Walgreen profit up as it fills more prescriptions

NEW YORK (Reuters) - Walgreen Co <WAG.N> reported a higher profit as sales of general merchandise rose during the holidays and Valentine's Day and the drugstore chain filled more prescriptions.

Sales rose 8.9 percent to $18.5 billion, slightly above Wall Street's forecasts of $18.4 billion, according to Thomson Reuters I/B/E/S.

Sales at stores open at least a year 4.1 percent. Same-store sales of general merchandise rose 4.3 percent. Prescription sales, which account for nearly two-thirds of sales, were up 3.9 percent at drugstores open at least a year.

The company, which last month sold its pharmacy benefits management unit to focus solely on its retail business, said it reached its largest ever share of the in-store prescription market, filling 20.1 percent of U.S. prescriptions during the quarter.

Bill Smead, a portfolio manager with Smead Value Fund, which has owned Walgreen shares since 2008, said that concentrating on its stores would pay off as the economy improves and more customers come in to have prescriptions filled and pick up household items at the same time.

"Those are the kinds of things that warm your heart if you're a long-term investor," Smead said.

Chief Executive Greg Wasson said in a statement, "Our center of gravity remains our nearly 7,700 drugstores."

Walgreen said that gross margins remained level despite rising commodities costs and said that profitability in its drugstores was helped by the flu season.

Walgreen's profit rose 10.4 percent to $739 million, or 80 cents per share, in Walgreen's second quarter ended on February 28 from $669 million, or 68 cents per share, a year earlier.

That was in line with Wall Street forecasts, according to Thomson Reuters I/B/E/S.

Walgreen earlier this month sold its pharmacy benefits management unit for about $525 million in cash. [ID:nL3E7E925H] Its largest rival, CVS Caremark Corp <CVS.N> derives nearly half of its revenue from its Caremark PBM.

Shares were down 97 cents in premarket trading from a closing price of $41.97 on Monday.

(Reporting by Phil Wahba; Editing by Derek Caney, Dave Zimmerman)