Kroger (NYSE:KR) will post its first-quarter earnings numbers on Thursday, June 15, and investors aren't expecting much from the supermarket giant. In fact, the stock has trailed the market by a brutal 30 percentage points over the past year.

Yes, unfavorable shifts in Kroger's industry have dimmed its growth prospects for 2017. But does that slowdown really threaten its long-term business trajectory? 

Let's take a closer look at the important trends to watch in this week's results.

A man shopping for groceries.

Image source: Getty Images.

Slowing growth

Until just recently, Kroger was one of the fastest-growing national retailers on the market. Comparable-store sales gains were 4% or better for the two fiscal years ended in late 2015 but have decelerated sharply since then.

Its most recent growth pace was a tiny 1% that still marked a rebound from flat results in the prior quarter. Until that uptick, Kroger had seen its comps gains decline for four consecutive quarters.

Grocery price deflation reached historic levels during this period, so the slump isn't really reflective of competitive stumbles. Instead, Kroger increased its market share in fiscal 2017 for the 12th straight year. 

Against that backdrop, investors are expecting the retailer to post flat or slightly negative comps this quarter even as its sales volume ticks higher. CEO Rodney McMullen and his executive team in early March predicted near zero growth for the first and second quarters of the year, with comps accelerating in the second half of fiscal 2017. If quarterly comps do fall into negative territory, it will be the first time they have declined in over 10 years. 

Flat profits

Profit margin will tell investors a lot about how the competitive pressures on Kroger are affecting the business. Gross profit was 22% of sales in 2016, essentially flat against the prior year.

That's far lower than Whole Foods' (NASDAQ:WFM) 34% gross margin, which helps explain how Kroger has managed to significantly outgrow the organic and natural foods giant lately. 

Gasoline sales are a long-term drag on Kroger's profitability since they carry lower margins than the rest of the business. However, management plans to continue aggressively expanding its base of fuel centers because they help drive customer traffic. 

On the positive side, Kroger's profits are lifted by sales of its corporate label products. Anchored by growth in the Simple Truth organic franchise that has snatched market share from Whole Foods, these offerings hit a record 29% of sales volume last year and could climb past one-third of the retailer's business this year. 

Steady long-term outlook

Kroger aims to expand market share each year so that it can generate profit growth of between 8% and 11%, supplemented by a steadily growing dividend. Altogether, shareholders can expect to see total returns in the low double-digits over the long term.

The retailer has outperformed that target by a wide margin recently, with earnings improving 14% annually over the past three years. However, 2017 is likely to be a departure from that trend. Kroger's initial full-year outlook called for sales growth of below 1% powering profit gains of between 6% and 8%. Earnings growth would have been even worse, but the company is benefiting from an extra week in this calendar year that management believes will push per-share profit higher by $0.09.

Kroger isn't planning on sitting still through that soft operating environment and instead will plow investments into upgrading its stores, bulking up its e-commerce infrastructure, and hunting for game-changing acquisitions. Ideally, those moves will put the business into position to expand sharply once industry conditions turn positive again.