What happened

Shares of Kroger Inc. (NYSE:KR) were pulling back last month on increased competition as the nation's largest traditional supermarket chain lost 11%, according to data from S&P Global Market Intelligence. As the chart below shows, the stock fell alongside the broader market but failed to recover those losses as the S&P 500 bounced back.

KR Chart

KR data by YCharts.

So what 

The parent of chains like Harris Teeter, King Sooper's, Fred Meyer, and Ralph's had little company-specific news to report in the quarter other than the sale of its convenience-store business for $2.2 billion -- which the market didn't seem to react to.

An empty shopping cart in a supermarket aisle.

Image source: Getty Images.

However, Amazon stepped up its efforts to grab market share from Kroger by saying it would make free two-hour delivery available from Whole Foods across the country by the end of the year, starting the pilot program in four markets in February. The announcement is Amazon's biggest attempt to leverage its acquisition of the natural-foods grocery chain and combine it with its Prime loyalty program and its own logistics network.

At the same time, Kroger shares seemed to fall as a hoped-for deal with Boxed or Ailbaba failed to materialize. Shares had jumped in January on rumors of such an alliance.

Now what 

The grocery chain is set to report earnings tomorrow, and a strong report would redeem last month's slide. Analysts expect revenue to increase 11.6%, to $30.8 billion, with help from an extra week in the quarter. On the bottom line, earnings are projected to increase from $0.53 to $0.63. Still, it may take more than beating estimates to please the market.

As Amazon encroaches into Kroger's territory, pay attention to Kroger's digital sales growth, which more than doubled in its last report, as well as other efforts to fend off competition, like its expansion of ClickList, its grocery-pickup program. Comparable sales also will help highlight the company's ability to retain market share.

Thus far, Kroger has fared well since the Amazon-Whole Foods combination, and a strong report could propel a recovery, considering the stock looks cheap after the recent sell-off.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Kroger. The Motley Fool owns shares of and recommends Amazon. The Motley Fool is short shares of Kroger. The Motley Fool has a disclosure policy.