Kroger's Q4 Comps Looking Flat, But That's A Good Thing

Kroger Co KR surprised the Street in early December, when it reported in-line third quarter earnings but lowered the upper-end of its adjusted earnings per share guidance for the full year lower.

Kroger's stock has lost 9 percent over the past year and failed to participate in the "Trump rally" but analysts at Citi are finding some encouraging signs.

Alvin Concepcion, Citi's lead analyst covering the food and drug retail chain stocks, commented in a brief note that the first two months of Kroger's fourth quarter operations appear to show "solid" sales amid a favorable environment.

The analyst, citing data from Nielsen, believes that identical sales for the quarter thus far are running at 0.0 percent and this is actually positive since it would imply a running rate above investor expectations which was calling for negative identical sales.

Concepcion added that comparisons got sequentially easier by 120 basis points after the first two months of the quarter and if trends continue to accelerate then the company could be within range of achieving its guidance of reporting a "slightly positive" comps for the fourth quarter.

Finally, the analyst's findings relating to the competitive and promotional environment implies a stable and possibly better environment compared to the third quarter while fuel gross margins are also trending better than expected.