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Kroger: Can We Expect a Solid Quarter this Time?

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Part 2
Kroger: Can We Expect a Solid Quarter this Time? PART 2 OF 5

Understanding Kroger’s Top Line ahead of 2Q18 Earnings

Kroger’s sales growth to slow down in 2Q18

As we’ve discussed, Kroger (KR) will be reporting second-quarter results on September 8. The company is expected to grow revenues by 3.5% YoY (year-over-year) to $27.5 billion. This would be the supermarket giant’s slowest growth quarter in the last year and a half.

Kroger’s close competitor and the largest food retailer, Walmart (WMT), reported a 2.1% jump in sales to $123 billion when it reported second-quarter results on August 17. The company outdid Wall Street expectations by $560 million.

Kroger’s top line grew 4.9% YoY during the first quarter as the company benefited from its recent merger with ModernHEALTH. Same-store sales remained negative for the second consecutive quarter and stood at -0.2% (ex-fuel).

Understanding Kroger’s Top Line ahead of 2Q18 Earnings

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Kroger’s comps have been negatively impacted by deflationary headwinds and a tough retail environment over the last couple of quarters. Now that deflation has subsided, increasing competition—especially from Amazon (AMZN)—remains a key concern.

How Amazon could impact Kroger and other grocers

Amazon acquired organic and natural food pioneer Whole Foods Market (WFM) in June to increase its footprint in the grocery market.

Amazon now plans to cut prices at Whole Foods and might be willing to snatch away market share at the cost of its own profits. However, a price war in an already struggling grocery segment with razor-thin margins seems like bad news for the likes of Kroger, which solely depend on groceries. Read about Kroger’s margins in the next part of this series.

Investors looking for exposure to Kroger through ETFs can choose to invest in the First Trust Consumer Staples AlphaDEX Fund (FXG). KR has a weight of approximately 3.2% in FXG.

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