Kroger announced Tuesday that it will close three of its automated delivery fulfillment centers early next year and record an impairment charge of roughly $2.6 billion in its third-quarter results. The decision marks a major strategic shift as the U.S. grocery giant leans more heavily on third-party delivery partners.
The closures will affect the company’s robotic fulfillment hubs run jointly with British online grocery technology firm Ocado in Wisconsin, Maryland and Florida, all set to shut down in January. Kroger said it will continue monitoring its remaining automated facilities as part of an ongoing review.
No Impact to Core Sales, Ocado Set for Compensation
Kroger noted that the closures are not expected to affect its core sales performance.
Ocado, Kroger’s automation partner since 2018, confirmed it will receive over $250 million in compensation and anticipates a $50 million impact on its fee revenue in fiscal year 2026.
Pivot Toward Third-Party Delivery
As consumer habits shift back toward in-store shopping, Kroger has intensified partnerships with Instacart, DoorDash and Uber Eats. The company expects these collaborations to help boost its e-commerce profitability by around $400 million in fiscal 2026.
Industry analysts say the pandemic-driven surge in online grocery demand has faded, reducing the financial viability of running large automated warehouses.
“The pandemic bump didn’t hold, and shoppers moved back to stores quickly,” said eMarketer analyst Suzy Davidkhanian, noting that third-party platforms provide Kroger with broader consumer reach at lower operating cost. “In this environment, partnering rather than fulfilling in-house is the more efficient path forward.”
A Strategic Pullback from Automated Warehousing
Kroger had already signaled a reevaluation of its automated network in September, announcing a “site-by-site” assessment of the facilities developed with Ocado.
Ocado said the two companies will continue to operate the remaining five fulfillment centers located in Ohio, Texas, Georgia, Colorado and Michigan.
