American supermarket titan Kroger is confronting a severe crisis, with analysts warning the business 'stands at a crossroads' following a disastrous multi-billion dollar wager on online groceries. The chain's sales growth has virtually stalled, a dire situation even as food prices continue to climb across the United States.
A Costly Strategic Misstep
Analysts point to one clear conclusion: customers are actively choosing competitors like Walmart, Aldi, Costco, and Publix, and Kroger has failed to give them a compelling reason to remain loyal. 'Kroger should be producing punchier numbers,' stated Neil Saunders, Managing Director of GlobalData, commenting on the disappointing third-quarter results released this week. 'These numbers show the chain is losing shoppers, and the bleeding needs to stop.'
Saunders explained that budget-conscious shoppers are being lured away by lower prices, better value, and more engaging store formats offered elsewhere. With household finances still under pressure, customer loyalty is disappearing rapidly. The retail expert identified a central error: Kroger's billion-dollar gamble on Ocado's high-tech automated warehouses. This partnership, initiated in 2018, promised to revolutionise the chain's online grocery operation but instead became a spectacularly expensive dead end.
The Fallout from a Failed Partnership
The futuristic fulfilment centres, designed to supercharge Kroger's e-commerce arm, never attracted sufficient order volume to justify their colossal operating costs. Kroger is now shutting several down, announcing in November the closure of three sites in Maryland, Wisconsin, and Florida by January. The financial toll has been brutal. Kroger has terminated the Ocado partnership at a cost of $2.6 billion, contributing to an operating loss of $1.5 billion for the quarter.
This crisis hits at an acutely vulnerable time. The company has been without a permanent CEO since Rodney McMullen stepped down in March, leaving interim leader Ronald Sargent to steer the chain through fierce competition and the Ocado fallout. 'Kroger needs proper leadership rather than an interim CEO and it needs much greater focus and discipline,' Saunders argued. 'Kroger is something of a 'meh' retailer when it needs to be firmly on the front foot.'
Path to Recovery or Continued Decline?
Founded in 1883 and headquartered in Cincinnati, Ohio, Kroger operates nearly 2,800 stores across 35 states under banners like Harris Teeter and Fred Meyer. Despite the broader challenges, one area shows a glimmer of hope: the company's most recent figures indicate its online sales grew by 17 percent, driven by partnerships with delivery platforms like Instacart and DoorDash.
Nevertheless, the core issue remains. 'Kroger is not a retailer in collapse, and it manages things to an adequate degree, but in the extremely competitive arena of grocery retail, being adequate is simply not enough,' Saunders continued. He believes the future hinges on decisive action. 'In our view, Kroger now stands at a crossroads... For this to happen a new CEO needs to be installed, and that preferably needs to be someone from outside of Kroger who has very strong grocery experience.' The coming months will determine if this historic retailer can defend its sizable business and plot a credible path back to growth.
