Ocado has revealed it will pause the development of more automated distribution centres in the UK as online grocery demand begins to ease.
In a presentation to analysts, the online-only grocer stated two new customer fulfilment centres (CFCs), which were scheduled to open in 2024 and 2025, will now be delayed ,The Financial Times reported.
“We’ve taken the decision to pause the north-west and south-east CFCs,” Ocado chief monetary officer Stephen Daintith said.
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“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.”
The delay will result in the sales capacity of Ocado Retail, in partnership with Marks and Spencer, reaching £3.9 billion in the medium term, instead of an expected £4.5 billion.
Last year, it reported £2.3 billion in sales, Ocado revealed.
The online-only grocer had also previously warned it might not accelerate a capacity expansion programme that it had previously planned after its existing facilities could not be ramped up fast enough to capitalise on the Covid-19 pandemic boom.
However, the pandemic has waned and more customers have returned to stores, with Ocado expecting sales to fall this year for the first time on record, and having opened new warehouses in Essex, Bristol and Luton, it has more capacity than needed.
“That is not an option we are seriously considering,” Daintith continued.
“Right now at the reduced margins . . . would not be a sensible time to sell that business.”
