Kroger 3Q earnings don't disappoint as food retailer posts 36th consecutive same-store sales growth

CINCINNATI — Kroger remained one of the few outperforming supermarket operators Thursday morning as the grocer exceeded analyst consensus adjusted earnings per diluted share by 3 cents with 46 cents per share. Actual reported net earnings were even higher — 60 cents per share — as Kroger benefitted from a settlement with Visa and MasterCard and from a reduction in the company's obligation to fund the UFCW consolidated pension fund created in January. 

Kroger shares were up 3.4% to $25.90 in late morning trading. 

Looking out over the coming holiday and into 2013, the news surrounding the fiscal cliff does hang as a potential pall over future sales executives noted, but generally the economy has been slowly improving among upper-income customers, as evidenced by the "slow, gradual improvement" in identical-store sales. 

For the third quarter ended Nov. 3, Kroger posted same-store sales growth of 3.2%, not including fuel sales, marking the company's 36th consecutive quarter of positive identical supermarket sales. 

Credit Suisse analyst Ed Kelly predicted that Kroger would be able to maintain identical store sales increases of 3.5% through 2013 in a research note published Wednesday. "Improved volume growth should offset less inflation and the generic wave," he suggested. "Management’s comments on Q4 trends will also be important, although IDs seem poised to reaccelerate in 2013, given the return of inflation and diminishing generic impact."

"The economy is slowly improving, but value customers are still struggling," David Dillon, Kroger chairman and CEO told analysts Thursday morning. "Overall consumer confidence is up, but it remains fragile," he said, pointing to the increased attention the media has currently placed around the "fiscal cliff." 

Among Kroger's loyalty card household base, units per trip has been climbing, too. That's an indicator that on one hand, Kroger is satisfying more shopper needs — and on the other hand, that consumers are increasing their supermarket budgets. 

Total sales, including fuel, increased 5.9% to $21.8 billion. Total sales, excluding fuel, increased 3.7%.

Kroger's strong financial position has allowed the company to return more than $1.7 billion to shareholders through share buybacks and dividends over the last four quarters. During the third quarter, Kroger repurchased 14.5 million common shares for a total investment of $333 million, the company reported.