Kroger To Pay $350M To Close Robotic Warehouses, Plans Fulfillment Shift To Stores
News Summary
The Kroger Co. is scaling back its network of automated e-commerce fulfillment centers, pivoting its focus back to expanding its brick-and-mortar grocery store network. The company announced the closure of three of its eight robotics-powered fulfillment centers and the cancellation of a planned center in Charlotte, though one in Phoenix will proceed. Kroger admitted its pandemic-era strategy of investing in automated warehouses to expand market reach was dragging e-commerce earnings into the red and creating significant headwinds for its bottom line. The company anticipates a $2.6B write-down in 2026 due to the closures and will make a one-time payment of $350M to UK-based robotics company Ocado. Chairman and interim CEO Ronald Sargent stated that Kroger plans to open 14 new stores in the fourth quarter and increase new-store builds by 30% throughout 2026. The company will now deepen its relationships with third-party grocery delivery services such as Instacart, DoorDash, and Uber Eats. Following the announcement, Kroger's stock price lost approximately 6% of its value, falling to a six-month low.
Background
Kroger is one of the largest grocery retailers in the United States, with a significant national presence. In the wake of the COVID-19 pandemic starting in early 2020, many retailers, including Kroger, heavily invested in e-commerce and automated fulfillment solutions to meet surging online demand driven by stay-at-home orders and shifting consumer habits. Kroger's partnership with UK-based robotics company Ocado was central to its digital transformation strategy, aiming to leverage advanced robotics and a network of fulfillment centers to compete with rivals like Amazon and Walmart. However, the economic viability of this capital-intensive model and its adaptability to evolving post-pandemic consumer behaviors have been under industry scrutiny.
In-Depth AI Insights
Does Kroger's strategic reversal signal a fundamental flaw in the automated fulfillment model? - This pullback is less about the failure of automation technology itself and more about its economic viability under current market conditions. Kroger's inability to achieve the necessary scale to offset the additional shipping costs of a