• The Wall Street Journal , Wednesday, September 17, 2008 10 AM

Kroger -- which operates more than 2,400 supermarkets under banners such as Smith's and King Soopers -- says sales of store brands accounted for a record 26% of its grocery revenue in the quarter. Store brands are generally cheaper than national brands but carry higher profit margins for grocers.

"In this economy, customers are much more willing to try a private-label item, and we're seeing signs that this is happening more and more as the year progresses," says Kroger CEO David Dillon. Kroger posted a 3.4% increase in its fiscal second-quarter profit.

In another sign of how the weak economy is changing shoppers' behavior, Kroger has experienced "noticeable improvement" in sales at its discount-oriented stores, such as Food 4 Less, in the past three to six months. Dillon also believes Kroger sales are getting a boost from shoppers deciding to eat more meals at home, a trend that has prompted some casual-dining chains to file for bankruptcy-court protection in recent months.

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