Kroger says online grocery is now profitable. Its new plan runs through stores.

Previously

In November 2025, Kroger said it would close three Ocado-built robot warehouses, in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla., saying the network wasn't meeting expectations. In December 2025, its quarterly filing put the charge at $2.585 billion, including a $350 million payment to Ocado that also covered a cancelled Charlotte, N.C., site. State notices covered more than 1,600 jobs.

October 2026 — Kroger, the Cincinnati-based grocery chain, moved its online orders off three robot warehouses and onto its stores in January. Here's what changed since Part 2 (January 2026), what it cost, and what went wrong.

Cost and outcome (as of October 2026)

Final charge: $2.497 billion before tax ($1.908 billion after tax) for fiscal 2025, after an $88 million reduction in the fourth quarter. (Kroger Q4 release, 10-K note)
Paid to Ocado: About $350 million in cash. (10-K note)
Customers: "Retained nearly all" households in markets where Kroger has stores. (Q1 call)
Profit: eCommerce, including ad sales, profitable in Q1 2026 and again in Q2. No dollar figure given. (Q1 call, Q2 release)
Growth: Adjusted eCommerce sales up 20% in Q2, excluding exited markets. (Q2 release)
New target: $500 million more eCommerce EBITDA by 2029, not counting ad sales. (Investor Update)

The final bill

The charge shrank a little. In its Q3 filing, Kroger booked $2.585 billion. Its fourth-quarter release, on March 5, 2026, shows a fourth-quarter adjustment of negative $88 million, leaving $2.497 billion for the year. The 10-K repeats $2.497 billion, or $1.908 billion after tax, including about $350 million in cash to Ocado. Neither document explains the $88 million change.

What happened to customers

On the June 18 first-quarter call, CFO David Kennerley said Kroger "closed three fulfillment centers at the end of the last quarter." In markets with Kroger stores, he said, "we retained nearly all of those households and successfully converted them to store-based delivery and pickup." eCommerce, including ad sales, "became profitable this quarter ahead of schedule," and the $400 million profit improvement Kroger promised in November was "accelerating faster than we thought." He added that it "wasn't just as a result of the closing of unprofitable Ocado sheds."

On the Sept. 11 second-quarter call, CEO Greg Foran said adjusted eCommerce sales grew 20%, "our second consecutive quarter of profitable eCommerce growth," and that Kroger had "renewed our focus on in-store fulfillment and fast delivery." The adjusted figure excludes three things: "fulfillment center exits in markets where Kroger does not operate stores, the sale of Vitacost, and the discontinuation of Ship Marketplace." Kroger hasn't said how many of those customers it kept.

What happened to the robots

Ocado's half-year results, on July 16, confirmed the three sites closed in January. Ocado said it had agreed to sell its technology in one of the closed Kroger sites to "a large U.S-based logistics company" and will keep maintaining the equipment. It didn't name the buyer or the site. Kroger's planned Phoenix site, set to be the first Kroger site with Ocado's AutoFreezer, is now listed for Ocado's 2027 or 2028 fiscal year.

What's changed

At the Oct. 20 Investor Update, Kroger's new leadership, under CEO Greg Foran, laid out its online plan. Ocado wasn't mentioned in the presentation or the transcript.

Nate Faust, who leads eCommerce, said online could grow from about $18 billion today to 30% of Kroger's business "in the long-term." Foran called the 30% "our best guess, in five, seven years." The engine is stores. "As we grow, we will add automation in our stores to fulfill orders faster, lower costs, and improve capital efficiency," Faust said. "And if we need more capacity... we will add more stores." Faust said 60% of store-based delivery orders arrived in under two hours in Q2, 23% in under one.

Mark Ibbotson, who runs store operations, described what store automation might look like: robots picking the "head of the assortment," the 3,000 to 5,000 most-ordered items, with the rest picked off the shelves. Kroger will "probably test the water in the short-term on micro-fulfillment in the store," he said. Micro-fulfillment means a small automated picking system inside or behind a store. Foran said that if a store gets too busy, "our first objective would be to go and find another location to open another store." Central automation hasn't gone away entirely: CFO David Kennerley said Kroger is "building an automated site in Franklin, Kentucky, supporting our Nashville and Louisville divisions, which we expect to complete in 2028," part of supply-chain investment to "support new stores and e-commerce demand."

Why it matters for operators

Kroger tried centralized robot warehouses, took a $2.5 billion hit, and is moving to automation sized to its stores. The lesson isn't that automation failed. It's that automation has to sit where the orders already are.

What went wrong

Kroger paid about $2.5 billion to change course. The final charge was $2.497 billion, including about $350 million to Ocado.
Some customers were left behind. Kroger strips out "markets where Kroger does not operate stores" from its growth figure. It hasn't said how many shoppers it lost there.
The $88 million is unexplained. Kroger trimmed the charge without saying why.
Profit isn't shown in dollars. Kroger says eCommerce is profitable, including ad sales, but we found no published dollar figure.
What we don't know yet: how the five remaining Ocado sites perform, whether Phoenix will open, and what in-store automation will cost.

Our follow-up question for Kroger

What will the in-store micro-fulfillment test cost per store, and how will its cost per order compare with the five Ocado sites still running?

Sources

Kroger, “Kroger Reports Fourth Quarter and Full Year 2025 Results and Announces Guidance for 2026,” March 5, 2026. ir.kroger.com (SEC copy: sec.gov)
Kroger Form 10-K, fiscal 2025, note on fulfillment network charges. sec.gov
Kroger Q1 2026 earnings call, corrected transcript, June 18, 2026. s202.q4cdn.com
Ocado Group, half-year results for the 26 weeks ended May 31, 2026, July 16, 2026. rns-pdf.londonstockexchange.com
Kroger, “Kroger Reports Second Quarter 2026 Results and Updates Guidance for 2026,” Sept. 11, 2026. ir.kroger.com
Kroger Q2 2026 earnings call, corrected transcript, Sept. 11, 2026. s202.q4cdn.com
Kroger, “Kroger Outlines Plan to Build America's Favorite Grocer and Introduces New Long-Term Financial Targets,” Oct. 20, 2026. ir.kroger.com
Kroger 2026 Investor Update presentation, Oct. 20, 2026. s202.q4cdn.com
Kroger Investor Day, corrected transcript, Oct. 20, 2026. s202.q4cdn.com
Earlier in this series: Parts 1–2. /case/kroger-ocado-closures-announced, /case/kroger-ocado-settlement-closures

Disclosure: [not in copy] Editor placeholder