Kroger Co. (KR) on Tuesday reported a slide in quarterly profit and reiterated its outlook for weaker 2004 operating earnings due to costs tied to a 5-month labor strike that crippled its Southern California stores.

Kroger, based in Cincinnati, said its profit fell to $262.8 million, or 35 cents a share, in the fiscal first quarter ended May 22. The year-earlier profit was $351.5 million, or 46 cents a share.

The company estimated that the labor dispute, which also affected its rivals Safeway Inc. (SWY) and Albertsons Inc. (ABS), cut the latest earnings by $71.6 million, or 10 cents per share.

According to Reuters Estimates, analysts had expected Kroger to post a fiscal first-quarter profit of 36 cents a share.

Kroger Chief Executive Officer David Dillon said the company continued to invest in price cuts and other promotions to revive sales in Southern California, one of the nation's key food markets.

But even with the promotions, the company's identical food-store sales, which exclude new or replacement supermarkets, rose by only 0.5 percent, excluding fuel and the impact of the strike.

In the fiscal fourth quarter ended Jan. 31, sales measured on the same basis had risen by 1.3 percent.

Dillon also reiterated that the company expects 2004 earnings to be lower than in 2003, excluding the effect of the labor disputes and unusual items, as the grocer works to improve customer service and merchandise assortments.