Kroger's house brands typically have a higher profit margin than the national labels. The shift by consumers to less-expensive but higher-margin private label goods is reflected in Kroger's financial results, Agnese said. Earnings increased 8% to $349.2 million in the quarter ended Jan. 31 even though sales grew less than 1% to $17.3 billion.
"Profits are the outcome of focusing on the customer," Dillon said.
Ralphs, held back by the bitter 2003-04 grocery workers strike and lockout and payment of $70 million in fines and restitution for violating federal labor laws during the labor dispute, is just now hitting the stride of other Kroger divisions.
"Coming out of it was really hard," Dillon said. "We needed to get everyone focused back on the business, and we started out slow. Some of our associates and some of our managers did not have the right attitude to help us come back."
Dillon likes the progress both Kroger and Ralphs have made but noted that competition only gets tougher as nontraditional grocery retailers such as Target and CVS devote more space for food.
The best way to meet that competition is to keep Kroger focused on its shoppers.
"Ten years ago we paid too much attention -- almost every day -- looking at what our competition was doing," Dillon said. "We can't ignore our competitors, but we have to pay more attention to what our customers want in our stores."
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jerry.hirsch@latimes.com
