Walgreen Co, the largest U.S. drugstore chain, reported a nearly 20 percent jump in quarterly profit as growth in sales of prescription drugs and flu shots offset consumer cutbacks on discretionary items.

The growth was slightly better than analysts had anticipated, and Walgreen shares rose 3.4 percent to $37.90 in premarket trade.

Walgreen has led its rivals in administering seasonal and H1N1 flu shots, which boosted pharmacy sales in the quarter. Walgreen and its Take Care in-store clinics have handled 5.4 million seasonal flu shots so far this year, compared with 1.2 million for the entire flu season last year.

They are also administering vaccinations for H1N1, or swine flu, across most of the country.

The company said the flu shot program brought new shoppers into stores, as two-thirds of those who got shots had not filled a prescription at Walgreens in the last six months.

The company, which operates more than 7,140 Walgreens drugstores, earned $489 million, or 49 cents per share, in the fiscal first quarter ended on November 30, up from $408 million, or 41 cents per share, a year earlier. Results in the latest quarter include a 3 cent per share hit from restructuring and other costs.

Analysts, on average, expected Walgreen to earn 48 cents per share, according to Thomson Reuters I/B/E/S.


The company, along with rivals CVS Caremark Corp and Rite Aid Corp, faces stepped up competition from Wal-Mart Stores Inc and other chains that have expanded their pharmacy offerings.

Walgreen has responded by updating its stores, web site and advertising to attract shoppers who have become more cautious during the downturn. It has also cut corporate jobs, scaled back its rapid pace of store openings and taken other steps to trim costs.

Separately, CVS named a new president of its pharmacy benefits management unit and increased its stake in a company that works on genetic benefit management.

Walgreen previously said first-quarter sales jumped 9.5 percent to $16.36 billion. Sales at stores open at least a year rose 4.9 percent. Same-store sales of prescriptions jumped 6.1 percent, and same-store sales of general merchandise rose 2.7 percent.

Sales of general merchandise, particularly seasonal items, have been hard hit as consumers cut back. Walgreen said earlier this month that Thanksgiving weekend was notably softer.

Walgreen has seen a similar drag on sales through mid-December, but is hopeful that last-minute shoppers will visit its stores in the final days leading up to Christmas, President and Chief Executive Greg Wasson said in a statement.

The company is also adding beer and wine in more stores as part of its plan to become more convenient.

(Reporting by Jessica Wohl; editing by John Wallace, Dave Zimmerman)