Shares in online food retailer and warehouse operator Ocado (OCDO) dropped 10% on news a Canadian warehouse is to shut. After assessing ecommerce demand, customer Sobey’s has decided to close its facility in Calgary.

Share price: 220.8p (-10.2%)	PE: n/a
Market cap: £1.8bn	Yield: n/a

LACK OF DEMAND

Canadian firm Sobeys operates three CFCs (customer fulfilment centres) using Ocado’s smart platform software and robots. However, due to lack of demand in the Alberta online grocery market it has decided to close its Calgary centre.

In another blow, Sobeys said it would keep development of its Vancouver CFC on hold as it assessed the market opportunity. The go-live timeline will be regularly reviewed and the site could still be commissioned, but there are no guarantees.

Sobeys said it would continue to serve customers through its Toronto and Quebec CFCs. The firm sees rising online penetration and high growth potential in the Ontario and Quebec areas.

Ocado will receive £18 million from Sobeys in compensation for the Calgary CFC, while FY26 revenue will take a £7 million hit. The UK firm is still targeting positive free cash flow this year driven by live and new sites.

From our previous work we know Ocado is one of the highest-beta or most volatile stocks in the market. Moreover, as well as regularly registering daily moves of 10%, it often moves the other way to the market.

The firm has been making losses on its smart platform and CFCs for over a decade so 2026 is ‘show me’ time. Losing a Sobeys site is unfortunate, so investors have to hope it isn’t part of a wider pattern.

Unfortunately, late last year US grocery giant Kroger also decided to ‘optimise’ its CFC network. As a result, it will shut three sites this month and has cancelled plans to open a new CFC in Charlotte, North Carolina.

On the other hand, the retail business, which it co-owns with Marks & Spencer (MKS), is a jewel. We would rather have exposure through Marks and avoid the overseas CFC business.

Read the press release here: https://www.ocadogroup.com/investors

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