Ocado Group PLC (LSE:OCDO) shares tumbled around 10% on Friday after unsettling remarks from its largest US partner, Kroger.
On its earnings call, the grocer said it would take a “hard look” at its automated customer fulfilment centres (CFCs) and conduct a “full site-by-site analysis” of the network.
Neil Wilson at Saxo Markets said the comments were “clearly a negative for Ocado” since Kroger “seems likely to move away from the kind of large CFCs provided by the British company and instead seems to be looking to lean on local stores to fill orders.”
Ocado’s automated warehouses have been central to its international expansion story, with Kroger a flagship client.
Any shift by the US retailer towards smaller-scale, store-based fulfilment would raise questions about future demand for Ocado’s technology.
The stock reaction, down 30.4p at 269.6p, highlights investor concern that the model may not deliver the growth originally promised.