Kroger drives Q3 sales up 5.9% in 'difficult operating environment'

CINCINNATI -- Kroger on Thursday reported a total sales increase of 5.9% to $26.6 billion for the third quarter ended Nov. 5. Total sales, excluding fuel, increased 7.1% in the third quarter compared to the same period last year. Total supermarket sales, excluding fuel and Roundy's, increased 1.6% in the third quarter compared to the same period last year.  

"I am proud of our associates for continuing to connect with our customers in a difficult operating environment," stated Rodney McMullen, chairman and CEO, Kroger. "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," he said. "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 reported net earnings of $391 million, or $0.41 per diluted share, and identical supermarket sales growth, without fuel, of 0.1% in the third quarter of 2016, which ended on Nov. 5. Net earnings in the same period last year were $428 million, or $0.43 per diluted share.

Gross margin was 22.2% of sales for the third quarter.

Kroger narrowed its net earnings guidance range to $2.03 to $2.08 per diluted share for 2016. The previous guidance range was $2.03 to $2.13. Kroger's adjusted net earnings guidance range per diluted share for 2016 is $2.10 to $2.15, which excludes the $0.07 charge from the company's commitment to restructure certain multi-employer pension obligations in the second quarter. The previous adjusted guidance range was $2.10 to $2.20.

For the fourth quarter of 2016, Kroger expects slightly positive identical supermarket sales growth, excluding fuel.

The company's expected capital investments – excluding mergers, acquisitions and purchases of leased facilities – is $3.6 billion to $3.9 billion for the year.

Kroger expects the operating environment in the first half of 2017 to be similar to today. The second half of 2017 should show improvement as the company cycles the current environment.

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