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Kroger to Open More Spoke Facilities in Texas, Alabama

Fulfillment network expands to 3 new cities
Marian Zboraj, Progressive Grocer
Kroger to Open More Spoke Facilities in Texas, Alabama
Kroger is expanding its delivery services with more spoke facilities in newly named geographies Austin and San Antonio, Texas, and Birmingham, Ala.

The Kroger Co. continues to expand its reach with the addition of spoke facilities in Austin and San Antonio, Texas, and Birmingham, Ala. As a continuation of Kroger's entry into Florida in 2021 without physical stores, the new Texas and Alabama facilities will serve as new geographies for the company to introduce its modern take on e-commerce.

As with the grocer's other spoke facilities, the new Texas and Alabama spokes will be powered by the Kroger Fulfillment Network and Ocado Group, a U.K.-based technology company that provides end-to-end online grocery fulfilment solutions. Through its hub-and-spoke delivery network, Kroger is able to serve customers without traditional brick-and-mortar stores.

"I'm incredibly excited for the future of Kroger, and both thriving physical stores and digital solutions are part of it,” said Rodney McMullen, Kroger's chairman and CEO. “We continue to feel great about the momentum we're experiencing with Kroger Delivery and our partnership with Ocado, supporting Kroger in strategically leveraging our unique assets to expand in existing regions, including Atlanta, Cincinnati and Dallas, as well as enter into new geographies like Austin, Birmingham, Cleveland, Oklahoma City, Orlando, San Antonio, South Florida and the Northeast through a flexible network of differently sized high-tech facilities operated by friendly and knowledgeable associates.”

The northeast Austin and San Antonio spoke facilities, measuring 70,000 square feet and 67,000 square feet, respectively, will both collaborate with the hub in Dallas (slated to open this spring) to serve as last-mile cross-dock locations for grocery delivery services. Both Texas facilities are pending finalization of lease negotiations.

Meanwhile, the 50,000-square-foot Birmingham spoke facility, located at 30 West Oxmoor Road, will collaborate with the newly opened hub in Forest Park, Ga., a city south of Atlanta.

"Kroger's digital investments are focused on driving expanded capacity, improving the customer experience, and developing new, innovative propositions via our strategic partnerships, including our Kroger Delivery fulfillment network powered by Ocado technologies," said Yael Cosset, Kroger's CIO and chief digital officer. "Kroger's growing seamless ecosystem continues to scale and allow us to reach customers who are not in the proximity of a store with delivery services, and we're committed to doubling both our digital sales and profitability pass-through rate by the end of 2023, and our continued network expansion will help us reach this target."

All three facilities are expected to be operational later this year, with each creating up to 161 job opportunities.

"This network is enabling Kroger to create thousands of technology, operations, logistics and customer care jobs and improve access to fresh food in cities eager for the variety and value offered by Kroger that once could only be accessed through our stores," said Gabriel Arreaga, Kroger's SVP and chief supply chain officer.

Kroger anticipates opening 17 new facilities, including hubs and spokes, within the next 24 months.

The news of the additional spoke facilities follows news of Kroger’s impressive fourth quarter. For the quarter, which ended Jan. 29, same-store sales increased 4% at the grocer. Digital sales grew 105% on a two-year stack. Total company sales were $33 billion for the period, compared with $30.7 billion for the same period last year. Total company sales, excluding fuel, increased 3.7% compared with the same period last year. Net income at Kroger totaled $566 million, or 75 cents per share, a 1.7% increase from the prior-year period. For the full year of fiscal 2021, revenue at Kroger was $137.9 billion, an increase of 0.2%. Net earnings for fiscal 2021 were $1.6 billion, an increase of 1.2%.

Serving 60 million households annually nationwide through a digital shopping experience, and almost 2,800 retail food stores under a variety of banner names, Cincinnati-based Kroger is No. 3 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America.

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