Earnings Preview: Kroger to report 1Q

Kroger's 1Q to give glimpse on supermarket operator's ongoing transformation efforts

Associated Press

NEW YORK (AP) -- The Kroger Co. reports its fiscal first-quarter results Thursday, which should give investors a closer look at how the country's largest traditional supermarket operator is keeping pace with a changing industry.

WHAT TO WATCH FOR: The Cincinnati-based company, which also owns Ralphs, Fry's and Food 4 Less, is looking to fend off big-box retailers, drug store chains and specialty chains such as Whole Foods Markets Inc. As such, it's been working on improving the in-store experience, such as by reducing wait times on lines and expanding its selection of organic and natural foods.

Kroger has also been experimenting with different store formats that are larger and smaller than its traditional grocery.

Sales at stores open at least a year should be a key indicator of how its efforts are holding up. The figure could also provide some clues on how deeply the company is discounting to attract customers.

WHY IT MATTERS: Traditional supermarkets are feeling the pressure from competitors on numerous fronts. Earlier this year, Supervalu sold off five of its major chains after struggling for years to fix its business. Supervalu said it would focus on its Save-A-Lot discount stores, as well as smaller regional chains.

And this month, Safeway announced it was selling its Canadian operations to pay down debt, buy back stock and possibly invest in "growth opportunities."

Kroger so far has managed to keep growing. Looking ahead, the company has said it expects net earnings this year to be in line with its long-term growth projection of 8 percent to 11 percent.

WHAT'S EXPECTED: Analysts on average expect a profit of 89 cents per share on revenue of $30.24 billion, according to FactSet.

LAST YEAR'S QUARTER: The company earned 78 cents per share on revenue of $29.07 billion.

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