CINCINNATI, OH - Citing sinking food prices as a cause, Kroger Co. announced third quarter results that fell on the lower end of its expectations.

Rodney McMullen, Chairman & CEO, Kroger"I am proud of our associates for continuing to connect with our customers in a difficult operating environment,” said Chairman and CEO Rodney McMullen, in a company press release. “Deflation persisted as we expected during the quarter. We are firmly focused on our long-term strategy of improving our connection with customers and associates, and continue working on process changes to lower costs. We don't change our strategy based on quarterly swings in results. We remain committed to delivering on our long-term earnings per share growth rate guidance."

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According to Reuters, Kroger's stock fell around four percent in premarket trading. Since then, however, shares seemed to have stabilized, even rising a modest 2 percent. 

Details of the third quarter report include:

• Total sales increased 5.9 percent to $26.6 billion, compared to $25.1 billion this time last year.
• Total sales excluding fuel grew a more robust 7.1 percent compared to the same period last year.
• Total Supermarket sales, excluding fuel and Roundy’s, increased 1.6 percent in the third quarter compared to last year.

• Gross margin was 22.2 percent of sales this quarter.

• Total operating expenses—adjusted to exclude fuel, Roundy’s, and an $80 million contribution to the UFCW Consolidated Pension Plan in the third quarter of 2015—increased 19 basis points as a percentage of sales compared to last year.

• Net total debt to adjusted EBTIDA ration increase to 2.35 in the third quarter, compared to 1.99 during the same time last year, in part as a result of mergers with ModernHEALTH and Roundy’s Inc.

• Return on invested capital, excluding Roundy’s, was 13.63 percent for the third quarter, down from 14.16 percent in the third quarter of 2015.

Kroger has modified its fiscal guidance for the remainder of 2016:

• A net earning guidance range of $2.03 to $2.08 per diluted share, adjusted from a previous guidance of $2.03 to $2.13.
• An adjusted net earnings guidance range of $2.10 to $2.15 (excluding a $0.07 charge as a result of restructuring some multi-employer pension obligations), down from a previous guidance of $2.10 to $2.20.
• Expected capital investments—excluding mergers and acquisitions—is $3.6 to 3.9 billion for the year.
• Excluding fuel, the company expects slightly positive identical supermarket sales growth.

Kroger intends to announce its 2017 business plan and fiscal guidance in March. The company expects positive identical supermarket sales, a net earnings growth on the low end of the company’s 8 to 11 percent long term growth rate, and an operating environment very similar to today’s. The company says it remains committed to achieving its long projections and to growing dividends.

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Kroger Co.