell its tech in multiple new markets, aiming to generate recurring revenue outside its existing partnerships.
Recent half-year results showed a pre-tax profit of £611.8m for the six months to 1 June, reversing a £153.3m loss a year earlier, boosted by a revaluation of its stake in Ocado Retail.
However, analysts have warned that exporting the warehouse model remains tricky, citing “double-digit leverage, low interest coverage and sustained negative free cash flow.”
The UK business continues to grow, with Ocado Retail, a joint venture with Marks & Spencer, now delivering to around 82 per cent of the population and reporting a 15.8 per cent sales increase in the 12 weeks to November.
Expansion plans include a new Northern fulfilment centre and more delivery slots to capture rising demand in the fastest-growing grocery channel.
Shares traded near 220p in early deals on Tuesday, as investors weigh the potential of Ocado’s global tech push against lessons learned from the Kroger setback.