Mammoth grocery-store chain The Kroger Co. (NYSE: KR) recently posted very solid third quarter (3Q) results. Total sales increased 10% to $16 billion for the quarter. This marks the 10th quarter in a row that Kroger has posted sales increases of at least 3%. Year-to-date (YTD) total sales increased 7.6% to $53 billion. 3Q net earnings were equally impressive, $253.8 million or $0.37 per diluted share. This represents a $39 million improvement over 3Q 2006 net earnings. Grocery stores have notoriously low profit margins, so it speaks well of Kroger management that Kroger earned these good numbers while increasing profit margins slightly, expanding capital investment to $555 million, growing its own line of organic goods, while simultaneously decreasing general administrative expenses.

YTD net earnings stand at $857.6 million or $1.22 per diluted share, a 20% increase over 2006 results. Given the strong comparable stores sales growth, Kroger CEO David Dillon has raised FY 2007 guidance to reflect 5% overall sales growth, which will exceed the previous guidance figure of $1.67 per diluted share. Kroger repurchased 16.5 million shares in 3Q 2007, for a total of $442 million, with $200 million leftover for 4Q buybacks.

Investors were perhaps hoping for even better news from Kroger. The stock lost over 8% of its value in the previous week, and closed at $25.88 on 19 December, down $0.29.