Ocado rating affirmed at B- as Fitch keeps stable outlook

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Ocado rating affirmed at B-

Highlights

Fitch affirms Ocado Group PLC's Long-Term Issuer Default Rating at 'B-' with a Stable Outlook, citing constrained ratings due to negative free cash flow and weaker EBITDA growth in FY26 following CFC closures.
EBITDA for FY26 is forecast at about GBP150 million, down from previous expectations of nearly GBP190 million, as closures of three Kroger and one Sobeys CFCs reduce fee income and pressure performance.
Ocado bolsters liquidity with GBP261 million compensation from Kroger and GBP18.5 million from Sobeys in early 2026, while executing a GBP150 million cost-saving programme and addressing refinancing risks ahead of the GBP350 million 2027 debt maturity.

Rating factors and 2026 earnings pressure

As reported by Fitch Ratings, Ocado Group PLC's Long-Term Issuer Default Rating is affirmed at 'B-' with a Stable Outlook, while its unsecured instrument rating remains at 'B-' with a Recovery Rating of 'RR4'. The rating applies to the perimeter excluding separately ring-fenced Ocado Retail Ltd, and remains constrained by still deeply negative, though improving, free cash flow and weaker EBITDA growth in 2026 after customer fulfilment centre closures.

Fitch says the closure of three Kroger CFCs and one Sobeys CFC slows EBITDA growth in FY26. It now forecasts EBITDA of about GBP150 million, below its earlier expectation of nearly GBP190 million, mainly because of lower fee income from the affected sites. The agency also expects free cash flow to remain well above negative GBP200 million in the year, excluding restructuring costs, as lower CFC fee receipts and working-capital effects weigh on performance.

Interest cover is likely to weaken to around 1.3x as the higher cost of 2025 debt refinancing feeds through on a fully annualised basis. Fitch nonetheless expects that pressure to be temporary, with metrics improving in FY27 as module count rises toward 125 by the end of 2027 and savings from the company's cost programme take fuller effect.

Liquidity cushion and medium-term credit implications

Fitch says cost controls and compensation payments linked to partner closures support Ocado's liquidity and medium-term cash flow trajectory. The company is implementing a GBP150 million cost-saving programme in FY26, including workforce reductions and savings across corporate and technology functions, aimed at moving toward positive free cash flow generation.

The ratings agency still expects negative free cash flow in FY26, close to negative EUR300 million, but says the benefit of these actions should become more visible from 2027. It forecasts a material reduction in negative free cash flow to below negative GBP100 million in FY27.

Liquidity is also supported by closure-related compensation, with Ocado receiving GBP261 million from Kroger in January 2026 and GBP18.5 million from Sobeys in February 2026. Fitch says those proceeds partly offset the earnings hit from the closures and help the group manage ongoing investment needs and the upcoming GBP350 million 2027 debt maturity. It adds that refinancing risk has fallen after Ocado's 2025 debt actions addressed 2025 and 2026 maturities and extended its revolving credit facility to 2027.

Even so, Fitch says execution risk remains high because Ocado's revised strategy, centred on a re-imagined fulfilment model and smaller modular solutions, still has to prove it can deliver sustainable scale, profitability and cash generation. Further partner closures, softer demand or delays in reaching critical mass at individual CFCs could weaken the financial trajectory and pressure the rating.

Our earlier coverage of EnQuest’s USD675 million senior unsecured bond due 2031 outlined Fitch’s B+ rating and RR3 Recovery Rating for the notes, with proceeds aimed at refinancing existing debt, covering fees, and keeping some cash on the balance sheet. We noted Fitch’s view that EnQuest’s small scale, high costs and North Sea exposure are balanced by moderate leverage, solid liquidity and gradually improving geographic diversification, supporting a Stable outlook on the issuer rating.

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