Investors never abandoned Kroger (NYSE:KR) stock, even during the worst of the market slump in late March. Shares didn't even fall into negative territory for 2020 that month, in fact, and they're significantly outperforming the S&P 500 through early June.

That rally will be tested when the supermarket chain announces its first-quarter results on Thursday, June 18. And, while that report is likely to show strong sales growth as consumers stocked up on essentials and home cooking supplies, Kroger might struggle to stand out against peers like Walmart (NYSE:WMT) and Costco (NASDAQ:COST).

A woman shops while wearing a mask.

Image source: Getty Images.

A blowout growth number

All signs are pointing to Kroger announcing a record-setting growth figure for the period as consumer demand shifted drastically toward satisfying home cooking needs in recent months. The fiscal first quarter runs through late May and covers the period of maximum COVID-19 related social distancing efforts in the U.S.

The big question is whether Kroger held its own in the market share battle with Walmart and other national retailers. Walmart announced a 10% spike in comparable-store sales through late April and Costco has been growing at a 7% clip through May.

Most investors who follow the stock are expecting Kroger to post similarly strong growth of around 8% on Thursday. Keep an eye on the e-commerce sales channel, which was a standout competitive asset for Walmart through the early days of the pandemic.

Challenging work environment

Kroger's position as an essential retailer came with some major costs that should harm profitability this week. Those costs include extra cleaning and sanitation expenses, higher wages for front-line employees, and more generous paid leave for workers risking their health as the novel coronavirus spread around the country.

The financial impact from these moves has hurt some retailers more than others. Walmart's cash flow slumped, for example, while Dollar General's soared. Kroger's more focused merchandise portfolio should tilt its results closer to the positive side of the spectrum, though. It doesn't have a large apparel business, for example, that might require huge writedown charges. Thus, investors are expecting overall earnings to improve to roughly $1 per share from $0.73 per share a year ago.

The latest updates

Kroger is likely to avoid making any short-term outlook prediction, just as its peers have done, while citing huge variables at play around the path of the novel coronavirus and economic growth rates. But its report will cover about one month of shopping trends more than its main rival Walmart, so investors should get extra clarity from the supermarket giant.

CEO Rodney McMullen and his team said in early March that they expected comps growth to accelerate slightly for the second straight year, rising up to at least 2.25% compared to 2% in fiscal 2019. Executives predicted that this sales haul would translate into operating profit of roughly $3 billion and adjusted free cash flow between $1.6 billion and $1.8 billion.

The COVID-19 pandemic likely pushed sales gains well ahead of that initial target through the start of the year. But we'll find out on Thursday how its finances were impacted, and whether management is seeing a sharp slowdown as states relax their stay-at-home orders and the restaurant industry reopens for business.

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