Investors have high expectations heading into Kroger's (KR -0.49%) second-quarter earnings report. While its rival Walmart (NYSE: WMT) has been winning market share in recent quarters, the supermarket chain is still enjoying a persistent growth lift. Wall Street is excited about the potential for new profit streams, too, including from its growing e-commerce channel.

That bright outlook will be tested on Friday when Kroger reveals its latest operating trends while updating its forecast for the rest of the year. Let's look at a few key metrics to watch in that report.

A man shops for beers at a grocery store.

Image source: Getty Images.

Market share

Kroger confirmed back in June that its pandemic boost was far from over. Sure, comparable-store sales turned negative in Q1 after jumping over the last few quarters. But that slump was due to soaring volumes during the initial phases of the pandemic. On a two-year basis, which smooths out that volatility, revenue was up 15%.

Walmart in early August revealed essentially the same growth pace through its fiscal second quarter, and we'll find out this week whether Kroger is holding its own against its key rival in most metropolitan areas.

Walmart credited its fresh produce segment for lifting customer traffic through the early summer weeks, but it's likely that these gains didn't come at Kroger's expense. The big clue will be whether Kroger's two-year growth pace remains comfortably in double-digit territory.

Playing catch-up

Kroger is a bit behind rivals like Walmart and Target in building out a formidable e-commerce fulfillment network. These platforms have been lifting profitability for Kroger's peers through the pandemic by allowing for ultrafast delivery options.

A key part of the bullish thesis for the stock is that Kroger will soon catch up to these peers and begin seeing financial benefits from its multichannel model. Look for the results to show up in operating margin, which currently trails far behind those of most of its peers.

KR Operating Margin (TTM) Chart

KR Operating Margin (TTM) data by YCharts

CFO Gary Millerchip told investors back in June that Kroger's business model will soon start demonstrating its financial strength. There might be hints of that growing earnings power in this week's report.

A new outlook

There's no shortage of potential risks that Kroger executives can cite as they update their short-term outlook this week. These include shipping bottlenecks, inflation, and new COVID-19 outbreaks.

Yet investors might still get a detailed update to the 2021 outlook, which currently calls for sales to rise by about 11% on a two-year basis, compared to the 2% annual pace that shareholders had become used to seeing before the pandemic.

If Kroger can keep growing at least as quickly as its industry while finding ways to boost efficiency, then shareholders should continue accruing solid returns.

In the meantime, they can collect one of the industry's highest dividend yields as they wait for more concrete signs that Kroger is closing the performance gap with national consumer staples retailers like Walmart, Costco, and Target.