Grocery chain Kroger (NYSE:KR) this week posted third-quarter earnings results that beat Wall Street's, and management's, already-high expectations. The retailer put more distance between itself and rivals while boosting its 2015 growth outlook for the third time this year.

Here's a breakdown of the headline results:

The raw numbers

 

Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)

Revenue

$25.1 billion

$25 billion

N/A

Net Income

$428 million

$362 million

18%

EPS

$0.43

$0.36

19%

Source: Kroger financial filings.

Surprising sales and profit growth
Comparable store sales growth clocked in at 5.4%, for a surprising acceleration over the prior quarter's 5.3% uptick. Kroger has now seen its comps improve by 5% or better for the last five straight quarters. That performance trounces rivals like Whole Foods (NASDAQ: WFM), which has had trouble finding positive comps lately, and Wal-Mart. Whole Foods last month announced a slight decrease in third-quarter comps, which management attributed to increasing competition as its customer traffic fell by 1%. Judging by Kroger's growth results, it's clear that it is capturing at least some of the natural foods leader's thunder .

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Quarterly comps growth excluding fuel sales. Source: Kroger filings.

Kroger also beat profit expectations, with earnings rising nearly 20% to $0.43 per share. Consensus estimates were for a much smaller improvement, to $0.39 per share. Expenses grew at a slower pace than revenue, powering a hefty profitability gain: Operating margin jumped to 3.1% of sales from 2.6%. "Kroger's consistent results demonstrate once again that our relentless focus on customers is the key to sustainable shareholder returns," CEO Rodney McMullen said in a press release.

Capital spending and returns
Aiming to take advantage of that strong operating momentum, management prioritized expansion spending over cash returns to shareholders. Kroger spent $832 million on capital investments -- and just $31 million on stock repurchases this quarter.

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Image source: Kroger.

Executives said in September that they have identified a "strong pipeline of high quality projects" that they plan to devote as much as $3.3 billion toward this year. That includes initiatives like new store brands, and online ordering and delivery.

As a result, stock buybacks have taken a back seat to those projects, for now. Repurchase spending is running at half the pace of the same period last year.

Rising outlook
Kroger boosted its 2015 growth outlook for the third time this year. Management now sees comps improving by as much as 4.5% next quarter, which implies full-year growth of as much as 5.25%. Executives had started the year targeting 3.5% comps in 2015, before steadily ratcheting up that forecast with each passing quarter.

Profit is now expected to be $2.03 per share, or 15% above last year's haul. That puts management on track to significantly outpace their long-term target of between 8% and 11% annual EPS growth.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Demitrios Kalogeropoulos owns shares of Whole Foods Market. The Motley Fool owns shares of and recommends Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.