Ocado Group is facing renewed scrutiny over its heavy reliance on debt amid soaring interest costs that threaten its path to profitability.
The online grocery technology firm, led by founder and CEO Tim Steiner, has seen its annual debt interest bill climb from around £27m last year to nearly £100m in 2025 following a recent £300m bond refinancing at an 11% coupon rate.
This move extended its debt maturity but came at a much higher cost compared to previous bonds yielding below 4%, the Telegraph reported.
Steiner, a former Goldman Sachs bond trader, has built Ocado into a £2bn valuation business supplying automated warehouse technology to retailers including Kroger in the US and Morrisons and M&S in the UK.
However, its significant debt pile— which stood at £1.2bn at the end of 2024 against equity of £1.9bn—raises concerns in the context of rising interest rates.
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The company reported a pre-tax loss of £375m on £1.2bn revenue in 2024, a slight improvement from the previous year’s £394m loss on £1.1bn revenue. To accelerate its turnaround, it cut nearly 1,000 jobs last year and plans further reductions in research and development.
It aims to achieve positive cash flow by next year, though some investors remain cautious after repeated delays in meeting cash-flow targets. Fitch Ratings assigned a B- rating to Ocado’s recent bond issue, citing “high execution risk” and ongoing “liquidity erosion” from capital expenditures.
Industry consultant Brittain Ladd highlighted Ocado’s “high-debt load compared with its market capitalisation,” while Shore Capital’s Clive Black points out that the company “has had to expend capital in order to generate sales” from the outset. Black adds that Ocado may need to raise further equity in the future despite a reported £772m cash balance at the end of 2024.
A critical factor for Ocado’s future lies in its US partnership with Kroger. With just eight automated warehouses currently operational, a significant expansion by Kroger could transform Ocado’s prospects. However, concerns persist over Kroger’s long-term commitment, with Ladd noting that Ocado “must get Kroger to announce they view Ocado as a long-term solution and partner.”
City sources say Kroger’s intentions will be a key focus of the firm’s interim results next month, as it looks to demonstrate growth potential amid rising financial pressures.
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