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Kroger's Chief Gives Shareholders Pep Talk at Meeting

CINCINATTI -- With a strong first quarter performance still reverberating, The Kroger Co.'s chairman and c.e.o. delivered a sunny outlook on 2005 to shareholders at the chain's annual meeting yesterday.

"2004 was a mixed year, with strong sales, but poor earnings. Our outlook for 2005 is brighter," Dillon was quoted as saying in a report on "Kroger enters this year with the strongest momentum in several years and a clear strategic vision. We're improving customer traffic in our stores, and selling more to the customers who are already there."

Dillon spoke of his company's mandate to improve the shopping experience, as part of a strategy called "Customer First," which ranges from better assortments to faster check-out times. He named a number of new initiatives toward that end:

-- Expanding natural foods sections, where sales are growing at double-digit rates.

-- Growing its partnership with gourmet coffee brands. The company in the past year doubled the number of Starbucks or Seattle Coffee shops in its stores, and expects 300 by the end of 2005.

-- Growing book sections, with some stores counting 2,800 titles.

-- Adding roughly 50 gas stations this year, for a total of about 600.

In 2004, Kroger also added 765 new private label products, for a total of about 8,000, which account for 24.6 percent of total grocery sales.

In a press conference after the shareholder meeting, Dillon said Kroger's success in negotiating some less-expensive labor contracts have enabled the company to move "very significant" savings into better pricing and store improvements.

"Our bottom line will be improved and supported by our improvement in sales, and that's really what gave us the increase in earnings in the quarter we just announced and will give us increases in earnings going forward," Dillon was quoted as saying.
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