Walgreen profit beats expectations

CHICAGO (Reuters) - Drugstore operator Walgreen Co said strong prescription drug sales and improved pricing boosted its earnings above Wall Street's expectations, sending shares up more than 9 percent on Tuesday.

The biggest U.S. drugstore chain said prescription sales at stores open more than a year rose 1.6 percent. That happened even as people saved money in a difficult economy by seeing their doctors less often and filling fewer prescriptions.

Drugstores, including Walgreen competitors CVS Caremark Corp and Rite Aid Corp , also faced difficult comparisons with last year when a swine flu outbreak boosted demand for medicines, tissues and other products.

"We still have a tough economy. We still have a tight consumer," said Chief Executive Greg Wasson. "We're doing everything we can to manage through that properly."

Executives from Walgreen touted the success of a program to improve store layout, which they said resulted in better sales of general merchandise. They expect an early flu shot push this year, which began late in the quarter, to boost sales too.

Walgreen has administered about 2 million shots. Its goal is to deliver 15 million shots this flu season.

Walgreen, which bought New York chain Duane Reade earlier in the year, also said profit margins increased, helped by stronger prices and fewer markdowns for general merchandise.

"(We) did a nice job in really maintaining and balancing that payoff between price and promotion," Wasson said.

Net earnings for the fourth quarter ended August 31 rose to $470 million, or 49 cents per share, compared to $436 million, or 44 cents per share, for the same quarter in 2009.

Analysts on average expected earnings of 44 cents per share, according to Thomson Reuters I/B/E/S.

Walgreen, which operates about 7,500 stores in the United States, said revenue rose 7.4 percent to $16.87 billion. Analysts were expecting $16.84 billion.

Sales at stores open at least a year rose 1.5 percent.

Walgreen shares rose $2.96 to $33.31. CVS rose 2.5 percent at $31.36, while Rite Aid gained 0.7 percent.

(Reporting by Emily Stephenson. Editing by John Wallace and Robert MacMillan)