Online grocery giant Ocado recently announced it will cut 500 jobs across its technology and finance departments as part of a cost-cutting drive. Facing financial losses, Ocado is leveraging artificial intelligence (AI) to boost engineering team productivity to address its financial pressures.
Ocado currently employs around 20,000 people, having already cut 1,000 jobs last year. CEO Tim Steiner said the decision was not taken lightly, and the aim is to improve engineering team efficiency through AI tools and reduce future R&D spending. Despite the layoffs, Ocado continues to roll out its next-generation robotic technology to clients including Kroger in the US and Casino in France.
In its high-tech warehouse in Luton, over one-third of items are currently picked by robots, with that figure expected to reach 70% in the future. Steiner noted that AI has not only boosted the productivity of warehouse robots but also allowed the company to reduce new employee recruitment despite sales growth.
However, Ocado's share price plummeted 17% following the announcement, driven by disappointment over lower-than-expected technology sales growth, projected at 10% this year compared to 18% last year. Delays in the construction of two new warehouses for Kroger impacted Ocado's technology sales. Despite this, Steiner emphasized the importance of the US market to Ocado, noting that almost all necessary equipment is already in the US, so changes in tariff policy won't affect the equipment configuration of these two warehouses.
Ocado reported a pre-tax loss of £374.5 million in the past year, although sales rose 14% year-on-year to £3.1 billion. Improved profitability was offset by impairments on older equipment. Furthermore, Ocado encountered difficulties in negotiations with UK retailer Marks & Spencer regarding the sale of shares, with M&S stating it wouldn't pay due to unmet performance targets.
Job cuts are becoming increasingly common in the retail sector. Aldi is undertaking a headquarters restructuring that may result in up to 350 job losses; Sainsbury's has announced 3,000 job cuts, while Tesco is cutting 400 roles.
Key takeaways:
🌐 Ocado plans to cut 500 jobs to leverage AI for cost reduction.
📉 The company's share price fell sharply by 17% due to lowered technology sales growth expectations.
📦 In the US market, Ocado's equipment configuration is unaffected by tariff policy, and it continues to provide new technology to clients.
