Why Kroger Stock Gained 17% in June

What happened

Supermarket giant Kroger (NYSE: KR) outpaced the market last month by gaining 17% compared to a less-than-1% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

Continue Reading Below

The rally pushed shareholders back into positive territory for the year, although the stock is still far below the all-time highs it reached in the opening days of 2016.

So what

Investors were pleased with the retailer's fiscal first-quarter report that paired modest growth at its physical stores with a sharp jump in the digital sales channel. Kroger's overall expansion rate remained far below the 5% mark it had enjoyed until late 2015, but executives said they saw evidence that their rebound plan was gaining steam.

Now what

Like rivals including Wal-Mart and Target, Kroger has warned its shareholders to expect reduced profitability as its sales shift toward the lower-margin online channel. The impact on earnings should fall over time, though, as the company gets its e-commerce infrastructure up and running.

These latest results demonstrate that Kroger can still produce healthy growth in a multichannel sales environment. Yet it's unclear exactly when the company might return to its prior pace of low double-digit annual earnings gains, so it could be while before the stock returns to all-time highs of around $40 per share.

10 stocks we like better than KrogerWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Kroger wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.