By Shares of Ocado fell more than 8% on Thursday after the online supermarket and retail-technology group unveiled plans to cut 1,000 jobs and reported a wider pretax loss for the latest financial year.
The company said the reductions form part of a broader effort to save £150 million in technology and support costs as it shifts from an intensive development phase to a more streamlined deployment of its automated warehouse systems.
“It’s about 1,000 people, it’s less than 5% of our global workforce,” CEO Tim Steiner told Reuters after Ocado published full-year results, adding that about half of the affected roles come from research and development, and around two-thirds of the job losses will be in the UK.
Cost savings drive restructuring
The latest round of redundancies follows 500 technology job cuts announced last year, when Ocado said it was using more artificial intelligence to support research and engineering.
The group has been under pressure to demonstrate that heavy investment in robotics and software can translate into sustainable profits.
Ocado said it was simplifying its business model as certain exclusivity agreements with overseas partners expire, allowing it to seek new collaborations.
In North America, the restructuring involves closing underutilised robotic customer fulfilment centres and eliminating associated roles to focus on more profitable sites.
For the 52 weeks ended November 30, Ocado reported a pretax loss of £377.6 million, compared with a loss of £339.8 million the previous year.
Revenue rose to £1.36 billion from £1.24 billion on a pro forma basis.
Underlying earnings increased 59% to £178 million, reflecting operational improvements despite the headline loss.
North American setbacks weigh on sentiment
The shares have fallen about 36% over the past year after Ocado’s North American partners — Kroger in the United States and Sobeys in Canada — announced plans to shut robotic customer fulfilment centres, citing weaker-than-expected demand.
Those decisions have revived doubts about the sustainability of Ocado’s business model, particularly in markets where customers are more dispersed and less concentrated in dense urban areas.
Analysts have also pointed to a broader industry trend towards fulfilling online grocery orders from existing stores rather than investing in dedicated automated warehouses.
Some question whether in-store fulfilment providers such as Instacart could shrink Ocado’s long-term addressable market.
Ocado expects to turn cash-flow positive, but analysts cautious
Ocado said it expects revenue in its technology solutions division to be around £500 million in fiscal 2026, excluding fees linked to the closure of a customer fulfilment centre.
The group forecasts that it will turn cash-flow positive in the second half of its 2025/26 financial year, with a full-year underlying cash outflow of about £200 million excluding closure fees.
It expects to achieve positive cash flow for the full year in 2026/27.
Despite the forward guidance, some analysts remain cautious.
RBC Capital Markets said Ocado’s capacity is likely to remain ahead of demand in the near term, which could continue to weigh on profitability.
The broker also suggested that management’s medium-term targets appear ambitious given the group’s cash-flow profile and the current industry environment.
They have questioned whether the growth of in-store fulfilment options–such as Instacart–will reduce its long-term total addressable market.
It says the stock price looks expensive currently since the company’s goals for the next few years look risky.
RBC doesn’t expect the company to sign any more massive, landscape-shifting deals with major supermarkets anytime soon.
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