Kroger (KR) is finding ways to improve its performance with plan to close three automatic warehouses following a review of its eCommerce operation, UBS Securities said in a Tuesday note.

"We think the company is approaching its savings from its eCommerce review in a smart way," the report said.

On Tuesday, Kroger said it expects Q3 impairment charges of about $2.6 billion as a result of the closures and its automated fulfillment network not meeting financial expectations.

The retailer also expects the closures to have a positive effect to eCommerce operating profit of about $400 million in 2026.

The report said some of the amount could flow through to its bottom line even as the company plans to reinvest the majority of the amount in various areas of the business.

"We suspect that it will drop $100mm of the savings to the bottom line and reinvest the majority to drive the business, which could be the right move for the longer-term," it said.

UBS kept its neutral rating on the stock with $74 price target.

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