Executive Summary

• Kroger reported 3Q16 EPS of $0.41, in line with the consensus estimate. Revenues were $26.6 billion, up 5.9% year over year, and above the $26.3 billion consensus estimate.
• Same-store sales ex fuel were up 0.1%, below the +0.5% consensus estimate, and driven by higher transaction sizes that were more than offset by softer customer traffic. Deflation was 1.5% in 3Q, up from 1.3% in 2Q.
• Kroger lowered the high end of its 2016 earnings guidance range, now expecting adjusted EPS of $2.10–$2.15 from $2.10–$2.20 previously. Kroger also expects EPS growth to be below the low end of its 8%–11% target range in 2017.