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How Is Kroger Doing a Better Job than Competitors?

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Top line versus peers

Kroger (KR) has seen a steady growth in its revenues while competitors have been struggling to keep pace in the intensely competitive low-margin grocery sector. The company’s total sales grew by 4.7% YoY (year-over-year) to $34.6 billion in fiscal 1Q17. Excluding fuel sales, growth was even more impressive, reaching 7.8%.

The company’s top-line growth not only beat organic food pioneer Whole Foods Market (WFM) but also beat Wal-Mart Stores (WMT) and Costco Wholesale (COST) in their most recently reported quarters.

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Unparalleled same-store sales performance

Kroger’s identical store sales, or comps, performance have been stellar. The company has achieved 50 consecutive quarters of positive identical supermarket sales growth (excluding fuel). By comparison, WFM, which recorded average comps of ~9% between fiscal 2011 and fiscal 2013, is struggling, with its comps staying in the red for the last three fiscal quarters.

Walmart

Kroger’s comps have grown by 2.4% in the last reported quarter, as compared to the 0.8% growth in comps for its closest competitor, Walmart. While Walmart sells all kinds of general merchandise along with grocery items, Kroger primarily sells groceries and fuel.

That said, Kroger is currently facing low inflation and deflation headwinds, which have negatively impacted its comps. During its fiscal 1Q17 conference call, the management noted that inflation was nonexistent during the quarter and was at its lowest in the past six-year period. Despite headwinds, Kroger’s performance has consistently been better than that of Walmart.

Investors looking for exposure to Kroger through ETFs can invest in the First Trust Consumer Staples AlphaDEX Fund (FXG). KR makes up 0.77% of FXG.

Now let’s discuss Kroger’s margins and profitability.

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