Q. Please give your opinion of The Kroger Co. stock. I wonder how well it's doing against all the competition. — BB, via the Internet

A. The largest traditional US grocery chain by revenues must focus on pleasing price-conscious consumers during this demanding time in which the economy remains uncertain.

Deep discounts and promotions to fend off intense competition take a toll on its bottom line. In addition, a decline in food prices has made it difficult to pass along increased packaging and labour costs.

Kroger shares are up nine percent this year following last year's 21 percent decline. Fourth-quarter earnings fell a disappointing 27 percent and, although Kroger executives say they see hopeful signs in divisions such as its jewelry stores, they expect a slow and uncertain recovery.

The Kroger empire is extensive, providing economies of scale and the ability to demand the best prices from suppliers. The firm is No.1 or 2 in 39 of its 42 major markets. It has increasingly been tailoring its stores to local preferences and emphasizing its strong private-label brands, which now total more than 14,000 items.

Kroger operates about 2,500 supermarkets and multi-department stores in 31 states under two dozen different names that include Kroger, City Market, Dillons, King Soopers, Fry's, Pay Less and Fred Meyer.

It also has nearly 900 supermarket gasoline stations, 40 food-processing plants and, under five different banners, operates about 800 convenience stores in 16 states.

Its nearly 400 fine jewelry stores in 35 states are operated under the Barclay, Fox, Littman and Fred Meyer names.

The analyst consensus opinion of Kroger stock is "buy", according to Thomson Reuters, consisting of seven "strong buys", six "buys", seven "holds" and one "underperform".

Big-time competition seems to be everywhere and growing. Drug store chain Walgreen is now offering fresh foods and prepared meals in thousands of its stores nationwide and has its own private-label brand.

This follows the lead of discounters such as Wal-Mart, Target and Costco, which have been cutting into the market share of traditional grocers such as Kroger, Safeway and Supervalu.

David Dillon, the firm's former chief operating officer, has been CEO since 2003 and chairman since 2004.

Earnings are expected to increase five percent in the fiscal year ending next January and 13 percent the following fiscal year. The five-year annualised growth rate is projected to be nine percent versus the 12 percent growth rate forecast for the grocery stores industry.

Q. Is the Dreyfus Fund a good investment bet for my retirement account? — MK, via the Internet

A. Don't expect either good or bad surprises.

Because it sticks relatively close to the Standard & Poor's 500 in its portfolio selections, this fund is unlikely to dramatically outperform that stock index. The positive side of that is that it is unlikely to do worse than the S&P 500 either.

The $990 million Dreyfus Fund is up 61 percent over the past 12 months and has a three-year annualised decline of two percent. Both results rank in the top one-fourth of all large growth-and-value funds.

"We're not completely sold on this fund," said Greg Carlson, analyst with Morningstar Inc. in Chicago, who can offer no compelling reason to invest in it. "It's certainly not a bad fund, but you can find better examples of actively-managed large blend funds."

Sean Fitzgibbon of the Dreyfus affiliate The Boston Co. has led the team since 2005. He also runs Dreyfus Premier Large Company Stock Fund, Dreyfus Disciplined Stock Fund and The Boston Co. Large Cap Core Fund.

David Sealy and Barry Mills are the Dreyfus Fund co-managers and the Dreyfus central research group also assists. Fitzgibbon has final say, but Sealy covers consumer stocks and Mills the tech sector.

The team buys reasonably-priced stocks with solid fundamentals, taking into account price/earnings ratio, cash flow, fundamentals, earnings growth and industry trends.

According to the latest Securities and Exchange Commission filings, Fitzgibbon and his co-managers did not have any of their own money invested in the Dreyfus Fund.

In general, it is considered preferable for the people running a fund to have a financial commitment to it because it clearly aligns their goals with those of the shareholders.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N Central Avenue, Suite 302, Phoenix, Arizona 85004-1248, or by e-mail at andrewinv@aol.com

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