The announcement that three Ocado Group PLC (LSE:OCDO) warehouses are to be closed by US grocer Kroger Co (NYSE:KR, XETRA:KOG) is "not as bad as it could have been", some analysts think, while others said it was a "near knockout blow".
Kroger announced the closure of three out of eight Ocado sites and has expanded its relationship with other delivery platforms Instacart, Doordash and Uber Eats to improve its e-commerce profitability.
Saying the news "was always a possibility, but not the worst one", analyst James Lockyer at Peel Hunt said there "are silver linings in many places", particularly that Kroger was not ending its partnership with the UK company.
Ocado is to receive $250 million in return, with Kroger saying that Ocado's automation technology works in high-density urban areas and wants to explore store-based automation too.
Peel Hunt cut its 2026 revenue forecast £37 million or 3%, which drops though to a 12% cut to EBITDA and a cut from 345p to 315p for the share price target.
Giles Thorne at Jefferies agreed that the news could have been worse and may in fact be "welcome" as it reveals the impact of Kroger's previously signalled intention to review its e-commerce operations.
Equally, he raised the downside aspects to the news, alongside the downgrade to current and future year expectations: "the market must now consider the Kroger CFC's that were committed but not yet under construction, but more fundamentally, the contagion Kroger's actions creates.
"Existing partners today, alongside potential partners in the pipeline, may now be re-considering their investment plans."
Clive Black at Shore Capital said Kroger's e-commerce review delivred a "near knock-out punch".
"We had expected Kroger to trundle on, not close CFCs, as part of its ongoing review, a dreadful acclamation of what Morrison, Waitrose and others already knew: capital intensive, centralised fulfilment of food to a dispersed mass-market customer does not financially work.
"With its leverage, we worry about Ocado more not less - how many more punches can it take?"
After Ocado successfully refinanced its December 2025 convertible bond and 2026 notes in the summer, Thorne said investors "must be thankful", with the next maturity being the January 2027 convertible bond.