The drugstore chain earned $522 million, or 53 cents per share, in the third quarter ended May 31, down from $572 million, or 58 cents per share, a year earlier.
Analysts on average expected net profit of 56 cents per share, according to Reuters Estimates.
Walgreen is cutting jobs, opening fewer stores than originally planned and trimming its selection of items as part of its plans to return to double-digit earnings growth under a new chief executive.
During the quarter, the company spent $65 million to reduce its assortment of items, or stock-keeping units.
Spending on revamping its operations and the opening of more stores than a year earlier drove up selling, general and administrative expenses during the quarter.
But the company said it was on track to save $1 billion annually starting in 2011.
We are well positioned to emerge from the current recession even stronger than we entered it, said Gregory Wasson, who became CEO in February.
During the call, Wasson said the company was still seeing consumers use credit cards less frequently and shop closer to paydays, when they have more cash.
Sales rose 8 percent to $16.21 billion, while sales at stores open at least a year increased 2.8 percent. On a same-store basis, prescription sales were up 3.8 percent, while general merchandise sales rose 0.9 percent.
Walgreen said it had filled 8.3 percent more prescriptions in the latest quarter than it did a year earlier, aided by more patients filling 90-day prescriptions. Those prescriptions, which are popular under many insurance plans, are counted as three 30-day prescriptions when they are filled.
Shares of Walgreen fell 4.5 percent to $30 in premarket trading.
Through Friday, the stock had jumped 27 percent so far this year, while shares of rival CVS Caremark Corp
(Reporting by Jessica Wohl; editing by Dave Zimmerman and Lisa Von Ahn)