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Kroger (KR) is sharply lower today after reporting its Q3 (Oct) results this morning. The grocery giant extended its more-than-five-year streak of EPS beats, though the upside was narrower than recent quarters. Revenue was just in line with expectations, increasing 0.7% yr/yr to $33.86 bln. It also narrowed its full-year guidance for EPS and comps to $4.75-4.80 (prior $4.70-4.80) and +2.8-3.0% (prior +2.7-3.4%). The mid-point of its new EPS guidance was a bit shy of analyst expectations.

• Identical sales (ex-fuel) rose +2.6% but softened from Q2 as several pressures weighed on customer behavior, including macro uncertainty, reduced SNAP benefits late in the quarter, and more cautious spending from middle and lower income households.
• Customers made smaller, more frequent trips and cut back on discretionary items, while food, private-label, and ready-to-eat categories remained more resilient, underscoring a consumer that is increasingly focused on value and prioritizing essentials.
• Gross margin expanded 40 bps to 22.8%, supported by lower shrink, improved supply chain costs, and a strong private-label mix, factors that helped support the EPS upside, alongside share repurchases, in a challenging backdrop.
• A big focus was its eCommerce business, which continued its strong performance, increasing 17% and marking six consecutive quarters of double-digit sales growth. KR also expects its e-commerce operations to become profitable in 2026 following its hybrid fulfillment overhaul.
• The revised guidance reflects a continuation of Q3 pressures, tougher Q4 comparisons, and about a 30 bps pharmacy headwind to ID sales tied to the Inflation Reduction Act, with e-commerce and private label remaining important offsets.

Briefing.com Analyst Insight

KR delivered a steady quarter, supported by solid margin expansion, strong private-label performance, and continued digital momentum, enough to extend its long streak of EPS beats despite a challenging consumer backdrop. However, the results weren't strong enough to offset the cautious tone around the consumer or the modestly trimmed expectations in its updated guidance. Identical sales slowed as SNAP timing, inflationary pressures, and reduced discretionary spending from middle income and lower income households weighed on results. Longer term, the expected profitability of e-commerce in 2026 is a meaningful positive, but near-term sentiment is dampened by softer comps and guidance, with the EPS midpoint landing below expectations and ID sales (ex-fuel) nudged lower.