Ocado might disagree, but Kroger’s tough decisions around its e-commerce re-think were the right thing to do. New CEO Gregory Foran explains why

It’s a time of transition for US grocery maven Kroger as the  firm appoints Walmart veteran Gregory Foran as its full-time CEO - and among his first actions has been a firm endorsement of the company’s ripping-up of its e-commerce strategy last year.

That’s not to say that Foran is anti-e-commerce, far from it. During his time as head of Walmart US he played a large part in putting in place the online building blocks to get that retailer to its recently-achieved goal of turning a profit in digital sales.

Given that interim CEO Ron Sargent has been candid in his admissions that Kroger is not making money out of online, despite a pandemic booster on the sales front, Foran faces a similar challenge in his new role, declaring:

E-commerce is a key focus area for us. We've built this into a more than $16 billion business with seven consecutive quarters of double-digit growth. There's a strong foundation, but we need to accelerate it...We know that we can accelerate e-commerce, and the decisions that have been made by Ron and the team put us in a great position. 

Those decisions have included the creation of a dedicated e-commerce business unit under the remit of Chief Digital Officer, Yael Cosset, and the closure of non-profitable Ocado automated fulfillment centers in favor of expanded relationships at local level with couriers such as UberEats and DoorDash.

Foran approves of this thinking it seems:

Our stores are central to how we serve customers online. Our refreshed hybrid fulfillment model, which better leverages the stores and delivery providers like Instacart, DoorDash and Uber Eats, positions us to accelerate growth while reaching profitability next year.

By using our stores as fulfillment hubs, we get inventory closer to customers, reduce last mile costs and offer the speed and convenience that customers are looking for. Our Media business is closely tied to this e-commerce momentum. We have the data, we have the customer relationships, and we have the platform. As e-commerce grows and our digital capabilities expand, we see a long runway to accelerate growth. 

No regrets

For his part, Sargent argues that the decisions taken around e-commerce strategy are paying off:

We delivered substantial cost savings across the organization through operational efficiencies and modernizing how we work. We then re-invested those savings directly into lower prices and improved customer service.

The early results from our new relationship with DoorDash and Uber Eats have exceeded what we originally planned. They have extended our reach to customers and shopping occasions we wouldn't otherwise capture. They are incremental, and they are profitable. Together with Instacart, we expect our convenience offerings to deliver over $1.5 billion in sales in 2026, which will help us accelerate our e-commerce growth.

He adds that these changes will make the e-commerce business profitable in 2026:

The reality is we plan on being profitable in the first half of '26. In terms of how we're doing it, basically, we're working on a lot of different areas to just improve the experience with our customers. And whether that's the refreshed website, whether that's a lot of initiatives around AI and agentic shopping. In-stock is a big focus, delivery service.

So all of those things, those nuts and bolts things, are really important to the growth of e-commerce this quarter. Obviously, the new partners help and will continue to help. And we are growing e-commerce business much faster than the market. And then as we mentioned, I think the third-party partners are on track to be over $1.5 billion on top of our organic growth in e-commerce this year.

AI on the shopping list

The firm has also announced the creation of a new role of Chief Data and AI Officer, promoting Milen Mahadevan, currently head of the analytics unit, into the slot. He will oversee all data and AI operations and lead AI -driven transformation initiatives, says Sargent, re-inforcing the priority placed on AI:

We see AI as a meaningful opportunity to both improve the customer experience and drive productivity across our business. We're already seeing results from more competitive pricing, improved shrink, to faster fulfillment and tools that help our associates work more efficiently. As we move forward, we plan to expand these capabilities, including agentic shopping on our digital properties. Milen's appointment ensures we have dedicated leadership to accelerate this work. 

And the money will be there to back this commitment, promises CFO David John Kennerley:

We have significant investment dollars in 2026 and beyond, targeted at making sure that we crystallize this opportunity. What I'd say is, like many other companies, we're at the early stages. We've made some good progress, but we've got a lot more to do. I think we've got already some emerging good proof points of the work that we're doing. If you look at areas like operations, some of the shrink results that you've been seeing from us, are driven by technology and AI, and that's an area where I'd expect us to continue to invest. In the people space, we've got some really good tools that are improving the employee experience, helping us manage labor better, help us schedule labor better.

And then of course, as a retailer, there’s the rise of agentic shopping to embrace, he adds:

We've got our own digital shopping assistant live in a couple of divisions. That's on the Kroger platform, and we'll expand that later this year to all divisions. We've obviously announced the partnership with Google. And I think there's a lot more to come in the agentic space, leveraging the advantages that we have on quality, freshness, etc. So I think [AI is] a big area of focus for us, [with] some good early proof points, the organizational and foundational investments we're making super critical, and much more to come, both from a customer experience and, what I'd call, productivity experience.

My take

Foran is clearly not about the rock the boat in terms of the e-commerce tough decisions that have been taken over the past two years:

Ron and David and the team, they haven't been sitting on their hands. They've been hard at it and made, I think, some really good decisions around Ocado.

Good news for Kroger, less good for Ocado - but then that’s become something of a theme, hasn’t it?

Onwards!