They say there's no need to cry over spilled milk -- unless maybe it was a couple of weeks too old when it fell. Even after a thorough cleanup, the unpleasant sour smell will take a while to completely fade away. Similarly, the Southern California labor dispute that ravaged traditional grocers last year may have already been mopped up, but the lingering effects are still noticeable. Slashing prices in that region has helped Albertson's (NYSE:ABS) market share climb back above pre-strike levels, but the cost of winning back customers continues to weigh heavily on the bottom line.

This morning, the company posted year-end operating income (excluding one-time items) of $1.33 -- at the low end of recently lowered guidance. The difficult year was capped off with a 43% jump in fourth-quarter earnings to $0.50, from $0.35 a year ago, but the results were aided by both an extra operating week and the contributions of the recently acquired Shaw's and Bristol Farms chains.

CEO Larry Johnson had a surprisingly candid assessment of the company's results: "We were not pleased with the performance we turned in during the fourth quarter. in the end we missed our earnings target, and that is unacceptable." No laundry list of excuses? No spinning the shortfall in a more favorable light?

While the quarter was hardly stellar for Albertson's, it wasn't a complete disappointment, either. Gross margins appear to have leveled off after previous declines, SG&A expenses dropped modestly, and the company's more profitable private-label products rose 34 basis points as a percentage of total sales (while the competition showed flat growth). Revenues jumped 29% to $11 billion, driven by a solid 5.3% gain in same-store sales. Last week, industry leader Kroger (NYSE:KR) reported a 0.8% improvement in comps.

Sales growth would have been even stronger had a mild flu season not crimped pharmacy-related revenues. Like CVS (NYSE:CVS) and others, weaker-than-expected flu outbreaks held sales at Albertson's 1,300 in-store pharmacies and 700 stand-alone drugstores in check.

With enough dollar-priced promotional merchandise to make Dollar General (NYSE:DG) proud and the installation of thousands of quick self-service checkouts in more than 1,100 stores, Albertson's has appealed to the price-conscious, time-starved shopper. At the other end of the spectrum, the recent purchase of the more upscale Shaw's and Bristol Farms chains also provides the company a foothold at the high end of the market.

As the only traditional grocer to regain its pre-strike market share, Albertson's is finding ways to increase store traffic. Fortunately for investors, it is also finding new ways to trim expenses. A savings initiative launched a few years ago has reduced costs by more than $1 billion, and now an additional $250 million in savings has been targeted for the next two years. If the company is forced to keep dropping prices to battle for market share, then it will need every penny of those savings.

Fool contributor Nathan Slaughter hates old, wilted produce. He owns none of the companies mentioned.