Walgreen Co , the largest U.S. drugstore chain, reported a quarterly profit that topped expectations as it began to benefit from a make-over that includes sprucing up stores and cutting jobs, sending its shares 10 percent higher.
Analysts have lauded Walgreen's efforts, such as cutting back on store openings, reducing clutter in stores and planning a loyalty program. But they say it will take time for these measures to pay off.
The company also unveiled a new plan to promote 90-day prescriptions available at its stores as an alternative to the mail-order programs favored by many insurance programs.
Rival CVS Caremark Corp has already benefited from its Maintenance Choice program, which allows customers to pick up 90-day prescriptions in CVS stores at the same lower price they would pay if getting the drugs through the mail.
Shares of Walgreen shot up to $37.61 in pre-market trading from its close of $34.19 on Monday. CVS gained 3.7 percent and Rite Aid rose 5 percent.
Walgreen profit fell to $436 million, or 44 cents per share, in the fiscal fourth quarter ended August 31, from $443 million, or 45 cents per share, a year earlier. The latest quarter's earnings per share included 3 cents in costs and 7 cents in savings from Walgreen's transformation plans.
Analysts, on average, had expected a profit of 39 cents per share, according to Reuters Estimates.
Sales rose 7.6 percent to $15.7 billion, while sales at stores open at least a year rose 2.4 percent. Same-store sales of general merchandise declined 1.4 percent, while pharmacy same-store sales rose 4.5 percent.
Walgreen, which currently has 7,042 stores across the United States, has continued to see weak demand for general merchandise. Last week, Rite Aid said consumers shopping at its drugstores were focused on buying items on sale and forecast a wider loss for its fiscal year.
Walgreen said it is on track to achieve $1 billion in pre-tax cost savings by 2011.
Walgreen will continue to look at potential acquisitions that reinforce its core strategies, Chief Executive Greg Wasson said in a statement, without outlining any possible deals.
(Reporting by Jessica Wohl; Editing by Derek Caney, Gerald E. McCormick, Dave Zimmerman)