"I didn't feel that we merchandised through the holidays as much as we're capable of," said David Dillon, the company's chairman and CEO. And competition from the largest retailer in the world will continue to be a factor, he said. "The pace of Wal-Mart's aggressive strategy into the supermarket industry shows no signs of slowing down."

This year executives expect net earnings to exceed $1.16 per diluted share. They are also forecasting a 2% identical-store sales jump, excluding fuel, over 2004. During its Q4, Kroger's identical-store sales, including fuel, were up 2.1%, and increased 0.8% excluding fuel.

For the full year total sales increased 4.9%, to $56.4 billion. During Kroger's Q4, they increased 5.1%, bringing in $13.7 billion.