Ocado Puts New Warehouses on Ice as Sales Slump

Ocado will pause the construction of more automated distribution centers in the U.K.

In a recent presentation to analysts, the U.K.-based online grocer said the opening of two new customer fulfillment centers (CFCs) initially planned for 2024 and 2025 would be put on ice as the firm restrategizes to reflect weaker demand.

“We’ve taken the decision to pause the north-west and south-east CFCs,” Ocado CFO Stephen Daintith said, as reported in the Financial Times (FT) on Friday (Dec. 2).

“That may change, it’s a pause, not a stop, but we think it’s a sensible thing to do given the surplus capacity we have today,” he added.

The decision follows moves to slow the timetable for the two new locations that PYMNTS reported in July.

After reporting an 8% drop in revenue in its first-half result, Ocado was able to claw back some of its losses and in September reported Q3 sales of 532 million pounds, up 2.7% compared with the same quarter last year.

Despite the slight resurgence, the third-quarter gains are unlikely to be enough to prevent the company from posting its first-ever full-year fall in sales, the company warned at the time.

Outside of the U.K., things are looking slightly better for Ocado, which sells its warehouse automation technology to other retailers abroad. Clients such as Kroger in the U.S. and Aeon in Japan have partnered with the British supermarket business to build their own automatic fulfillment centers.

In November, the company added Korea’s Lotte shopping to its list of technology customers in a deal that will see Ocado build robot-powered automatic warehouses for the Korean retail chain.

Investors have been mixed in their assessment of Ocado’s prospects. As the FT reported, this is reflected in a huge variation in target share prices among analysts, which it placed in the range of 3.90 pounds to 29 pounds each.

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