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CINCINNATI — The Kroger Co. reports second-quarter earnings Tuesday before the market opens. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Cincinnati-based Kroger, the nation's largest traditional grocery chain, has seen sales rise in the recession as shoppers have cut down on eating out and bought groceries more often. And when they go to Kroger stores, they have increasingly bypassed national brands to load their carts with store brands, usually priced lower and now accounting for more than a third of all grocery items it sells.
Kroger has kept up a barrage of buying incentives for budget-strapped consumers. Besides offering more coupons, it features $5 discounts for buying several featured items at once and also frequent 10-items-for-$10 promotions.
Kroger operates some 2,500 supermarkets and multi-department stores in 31 states under two dozen local banners that include Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market.
BY THE NUMBERS: Analysts polled by Thomson Reuters expect earnings of 44 cents per share, up 2 cents from last year's second quarter, with revenue slightly up at nearly $18.2 billion, after $18.1 billion last year. Kroger didn't offer second-quarter earnings guidance, but it has projects earnings of $2 to $2.05 per share for the year.
ANALYST TAKE: Analysts say with food prices down and unemployment still rising, there's additional price pressure to drive traffic to stores. And there is rising competition between traditional supermarkets and big-box discounters that sell groceries, led by Wal-Mart Stores Inc.
"Although we continue to believe Kroger is the best-positioned food retailer from a strategic perspective for the long term, we are cautious," BMO Capital Markets analyst Karen Short said in a recent research note. He wrote that recent deflationary pressures could cut into revenue.
Kroger has said it expects sales to grow between 3 percent and 4 percent at stores open at least five quarters, a closely watched retail gauge.
WHAT'S AHEAD: Besides watching whether Kroger trims its sales growth target, analysts will check the impact of fluctuating gas prices on Kroger's service station business. Wall Street also is watching whether Kroger's solid cash and credit positions lead it to do some bargain-hunting for smaller chains to acquire.
STOCK PERFORMANCE: Kroger shares have traded in a very narrow range for months, beginning the second quarter at $22.22 and not closing above $23 since early June. They traded as high as $29.59 nearly a full year ago, but fell as low as $19.39 in March.
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