Kroger stunned investors with a $1.32 billion quarterly loss early this month, exposing years of strategic missteps. Once seen as a retail titan, the 142-year-old grocer now struggles to compete with Walmart, ALDI, and Costco. Five converging crises—including a failed $2.6 billion automated warehouse project, a nine-month leadership vacuum, a blocked merger lawsuit, and over 3,600 job losses—have reshaped its trajectory.
CEO Rodney McMullen’s resignation and ongoing litigation only add to the turmoil. “We raised prices on milk and eggs beyond inflationary increases,” admitted Kroger executive Andy Groff during the merger trial, highlighting operational miscalculations.
The Merger That Never Was
Kroger’s 2022 announcement of a $24.6 billion merger with Albertsons promised a retail powerhouse capable of challenging Walmart’s dominance. Shareholders were optimistic, yet the plan masked underlying operational weaknesses. In December 2024, a U.S. District Court in Oregon blocked the merger on antitrust grounds, following the FTC’s February 2024 lawsuit, which claimed that reduced competition would harm consumers.
During the August 2024 trial, Kroger executive Andy Groff admitted to raising milk and egg prices above inflation, a move regulators called price gouging. Albertsons terminated the deal, demanding a $600 million termination fee plus additional damages, while Kroger countersued in March 2025, alleging sabotage. The ongoing litigation distracts management and adds financial uncertainty, leaving Kroger vulnerable as competitors continue to gain ground.
The Ocado Disaster
Kroger’s partnership with Ocado, a British automated fulfillment technology company, has been a costly misstep. Signed in 2018, the collaboration aimed to modernize Kroger’s online fulfillment. However, by June 2025, only eight of the planned 20 warehouses were operational. Each facility required 5,000 to 8,000 daily orders to break even, yet Kroger managed just 2,000 to 3,000, highlighting fundamental flaws in its digital strategy.
In Q3 2025, Kroger wrote off $2.6 billion in failed warehouse investments and paid Ocado $350 million to settle the partnership. This dramatic loss erased years of shareholder value in a single decision and underscored the risks of relying heavily on unproven technology without proper execution.
Leadership Collapse and Market Decline
CEO Rodney McMullen resigned on March 3, 2025, after a board ethics investigation, leaving Kroger in a nine-month leadership vacuum. Interim CEO Ron Sargent inherited a company grappling with operational crises and declining market share. Kroger’s U.S. share fell from 9.8% to 8.5% over five years, while Costco gained 1.4 points to 8.4%, and Walmart maintained 21% dominance.
YouGov’s December 2025 grocery rankings placed Kroger fifth in consumer consideration at 23.9%, far below Walmart at 63.3%. Value perception also lagged, with ALDI scoring 38.6 compared to Kroger’s lower rating. Despite a 2.6% identical sales growth in Q3 2025 excluding fuel, U.S. core inflation of 3.0% to 3.2% meant real sales actually declined, showing Kroger’s widening gap between revenue and operational costs.
The Human Cost
Kroger announced 60 store closures through mid-2026, resulting in the elimination of 1,500 to 2,100 store-level positions. Corporate layoffs in August 2025 affected fewer than 1,000 employees, primarily in tech and digital teams responsible for 17% of e-commerce growth in Q3. The automated fulfillment center closures in Madison, Wisconsin; Groveland, Florida; and Frederick, Maryland, impacted over 1,300 workers, many of whom had relocated for these positions.
Employees earning $18 to $24 per hour received WARN notices in November 2025, facing sudden uncertainty. These closures highlight the real human impact of Kroger’s failed strategies, as frontline workers bear the brunt of corporate missteps while leadership navigates ongoing litigation and operational recovery.
What Comes Next
Kroger will appoint its first external permanent CEO in Q1 2026, aiming to stabilize operations and improve e-commerce profitability by $400 million following Ocado closures. Yet market share losses to Walmart, ALDI, and Costco persist, making the challenge formidable. The company must rebuild consumer trust, reestablish value perception, and execute operational fixes while managing lingering litigation and employee uncertainty.
Kroger’s recovery now depends on decisive leadership, strategic clarity, and renewed focus on efficiency. The next steps will determine whether this grocery giant can regain relevance or if its decades-long dominance will continue to erode under mounting pressures.
Sources:
FTC lawsuit filing (February 2024) challenging Kroger-Albertsons merger
U.S. District Court Oregon ruling (December 10, 2024) blocking merger
Kroger Q3 2025 earnings report (December 4, 2025)
Wisconsin Department of Workforce Development WARN notice (November 18, 2025)
Maryland Department of Labor WARN notices (November 19 and 24, 2025)
Florida Commerce WARN notices (November 2025)
YouGov U.S. Grocery Store Brand Rankings (2025)
Kroger-Albertsons merger agreement announcement (October 14, 2022)