Kroger announced that it will shut down its Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida automated customer‑fulfilment centers by January 2026, and will record an impairment charge of roughly $2.6 billion in the third fiscal quarter of 2025.
The closures stem from the centers’ underperformance in low‑density markets, where the cost of operating large, automated facilities outweighs the volume of online orders. Kroger’s analysis showed that the three sites generated far less revenue than projected, and the capital tied up in their infrastructure could not be justified by the modest sales volume. The company is pivoting to a hybrid e‑commerce model that leverages its extensive store footprint for fulfillment, partners with third‑party delivery services, and deploys automation selectively in high‑density regions.
Kroger will receive more than $250 million in compensation from Ocado for the early closure of the sites, a settlement that reflects the value of the technology and real‑estate assets that were originally built under the partnership. The payment is structured as a lump‑sum cash settlement, with additional performance‑based earn‑outs tied to the continued use of Ocado’s platform in the remaining facilities.
The $2.6 billion impairment will reduce Q3 2025 earnings per share, but management expects the shift to a hybrid model to lift e‑commerce operating profit by about $400 million in 2026. The cost savings from closing the under‑used centers, combined with lower fulfillment costs in high‑density markets, are projected to improve gross margin and operating leverage across the grocery‑delivery business.
Kroger is expanding its relationships with Instacart, DoorDash, and Uber Eats to fill the delivery gap left by the closed centers. The company believes that the combination of in‑store pickup, rapid “30‑minute” delivery from high‑density hubs, and third‑party logistics will provide a competitive advantage in speed and convenience, while keeping capital expenditures lower than a fully automated network.
"E‑commerce remains a core part of serving customers who want better value, wide selection and flexible ways to shop," said Ron Sargent, Kroger’s chairman and CEO. "We are taking decisive action to make shopping easier, offer faster delivery times, and provide more options to our customers, and we expect to deliver profitable sales growth as a result."
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