Kroger also said that this year's earnings should top Wall Street's average expectations, sending its shares up more than 3 percent in early trading.

Profit was $384.8 million, or 54 cents per share in the fiscal fourth quarter that ended February 3, compared with $282.1 million, or 39 cents per share, a year earlier. Kroger said the latest quarter got a boost of 3 cents per share from the adjustments of certain deferred tax balances that were not contemplated in its forecast.

Analysts, on average, expected Cincinnati-based Kroger to earn 45 cents per share, according to Reuters Estimates.

Traditional U.S. grocery stores have come under increased pressure from a variety of foes: supercenters such as Wal-Mart Stores Inc. <WMT.N>, dollar stores, drugstores, natural chains such as Whole Foods Market Inc. <WFMI.O> and restaurants.

But Kroger and other chains have been remodeling their stores, improving customer service and promoting items such as fresher produce to entice shoppers to return.

Such changes appear to be working at Kroger. Sales in the fourth quarter rose 14.5 percent to $16.9 billion, and were up 5.7 percent after adjusting for an extra week. The sales topped analysts' average revenue forecast of $16.84 billion.

The company, which runs stores under such names as Kroger, Fred Meyer and Ralphs, as well as jewelry stores Littman and Barclay, said sales at identical supermarkets -- a measure that tracks stores open for at least five quarters -- rose 5.6 percent including gasoline sales, and 5.3 percent excluding sales of gasoline.

Kroger said it expects to earn $1.60 to $1.65 per share in the current fiscal year, which equates to 9 percent to 12 percent growth over adjusted earnings per share in the year that ended in February.

Analysts, on average, expected the company to earn $1.57 per share this year.

Kroger said the growth should be driven by strong identical sales, slightly improved operating margins and fewer shares outstanding.

Kroger also forecast identical supermarket sales growth of 3 percent to 5 percent, excluding fuel sales, for the current fiscal year.

The company, which has union employees, said its growth rate assumes a stable labor environment. Kroger added that labor negotiations will be challenging this year, with talks covering store workers in southern California, Cincinnati, Detroit, Houston, Memphis, Toledo, Seattle and West Virginia.

Kroger also said that it plans $1.9 billion to $2.1 billion of capital expenditures this year, excluding acquisitions, and plans to increase supermarket square footage 2 percent before acquisitions and operational closings. The company said its growth would focus on large, fast-growing markets.

Kroger also forecast $125 million in company-sponsored retirement plan contributions this year, a reduction of $50 million from last year.

Kroger's shares rose 90 cents, or 3.50 percent, to $26.66 on the New York Stock Exchange.