Executive Summary

• Kroger reported fiscal 2Q16 adjusted earnings per share (EPS) of $0.47 versus $0.44 a year ago and beat consensus by two pennies. Revenues were $26.6 billion, up 4% year over year and slightly below the consensus estimate of $26.8 billion.
• Identical supermarket sales were up 1.7%, however there was deflation in most categories, except in produce and pharmacy.
• The company lowered FY16 EPS guidance to $2.10–$2.20 from $2.19–$2.28 due to continued deflation. Kroger also reduced guidance for supermarket same-store sales and capital expenditures (capex), however, it kept its long-term EPS growth rate target of 8%–11%.