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Walgreen beats expectations with 8 percent rise in profits

By Associated Press


NEW YORK » Walgreen Co., the largest drugstore chain in the U.S., said yesterday its profit rose 8 percent in the fiscal fourth quarter as it boosted sales by adding more than 500 stores.

Walgreen shares jumped more than 11 percent as the results easily surpassed analyst expectations. The shares rose the most in almost two years.

Walgreen, which has been increasing its presence in Hawaii, said prescription drug sales improved, and sales of other items like cosmetics and food were more profitable because of better prices and successful promotions. Sales of "front end" or nonpharmacy items have been hurt by the weak economy as shoppers have cut back on their spending.

The company said the beginning of flu shot season has been brisk. Since the middle of August it has administered more than 2 million flu shots and sprays. Many of those sales are not included in its fourth-quarter results since the period ended Aug. 31, but Walgreen said it is aiming to sell 15 million flu shots over the winter months. That's more than twice the 7 million shots it sold in 2009-10.

The Deerfield, Ill., company reported net income of $470 million, or 49 cents per share, for the quarter. That's up from $436 million, or 44 cents per share, a year earlier. Analysts on average expected earnings of 44 cents per share, according to a Thomson Reuters poll.

Walgreen shares rose $3.46, or 11.4 percent, to close at $33.81.

Raymond James analyst John Ransom said most investors had expected Walgreen to fall short of the consensus estimate.

The company's results included 4 cents per share in expenses related to the purchase of Duane Reade, which closed in April and brought the company 258 stores. It reported a penny per share in costs from its restructuring plan, from which it aims to save $1 billion per year.

Revenue rose 7 percent to $16.87 billion from $15.7 billion as the company continued to expand, also topping analysts' $16.84 billion average estimate.

Revenue at stores open at least a year rose 1.5 percent during the quarter, while prescription revenue at those stores rose 1.6 percent.

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