Pity supermarket giant Kroger (KR) . Even when you think all the bad news is out there, the food and drug store retailer finds ways to disappointingly surprise. On Thursday, Kroger trimmed its 2016 fiscal year earnings forecasts when it reported its third quarter results, though investors have chosen not to punish the stock in the day's trading.

Kroger, the nation's largest supermarket retailer with 2,700 locations, said it expected to report earnings of $2.10 to $2.15 for its 2016 fiscal year, effectively reducing the top end of its previous forecast, which had called for EPS of $2.10 to $2.20. Analysts have been looking for the company to come in at $2.13. The company's 2016 fiscal year ends Jan. 28, 2017.

The company did put up fiscal third quarter results that matched Wall Street's forecasts at 41 cents a share. Revenue of $26.56 billion for the period narrowly outpaced forecasts.

Kroger management said in a statement that it would give fiscal 2017 guidance in March. The company said it was standing by its long term ambitions to grow earnings between 8% and 11%, but acknowledged today that it expected its 2017 numbers to come up short of the low end of that projection.

Kroger, like a number of food purveyors, has been hit by the deflation in food prices that has persisted for most of the year, owing to a pullback in agricultural commodity and energy prices. The best-case scenario for the retail category is that the declines in food prices bottomed out in October, and that the extent of the pressure on food prices will narrow in coming quarters. However, there's little hope that food prices will actually begin to head higher anytime soon, which might mean that food retailers will be fighting this headwind for much of calendar 2017.

Kroger also has been hit by the push on the part of deep discount retailers into its business. Walmart Stores (WMT) has made a big move into the food retailing industry, often using lower food prices to drive traffic into its locations to promote the sale of products in other parts of the store.

Meanwhile, Kroger is being threatened by the incursion of European based deep discount retailers. Privately held German based Aldi has 1,400 U.S. stores, and has been expanding aggressively into southern California. Meanwhile, Lidl, another German deep discounter, has announced its intentions to push into East Coast markets by 2018. The competitive threats have only exacerbated the pressure that food deflation has put on retailers such as Kroger.

It's not as if Kroger is defenseless against these competitive forays. It's considered to be among the least expensive large cap retailers, with a P/E of 15. Operationally, the company is regarded as having a strong value proposition for consumers, a robust private label business, a diverse store base and a reputation for strong execution. It's building on its digital sales channel. There's also been chatter that Kroger would be a beneficiary if the incoming Trump administration made good on suggestions that it will look to reduce corporate taxes, a move that could immediately improve Kroger's financial performance.

Kroger has been making some attempts to mollify skeptics. For instance, it has stepped up its attempts to return cash to shareholders with dividends and buybacks. But analysts said that bears continue to greatly outnumber bulls on the stock, as Deutsche Bank pointed out in a recent analysis report.

The stock is actually higher in Thursday's trading, despite the lackluster guidance, with shares adding 31 cents intraday to get to $32.26.

However, the stock has been hit hard this year, falling 23% year to date as of Wednesday's close of trading, as investors focused on the overhangs of food deflation and the fierce competitive environment.

What's more, there's not much optimism for an imminent recovery in value. Kroger customarily traded at an enterprise value to Ebitda multiple of 7.9 times. With the pullback this year, that figure is closer to 7.1 times. Fundamentals and financials would both have to show some recovery for investors to get optimistic that the stock should trade closer to the 8 times EV/Ebitda figure that competitors like Walmart command. The reality, analysts have said recently, is that Walmart has some growth strategies it's executing on, while Kroger remains at the whims of the supermarket business's destructive fundamentals.

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