Investors haven't found many reasons to celebrate Kroger's (NYSE:KR) last few earnings reports. That's because the supermarket giant's growth hit a wall over the past 18 months, just when its industry peers were posting impressive sales numbers. The chain's rebound plans haven't delivered concrete results, either, while pushing profitability lower.

On Thursday, Kroger has a chance to change that negative operating story with its fiscal second-quarter earnings report. Management has in fact predicted improving metrics, and this week's results will show whether that bright outlook was too optimistic. Let's take a closer look.

A man examining a jar of olives in the aisle of a grocery store

Image source: Getty Images.

Market share updates

Kroger won small but steady market share gains through the decade ending in 2016, but recently it has been losing ground. Sales growth has been below 2% for several quarters, compared to over 3% for main rival Walmart (NYSE:WMT). For its part, the retailing titan said last month that it continued to gain market share on its way to its best growth rate in over a decade.

Thursday's report will show whether Kroger lost more grocery shoppers to Walmart and other chains, or if growth rebounded. CEO Rodney McMullen and his team suggested the recovery would be coming soon, even if the start to the year trailed expectations. "We had a few headwinds during the first quarter, including sales," management said in June, "which we know must be stronger." Better sales growth would be closer to the 3% that Walmart recently notched than the 1.5% that Kroger managed in its last earnings report.

Financial wins

The consumer staples giant had some encouraging news to report on the financial front last quarter, raising expectations for brighter earnings numbers this week. Gross profit margin held steady in Q1 thanks to robust demand for Kroger's in-store brands. These franchises now account for over 30% of sales volume and are among the fastest-growing categories in the store. Kroger also noted improving free cash flow trends, which should show up again on Thursday.

Sure, these wins haven't yet delivered the rebounding bottom-line profitability that investors have seen at Walmart and Target (NYSE:TGT) this past year. But Kroger isn't as far along in its multichannel retailing transition, and so its results have been lagging. Management has been predicting that shift will happen as soon as the back half of fiscal 2019, and this week's report will go a long way toward boosting -- or deflating -- that optimism.

How 2019 is shaping up

Both Walmart and Target raised their 2019 outlooks following their second-quarter reports and there's a chance Kroger will follow suit with its own upgrade. After all, its latest announcement only calls for growth of about 2% while peers are boosting guidance above 3%.

Given its slow start to the year, though, investors might be happy enough to see Kroger's growth rate affirmed rather than lowered. Its outlook calls for sales to accelerate over the year's final three quarters. There was little evidence of that rebound building in its last report, and that's the main thing to look for in this week's announcement.

Even a modest uptick will support management's claim that its three-year rebound plan is finally gaining steam in its second year. Reduced guidance, on the other hand, would suggest mounting execution issues that threaten to keep Kroger's earnings declining for potentially a fourth straight year.

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