Kroger Co. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, Profit Drops

S&P 500 (NYSE:SPY) component Kroger Co. (NYSE:KR) reported its results for the third quarter. Kroger is a retail chain operating food and drug stores, multi-department stores, jewelry stores, and convenience stores in the United States.

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Kroger Earnings Cheat Sheet for the Third Quarter

Results: Net income for the grocery store fell to $195.9 million (33 cents per share) vs. $202 million (32 cents per share) a year earlier. This is a decline of 3% from the year earlier quarter.

Revenue: Rose 10% to $20.6 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: KR beat the mean analyst estimate of 31 cents per share. Analysts were expecting revenue of $20.38 billion.

Quoting Management: “Kroger had an outstanding third quarter. Our associates delivered on our Customer 1st strategy and we had strong sales and earnings per share growth,” said David B. Dillon, Kroger’s chairman and chief executive officer. “This is exactly the positive momentum we strive for as we enter the holiday season, our most exciting time of the year. Based on the consistency of our results, we have the confidence to raise our earnings guidance for the year.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.5 percentage points to 20.6% from the year earlier quarter. Over that time, margins have contracted on average 1.2 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 11.3% to $20.91 billion in the second quarter. The figure rose 10.9% in the first quarter from the year earlier and climbed 7.6% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 41 cents versus a mean estimate of net income of 43 cents per share.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 48 cents per share, down from 51 cents ninety days ago. At $1.95 per share, the average estimate for the fiscal year has fallen from $1.96 ninety days ago.

Competitors to Watch: Safeway Inc. (NYSE:SWY), Whole Foods Market, Inc. (NASDAQ:WFM), SUPERVALU INC. (NYSE:SVU), The Fresh Market Inc (NASDAQ:TFM), Winn-Dixie Stores, Inc. (NASDAQ:WINN), Ingles Markets, Inc. (NASDAQ:IMKTA), Weis Markets, Inc. (NYSE:WMK), Delhaize Group (NYSE:DEG), Ruddick Corporation (NYSE:RDK), Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Arden Group, Inc. (NASDAQ:ARDNA).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)