By Anuja Bharat Mistry
(Reuters) -Kroger will close three automated delivery fulfillment facilities and record an impairment charge of about $2.6 billion in its third quarter, as the U.S. grocer expands its third-party delivery partnerships.
The company said on Tuesday it would shutter the centers it operates with British online supermarket and technology group Ocado in Wisconsin, Maryland, and Florida in January, while monitoring the rest.
Kroger, which had partnered with Ocado in 2018 to deploy the company’s Smart Platform for automated fulfillment centers, expects the closures to have no impact on its core sales.
Ocado said it would receive over $250 million in compensation following the closures, and expects an impact of about $50 million in fiscal year 2026 for its fee revenue in fiscal year 2026.
Kroger had strengthened its partnership with online grocery and food delivery firms such as Instacart, DoorDash and UberEats, as part of its efforts to rework its e-commerce strategy, and expects to improve e-commerce profitability by about $400 million in its fiscal year 2026.
“The pandemic bump didn’t hold, and shoppers moved back to stores quickly, so the economics of running dedicated ecommerce facilities may no longer make sense,” said eMarketer analyst Suzy Davidkhanian, adding the Kroger’s partnerships with the online platforms provide it more reach among consumers.
The company, in September, had signaled a potential retreat from investment in automated warehouses when it said it was conducting a “site-by-site” review of the fulfillment network it had built in partnership with Ocado.
“In this environment, partnering rather than fulfilling in-house is the more efficient path forward,” Davidkhanian said.
Both companies will continue to operate the remaining five sites in Ohio, Texas, Georgia, Colorado and Michigan, Ocado said.
(Reporting by Anuja Bharat Mistry and Neil J Kanatt in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila)
