"In southern California, we still have a lot of work to do," said David B. Dillon, Kroger chairman and CEO at Tuesday's earnings conference call. "Identical sales for the third quarter when compared to the third quarter of 2002 are down a little less than 1%, considering Ralphs and Food 4 Less together. We're comparing results to 2002 because of the disruption caused by the strike last year. Ralphs continues to be down, offset by increases at Food 4 Less."

Regarding the outlook for recovery for these brands in southern California, Dillon said, "Kroger doesn't have any recent experience in dealing with a strike of this magnitude or the challenges posed by the subsequent recovery. Thus recovery predictions are less meaningful at this point. We continue to make progress, however."

The strike, involving about 59,000 grocery workers at Albertson's-, Safeway- and Kroger-owned stores, lasted four and a half months, ending early in the spring of this year. Ultimately, the employers were able to wrest concessions out of the employees, mainly in the form of higher employee contributions toward health insurance. Since then, the company reports, major labor contracts covering about 20,000 workers in Seattle, Cincinnati, and at Food 4 Less in southern California have been ratified without a work stoppage, "as Kroger continued to make progress toward its goal of labor cost competitiveness," said Rodney McMullen, vice chairman of the retailer's board.

"We've stopped reporting a strike-effect number for southern California," McMullen added. "The reason is that, as we move further away from the strike, the calculation becomes less precise. Also, we expect a significant increase in earnings at Ralphs in 2005."

During the quarter, the company reported that 30 new stores were opened, 33 remodeled, and 20 closed. Total food-store square footage increased 1.2% over the prior year. Currently the company operates 2,531 supermarkets and other stores in 32 states under some two dozen banners, including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's, Fry's, Fry's Marketplace, Dillons, QFC and City Market. Kroger also operates (directly or through subsidiaries, franchise agreements, or operating agreements) 792 convenience stores, 439 fine jewelry stores, 520 supermarket fuel centers and 42 food processing plants.