Ocado is to cut hundreds jobs in its technology teams as part of the loss-making online grocery specialist’s efforts to reduce costs using artificial intelligence to help with research and engineering.
The company, which employs 20,000 people, said AI had helped improve the productivity of its engineering team, enabling it to cut 500 roles across its technology and finance divisions.
The latest cuts come after Ocado reduced its headcount by 1,000 in the last financial year.
The technology group develops robotic picking and delivery tools for online retailers around the world and co-owns the British grocery delivery service Ocado with Marks & Spencer.
The group’s chief executive, Tim Steiner, said it needed to cut costs to meet cashflow targets. He said the planned cuts were “never something that’s easy or that we take lightly. It’s a very difficult day for us to have to announce that.”
Steiner said: “We are taking advantage of AI-type tools that drive up the productivity of our engineering teams and are spending less going forward on research and development.”
He said the group, which employs 10,000 people in the UK, continued to roll out its new robot-led tech to clients that include Kroger in the US and Casino in France, but much of its current round of development was focused on software and required fewer staff.
Steiner said AI was also helping to improve the productivity of the robots in its warehouses, allowing it to take on fewer new workers as sales grow.
In its most advanced warehouse in Luton, more than a third of individual items are now picked robotically and the group expects 70% of product types to be picked by robots in the near future.
Shares in the group dived 17%, reflecting disappointment at its prediction that technology sales would grow by only 10% this year, down from 18% last year, amid delays to two new warehouses for its US partner Kroger as it added additional technology.
Ocado revealed a pre-tax loss of £374.5m for the year to 1 December, narrowing from £394m a year before, despite sales rising 14% to £3.1bn. Big gains in profitability on technology and retail were offset by the cost of writing down ageing equipment.
The company completely wrote off a hoped-for final payment for the sale of a stake in its retail business to M&S, wiping out the last £29.1m of the originally expected £190m from its balance sheet.
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Steiner said negotiations continued, but M&S has said it will not pay the fee as performance targets were not met. Ocado, which has previously threatened legal action over the matter, said it spent £1.3m during the year on engaging specialists to support its argument that the targets should be adjusted.
The planned job losses at Ocado come amid a flurry of job cuts in the grocery sector. Aldi is consulting over plans for a head office restructure that could result in up to 350 roles going.
According to Grocery Gazette, which first reported on the plan, the changes will affect finance and some buying roles. Aldi said: “No customer-facing roles are affected, and no final decisions will be made until the consultation process is complete.”
Last month, Sainsbury’s said it was cutting 3,000 roles with the closure of hot food counters and its in-house cafes, while Tesco is trimming 400 roles from its head office and stores.
