Kroger is making a major shift in its kroger delivery strategy, announcing it will close three automated e-commerce fulfillment centers and take a $2.6 billion impairment charge in its third quarter. The closures are part of a broader restructuring aimed at improving profitability in the fast-growing online grocery market.
The facilities—located in Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida—will shut down in January 2026, according to filings from British partner Ocado Group. Kroger said the closures will not affect its core store sales as it reworks its online operations.
The move marks a significant pullback from Kroger’s earlier bet on automated warehouses. The company partnered with Ocado in 2018, investing heavily in robotic fulfillment centers to handle online orders. Ocado will receive more than $250 million in compensation following the shutdown of the three centers, though the companies will continue operating five remaining sites.
Kroger is now shifting toward a more flexible delivery model. The company has expanded partnerships with Instacart, DoorDash, and UberEats, aiming to reach more customers with faster, lower-cost service options. Executives say this new approach will help Kroger increase e-commerce profitability by about $400 million in fiscal 2026.
Industry analysts have long questioned whether large-scale automated warehouses were the most cost-effective way to support kroger delivery growth. Many competitors, including Walmart and Target, rely on store-based fulfillment, which requires lower overhead and shorter delivery distances.
Kroger’s online business continues to grow, but it has yet to reach profitability. The company said earlier this year it would review its digital operations to cut costs and improve margins. Kroger will now test more in-store automation and hybrid delivery models, signaling a move closer to strategies used successfully by rivals.
Ocado shares fell as much as 18% after the announcement, hitting their lowest point since 2013. Meanwhile, Kroger shares rose slightly in early trading, extending an 8% gain so far this year.
As the grocery industry continues to evolve, Kroger’s revamped kroger delivery strategy reflects a wider shift toward more efficient, flexible, and profitable online fulfillment methods.
