CHICAGO  - New York area drugstore chain Duane Reade Holdings Inc posted a smaller quarterly operating loss and improved margins, while its net loss widened on charges.

The privately held chain issued its fourth-quarter results on Tuesday, just weeks after it agreed to a takeover by U.S. market leader Walgreen Co.

Duane Reade is still cautiously optimistic about its prospects in the current economy, Chief Executive Officer John Lederer said in a statement.

The 50-year-old retailer, which is the largest drugstore chain in New York City, is not giving a 2010 forecast due to the pending acquisition by Walgreen.

Drugstores such as Duane Reade and Walgreen have suffered as consumers curbed spending on nonessential items such as candy. At the same time, they have been selling more generic drugs, which pressure pharmacy sales since they generate lower revenue but can help business overall as they are more profitable than their branded counterparts.

Duane Reade said its net loss had widened to $84.8 million from $17.4 million a year earlier. The results included $59.5 million of charges reflecting the probability of a near-term mandatory redemption of its preferred stock.

The operating loss narrowed to $1.4 million from $3.6 million.

Net sales rose 0.1 percent to $465 million.

Sales at stores open at least a year rose 2.6 percent, with increases of 0.05 percent in general merchandise and 6 percent at the pharmacy counter.

For the year, same-store sales rose 1.5 percent, in line with the company's November forecast of 1.1 percent to 2.1 percent growth.

Product margin in the quarter improved to 31.5 percent of net sales from 30.1 percent a year earlier.

During 2009, Duane Reade revamped its line of private-label items and introduced its DR Delish brand for food and beverages.

The company has more than 250 stores, which are set to keep their name when Walgreen acquires them later this year. (Reporting by Jessica Wohl and Dhanya Skariachan; Editing byDerek Caney and Lisa Von Ahn)