Improved customer service, cleanliness and quicker checkouttimes all helped results, said David Dillon, the grocer's CEO,during a conference call with investors and analysts. "Our verybest customers are buying more from us," he says. "We're runningbetter stores."

Kroger opened 16 units and renovated 39. The company also closed36 stores, 16 of which are in the San Francisco and Sacramento, CAmarkets, which the retailer is exiting. The company currentlyoperates 2,483 supermarkets and multi-department stores under morethan 20 banners, including Kroger Marketplace, Ralphs, Fred Meyerand Food 4 Less.

Executives say that they are implementing aspects of their FredMeyer mass-merchandise stores into the company's supermarkets.Best-performing categories for the company overall during thequarter were groceries, produce, natural foods and fuel.