By Jennifer Coogan and Lisa Baertlein

NEW YORK/LOS ANGELES (Reuters) - Kroger Co (KR.N: Quote, Profile, Research), on Tuesday beat Wall Street earnings targets despite a drop in profit and said the weak economy had not slowed its grocery store customers.

Identical store sales, which include stores that have been open five full quarters and have not been moved or expanded, are tracking at the high end of the company's forecast for fiscal 2008 growth of 3 percent to 5 percent excluding fuel, the Cincinnati-based company said.

"There really are no clear signs of the customer pulling back at Kroger," Chief Executive David Dillon told analysts on a conference call. Executives did, however, say the company has seen a decline in spending for discretionary items like jewelry and home furnishings.

Kroger posted fourth-quarter net profit of $322.9 million, or 48 cents per share. The company's net profit in the year-earlier period was $384.8 million, or 54 cents per share, and was boosted an unexpected tax benefit and other items.

Goldman Sachs analyst John Heinbockel said in a client note that Kroger's results were "solid and high-quality, exhibiting little fallout from an increasingly challenging macroeconomic environment."

The company has done "pretty well" managing accelerating food inflation, Heinbockel said, adding that 2008 "will be tougher because of both a slowing consumer and elevated inflation."

Investors have been worried about the impact of food inflation on the supermarket industry as consumer confidence and spending sag amid a broad U.S. economic slowdown.

Kroger executives estimated that product cost inflation during the fourth quarter was 3.8 percent compared with the year earlier, the highest level the company executives have seen in many years.