Investors have pushed Kroger (NYSE:KR) stock higher this year, along with rival consumer staples retailers Walmart and Target. Each of these companies has seen a sharp demand spike during the COVID-19 pandemic, and in Target's case, the selling environment produced a record profitability increase.

Kroger is expected to report similarly strong metrics when it announces its fiscal second-quarter results on Friday, Sept. 11. Let's look at the main trends to watch in that report.

A masked shopper holding a grocery bag.

Image source: Getty Images.

Sales growth

Kroger's reporting period doesn't match up exactly with its peers, but investors will still get a good idea of its market share momentum in this report. Walmart is its main rival, and the retail giant announced slowing sales growth that nonetheless still hit 9.3% in the U.S. market through the end of July. Comps growth at Target was a blistering 24.3% in that period.

In mid-June, Kroger announced 19.0% comparable-sales growth for its fiscal first quarter, suggesting it was winning market share. Its report this week will tell investors how much of a slowdown the chain experienced as much of the economy -- including restaurants -- gradually reopened. Investors are expecting revenue growth of approximately 5% compared to last quarter's 11.5% spike.

Operating margin

Last month. Target revealed a historic profitability increase that was supported by consumers' eagerness to pay up for ultra-quick fulfillment options like same-day pickup and delivery services. Kroger doesn't sell as many consumer discretionary products like apparel and home furnishings, so it might not have the same opportunity.

Still, the chain offers premium in-store brands like Simple Truth and has a formidable multi-channel retailing operation. These assets helped push operating margin higher last quarter and should deliver a similar result in the latest period. More broadly, investors who follow the stock are looking for earnings to improve to $0.53 per share from $0.44 per share a year ago.

No new outlook

The variable demand environment, along with big questions around the recession and further COVID-19 outbreaks, should keep CEO Rodney McMullen and his team cautious about issuing any detailed short-term forecast. Three months ago, executives said the pandemic has "dramatically changed the outlook for food retail in 2020," making it "difficult to predict specific outcomes."

Management will probably strike a similar tone on Friday, but investors still might see movement on its capital spending priorities. Kroger has been accumulating most of its excess cash through the pandemic's early days in preparation for a potentially protracted business disruption. The company ended fiscal 2019 with $399 million of cash, but that figure ballooned to $2.7 billion at the end of the fiscal first quarter.

With the possibility of disruptions declining, the chain may choose to take advantage of its stronger financial position by investing more into store upgrades, acquisitions, or directing more cash toward shareholders in the form of dividends and stock buybacks.

Each of these moves have the potential to boost long-term returns for Kroger stock. But the biggest payoff would come from signs that the chain has closed the growth gap with peers like Walmart and is preparing to return to the market-leading expansion rate shareholders saw as recently as 2017.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.