Kroger is closing three automated fulfillment centers to improve delivery operations’ speed and profitability. The company will shutter locations in Wisconsin, Maryland, and Florida in January, monitoring the remaining five facilities’ performance. CEO Ron Sargent aims to enhance the shopping experience and expects profitable sales growth from the changes.

The grocery retailer partnered with Ocado Group in 2018 to build automated warehouses. Kroger will incur a $2.6 billion charge for the closures but anticipates a $400 million improvement in e-commerce operating profit by 2026. Ocado shares dropped 16% on the London Stock Exchange, while Kroger shares rose 1% on the NYSE.

Kroger’s CEO Sargent noted the efficiency of using stores to fulfill delivery orders due to proximity to customers, offering faster and cheaper delivery. The company can deliver orders in under two hours from 97% of its 2,700 U.S. stores. Sargent emphasized that stores are Kroger’s most critical asset.

While stores are preferred for delivery fulfillment in many locations, automated facilities excel in high-density areas with strong demand. Kroger is also expanding partnerships with third-party providers like DoorDash, Uber Eats, and Instacart to enhance delivery options and customer experience. The company aims to provide a wide assortment of products and innovative delivery services.

Read more at Yahoo Finance: Kroger closing automated fulfillment centers as it tries to make delivery faster and cheaper