Comp momentum intact at Kroger

Kroger extended its same store sales winning streak to 36 consecutive quarters and reported better than expected profits Thursday.

The grocer reported a third quarter adjusted profit of 46 cents a share that exceeded analysts’ consensus estimate by three cents and said its identical store sales grew by 3.2%. Total sales, including fuel, increased 5.9% to $21.8 billion

"The economy is slowly improving, but value customers are still struggling," David Dillon, Kroger chairman and CEO said during a conference call. "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."　

Looking out over the coming holiday and into 2013, unfolding development surrounding the fiscal cliff are seen as a potential negative to sales, according to executives, but generally the economy has been slowly improving among upper-income customers, as evidenced by the "slow, gradual improvement" in identical-store 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 (fourth quarter) trends will also be important, although (identical store sales) seem poised to reaccelerate in 2013, given the return of inflation and diminishing generic impact."

The company also noted an increase in the number of items purchased per trip by its sizable base of loyalty card holders. During the third quarter, Kroger repurchased 14.5 million shares for a total investment of $333 million and reminded investors that during the past four quarter is has invested $1.7 billion in stock repurchases and dividends.