Q. Please give your prognosis for shares of Kroger Co. — F.L., via the Internet

A. America's largest conventional grocery chain, despite its impressive pricing power over food producers, must battle large general discounters such as Wal-Mart Stores and Costco.

Combined with a down economy and rising food prices, that worry has weighed on the company's shares.

Kroger (KR) shares are up two percent this year following increases of 16 percent and 22 percent in the prior two years. Net income in its first fiscal quarter, ended May 24, rose 15 percent, with total sales up 11 percent.

The chain has seen an increase in sales of its value-oriented house-label goods and a growing trend among families to buy groceries and eat at home rather than in restaurants. It offered bonuses to shoppers who spent tax stimulus checks at its stores.

Kroger has taken some successful steps:

• It has worked hard to control its prices over the past several years, aggressively using price promotions as well.

• More than 700 of Kroger's 2,500 supermarkets also sell gasoline, with discounts given to motorists who shop in the supermarket.

• It has expanded its discounts on generic drugs, offering 90-day prescriptions for $10. It has 1,900 in-store pharmacies.

Those gasoline and pharmacy operations encourage "all-in-one" shopping that means fewer trips. The company said its customers aren't shopping as often these days, but buying larger quantities of items when they do.

Consensus opinion on Kroger stock from Wall Street analysts is "buy," according to Thomson Financial, consisting of three "strong buys," five "buys," two "holds" and one "underperform".

With Kroger well-positioned to weather the current economy, some experts believe it will really excel once conditions improve. On the other hand, the tough price competition it faces will be a constant.

Kroger operates stores in 31 states under two dozen local store names that include Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's, Dillons, QFC and City Market. Its food-processing plants manufacture more than 40 percent of the company's house-label products, which management expects will grow to a $1 billion business this year.

The earnings estimate for the current fiscal year ending in January is a 12 percent gain and for the following year an 11 percent increase, according to Thomson. The five-year annualised growth rate of nine percent being forecast compares with 13 percent projected for the grocery store industry.