Kroger's (NYSE:KR) rebound is gaining steam. The supermarket chain this week announced its third consecutive quarter of improving sales gains even as management forecast another uptick in the key holiday quarter.

More on that optimistic outlook in a moment. First, here's how the third-quarter results stacked up against the prior-year period:

 Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

27.7 billion

$26.5 billion

4.5%

Net income

$397 million

$391 million

1.5%

Earnings per share

$0.44

$0.41

7.3%

Data source: Kroger financial filing.

What happened this quarter?

Kroger's sales growth pace inched higher to pass 1% for the first time in over a year. The improvement marked the third straight time that comparable-store sales accelerated since hitting a low in the fourth quarter of 2016.

Chart showing improving comps over the last three quarters.

Data source: Kroger filings. Chart by author.

Here are some key highlights from the quarter:

  • Kroger's 1.1% comps growth translated into modest market share gains, likely against its main competitor, Wal-Mart Stores (NYSE:WMT).
  • Gross profit margin rose slightly, to 22.4% of sales from 22.1%, as the savings from lower costs were only partially offset by price cuts.
  • E-commerce sales more than doubled due to Kroger's ClickList acquisition.
  • Operating margin held steady at 2.7% of sales.
  • Return on invested capital was unchanged at 12%.

What management had to say

CEO Rodney McMullen expressed confidence that Kroger's growth initiatives are resonating with shoppers. "Customers are recognizing our efforts to redefine the customer experience and rewarding us with their loyalty," he said in a press release. "We continue to accelerate our digital and e-commerce offerings, to grow our [in-store] brands, to lower prices for customers, and to invest in our associates," he continued.

A woman pushes a grocery cart.

Image source: Getty Images.

Overall, the results imply healthier operating gains ahead, according to executives. "This quarter shows that by investing for the future, our business continues to improve and gain momentum," McMullen said.

Looking forward

Kroger is looking forward to the seasonally strong fourth quarter that has gotten off to a quick start thanks to record Black Friday sales at its Fred Meyer stores. The healthy customer traffic numbers so far led management to forecast comps of above 1.1% for the holiday quarter, which would translate into Kroger's fourth consecutive quarter of logging improved sales trends.

McMullen and his team didn't upgrade their profit outlook that calls for earnings of between $1.74 per share and $1.79 per share. Thus, the retailer remains on track to post significantly lower profits this year as it cuts prices to stay competitive against rivals both online and in physical stores. In contrast, its long-term per-share earnings goal, which management recently stepped away from, had targeted annual growth of between 8% and 11%.

Still, this quarter's comps, and the bright outlook that management issued, show that Kroger's value-based strategy is delivering the results that executives hoped it would. The chain is expanding market share while generating modest, but still positive, earnings.

Yes, its growth pace is still far from the 5% or better that shareholders enjoyed through most of 2014 and 2015. But Kroger today appears to be turning the corner and headed toward the type of robust sales gains that will allow for a return to profit growth, perhaps beginning in fiscal 2018.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.