Kroger comps inch ahead in 3Q but outlook cloudy

Kroger Co.’s streak of positive same-store sales survived — barely — in the fiscal third quarter, reflecting challenges of ongoing price deflation and continued sales struggles at its newly acquired Roundy’s businesses.

The 0.1% non-fuel ID sales figure for the period ended Nov. 5 marked the 52^nd consecutive quarter Kroger posted positive comps but the gain was the smallest since that streak began exactly 13 years ago. Moreover, the Cincinnati-based retailer forecast similarly modest comps for the current fourth quarter and first half of next fiscal year.

Total sales increased by 5.9% to $26.6 billion and net earnings decreased by 8.6% to $391 million. Earnings per share of 41 cents met consensus Wall Street estimates.

"I am proud of our associates for continuing to connect with our customers in a difficult operating environment,” CEO Rodney McMullen said in a statement. “Deflation persisted as we expected during the quarter. We are firmly focused on our long-term strategy of improving our connection with customers and associates, and continue working on process changes to lower costs. We don't change our strategy based on quarterly swings in results. We remain committed to delivering on our long-term earnings per share growth rate guidance.”

Kroger said it was expecting “slightly positive” ID sales in the current fourth quarter, but reduced the top of its expected annual earnings guidance range by 5 cents. Kroger now expects to post annual earnings per share of $2.03 to $2.08, or $2.10 to $2.15 when adjusted for a pension restructuring.

The company said it would provide specific guidance for fiscal 2017 when it reports fourth-quarter earnings in March, but said it anticipates positive identical supermarket sales and net earnings likely to be below the low end of the company's 8%-11% net earnings long-term growth plans.