Kroger (NYSE:KR) is set to report its earnings results in just a few days, and investors are in high spirits heading into the announcement. Sure, the leading supermarket chain is likely to endure a growth slowdown as compared to 2020's booming results. But Kroger's flush cash position and wider customer base gives it a good chance at securing fundamentally stronger operating results over the long term.

With that big picture in mind, let's look at a few key points to follow in the retailer's announcement on Thursday, June 17.

A shopper looking at baby care products in a supermarket and pushing a stroller.

Image source: Getty Images.

Market share battle

The pandemic boost is likely over. Most investors who follow the stock are expecting to see sales tick lower compared to last year's soaring result. For context, revenue expanded at a double-digit rate in the fiscal fourth quarter.

Swinging consumer demand related to the pandemic will add noise to Kroger's next few earnings reports, but the more instructive trend to follow is market share. The chain said back in March that its multi-channel selling platform, combined with popular in-store brands like Simple Truth, has allowed it to outgrow the wider industry. "We see a 98% retention rate within our ecosystem," CEO Rodney McMullen told investors.

Yet Walmart (NYSE:WMT), its biggest competitor, recently claimed a big market share increase in the grocery store niche to start 2021. By following management's sales update, we'll find out this week whether some of that growth came at Kroger's expense.

Cost spikes

There are big questions around profitability, too, given that Kroger and its rivals must pour cash into their stores, supply chains, and e-commerce platforms to accommodate for all the extra volume they've enjoyed since the start of the pandemic. Prices are rising on essentials like beef, which provides a challenge for retailers hoping to pass along those costs while keeping sales humming along.

Follow Kroger's gross profit margin for hints about how well the company is doing on that score. The metric is approaching Walmart's 25%, but might take a small step backward if the chain struggled with supply chain, inventory, or pricing challenges.

Yet cash flow should remain strong, giving Kroger flexibility as it looks to build on its 2020 wins.

Debt and outlook

McMullen and his team might direct much of that excess cash toward stock buybacks. Debt is far below management's target, though, which means Kroger could be in the market for another large acquisition over the next few quarters. Its $2.5 billion Harris Teeter purchase worked out well, after all.

Finally, watch for executives to update their full-year outlook to incorporate all the latest sales trends. That forecast currently calls for sales to fall by between 3% and 5% compared to last year's 14% increase. On a two-year basis, which smooths out the volatility brought on by the pandemic, revenue should rise by about 10% from 2020 through 2021.  

That's a slight improvement over the 8% to 11% annual increase that management had targeted before COVID-19. But it will be some time before investors can be confident that Kroger is on a sustainably stronger growth and earnings path.

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