Walgreen Co. said Monday its profit fell 9% in the fiscal third quarter despite improving sales -- as greater expenses, including its reorganization efforts, reduced its income.
The drug store chain plans to cut its annual expenses by $1 billion starting in 2011, which is adding to its costs this year. In the quarter ended May 31, Walgreen earned $522 million, down from $572 million in the year-ago period.
Revenue grew 8% to $16.21 billion from $15.02 billion. Analysts forecast $16.16 billion in revenue, on average. Same-store sales rose 2.8%, with same-store pharmacy sales up 3.8% and front-end sales down 0.9%.
The company's selling, general and administrative expenses rose 8% during the quarter. Walgreen CEO Gregory Wasson said the company had "solid results in a difficult economy while recording significant restructuring costs." He said that Walgreen's customers are using less credit and are spending closer to payday.
The company is testing a program called "consumer centric retailing" that is designed to improve its front-end results by reducing the total number of products the company carries and better target consumer preferences. The program is being piloted at 35 stores, and Walgreen said those locations are doing better than expected.
In total during the quarter, Walgreen opened or bought 162 stores, which gave it a total of 6,857. It also has about 500 worksite health-and-wellness centers, along with specialty, institutional and mail-order pharmacies.