Walgreen, Rite Aid shoppers look for basics in Dec

CHICAGO (Reuters) - Walgreen Co's sales at drugstores open at least a year rose a better-than-expected 4.9 percent in December, as cash-strapped consumers continued to buy basics but shied away from holiday items.

Meanwhile, Rite Aid Corp's same-store sales slipped 0.2 percent as sales weakened later in December and it continued to see declines at stores it acquired back in 2007.

Walgreen, whose shares rose 4.8 percent, said it saw steady consumer traffic throughout December, with transactions in comparable stores up 0.7 percent.

Walgreen, which has been operating without a permanent chief executive officer since October, is redesigning stores, scaling back the number of store openings and adding more groceries to appeal to busy shoppers. It also recently hired its first chief marketing officer.

"One month does not make a trend but it appears the company may be getting some response to recent promotional activity and increased advertising," said Jefferies & Co. analyst Scott Mushkin, who has a "hold" rating on Walgreen. "Especially with lackluster results from Rite Aid, it looks like the company took share in December."

Basic necessities such as food, drinks and paper products sold well, Walgreen said, while demand for seasonal items such as Christmas decorations was weak.

Walgreen's same-store sales rose after falling 0.9 percent in November. The 4.9 percent same-store sales rise includes a boost of 2 percentage points because December 2008 had two more weekdays -- when patients typically fill more prescriptions -- than December 2007 did.

Walgreen said pharmacy same-store sales jumped 8.5 percent. General merchandise, or front-end, same-store sales rose 0.4 percent, but would have been up 2 percent to 3 percent without the drag from poor sales of seasonal merchandise.

Walgreen "is beginning to formulate a strategy to address the key issues," yet still faces a challenging environment, said Credit Suisse analyst Edward Kelly, who rates its shares "outperform."

Rite Aid's pharmacy same-store sales rose 1.2 percent in the four weeks ended December 27 while front-end same-store sales fell 2.4 percent. The results were worse than Rite Aid suggested when it posted its sixth straight quarterly loss last month. Through December 18, same-store sales were up 0.4 percent.

CVS Caremark Corp , a key competitor of Walgreen and Rite Aid, does not typically release monthly sales results.

However, after Walgreen posted a smaller-than-expected quarterly profit on December 22, CVS issued a statement standing by its full-year profit forecast. At that time, it said consumers were cautious and that it expected December same-store sales to be "well short" of their increases of 4.3 percent in October and 6.1 percent in November.

Walgreen said the number of prescriptions filled at comparable stores rose 6 percent, although that figure was hit by 1.6 percentage points as more patients filled 90-day instead of 30-day prescriptions.

Rite Aid bought the Brooks and Eckerd drugstore chains in 2007. Same-store sales at those acquired stores fell 1.6 percent in the December period. Credit Suisse's Kelly had expected those sales to rise 1 percent to 1.5 percent.

Walgreen said total sales were up 10.8 percent to nearly $6.11 billion. Rite Aid's total drugstore sales fell 2.1 percent to $2.16 billion. Walgreen had 6,636 stores as of December 31, while Rite Aid had 4,915 as of December 27.

Shares of Walgreen were up $1.08 at $26.63 in late morning New York Stock Exchange trade, while Rite Aid gained 2 cents to 36 cents. Rite Aid plans a reverse split of its stock to boost the share price.

(Reporting by Jessica Wohl; Editing by Derek Caney, Lisa Von Ahn and Gunna Dickson)

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