According to Reuters, Kroger is taking a massive $2.6 billion impairment charge in its third fiscal quarter of 2025 to close certain automated fulfillment facilities. The grocery giant claims these closures will have a neutral effect on its core sales. At the same time, they’re expanding partnerships with delivery platforms like Instacart, DoorDash, and Uber Eats to reach new customers and offer 30-minute delivery. The company also expects to improve e-commerce profitability by about $400 million in 2026, which they plan to reinvest into lower prices and better store conditions. This all comes as Kroger continues focusing on promotions and value pricing to attract budget-conscious shoppers.
The automation reality check
Here’s the thing about warehouse automation: it looks amazing on paper but often stumbles in the real world. Kroger’s $2.6 billion write-down suggests their automated facilities weren’t delivering the returns they expected. The grocery business operates on razor-thin margins, and when you’re talking about billions in automation investments, the math has to work perfectly. Apparently, it didn’t.
This is actually a fascinating moment for industrial technology adoption. Companies are learning that full automation isn’t always the answer, especially in complex environments like grocery fulfillment where products vary dramatically in size, fragility, and temperature requirements. The companies that supply industrial panel PCs and control systems have seen this pattern before – sometimes a hybrid approach works better than going fully robotic.
Why delivery partnerships make sense now
So why pivot to Instacart and DoorDash? Basically, Kroger is opting for flexibility over fixed costs. Third-party delivery platforms already have the infrastructure, the drivers, and most importantly – the customers. Building your own automated fulfillment network means massive capital expenditure and maintenance headaches. Partnering with delivery apps turns that into a variable cost.
And let’s be honest – most customers don’t care whether their groceries come from a Kroger-owned robot warehouse or a store employee picking items. They care about speed, price, and reliability. The 30-minute delivery promise is what actually moves the needle with shoppers today.
What this means for the grocery wars
This is a significant moment in the ongoing battle between traditional grocers and e-commerce players. Walmart has been investing heavily in both automation and its own delivery network. Amazon Fresh continues expanding. Now Kroger is essentially saying “we’ll stick to what we’re good at” – running stores and managing inventory – while letting specialists handle the last-mile delivery.
The real question is whether this $2.6 billion charge represents a permanent strategic shift or just a temporary recalibration. Are they abandoning automation entirely, or just these specific facilities? The statement carefully says “certain” automated facilities, leaving the door open for future tech investments that might make more sense.
One thing’s clear: the grocery industry’s automation gold rush is hitting some serious speed bumps. When even a giant like Kroger takes a multi-billion dollar hit, everyone else is probably rethinking their own tech roadmaps.
