By and  on March 24, 2010

Walgreen Co. reported that profits for the second quarter ended Feb. 28 were up 4.5 percent to $669 million, or 68 cents a diluted share, from $640 million, or 65 cents a share, in the same period a year ago.

On average, Wall Street analysts had expected EPS of 71 cents a share.

Quarterly revenues came in at $16.99 billion, a 3.1 percent rise from $16.48 billion a year ago.

“The unusual pattern of this year’s flu season impacted our overall comparable-sales performance for the quarter,” Greg Wasson, president and chief executive officer of Walgreens, told analysts during a conference call on Tuesday. “Both [prescription] and front-end sales spiked in the first quarter, when the flu hit hard and were relatively weak in the second quarter, when the flu subsided,” he noted.

Comparable-store sales decreased 0.2 percent in the quarter, while front-end comparable-store sales decreased 1.6 percent, the firm stated, adding that front-end sales were impacted in part by continued weak demand for discretionary goods because of the sluggish economy.

Wasson told analysts that new store openings would be slowed in an effort to free up cash for strategic acquisitions, the “most significant” being last month’s purchase of metro-New York drugstore chain Duane Reade. “Acquisitions help us fill in important regions of the country and widen our footprint more quickly than through organic growth,” said Wasson.

Of the 257-store Duane Reade acquisition, which is expected to close this fiscal year, he said, “Finding good real estate in Manhattan is very challenging. It would take us many years of organic growth to reach the store count that this acquisition brings us.” Wasson called beauty an “important department to 75 percent of our customers who are female [and] an area where we intend to grow.” He added that across the retailer’s 7,180 drugstores, “we’re dedicating more space to key categories like skin care and vitamins.”

For the first six months of the fiscal year, profits were up 10.5 percent to $1.16 billion, or $1.17 a share, from $1.05 billion, or $1.06 a share, during the prior-year period, on sales that increased 6.1 percent to $33.35 billion, from $31.42 billion.

Also Tuesday, the Federal Trade Commission said Walgreens agreed to pay almost $6 million to settle allegations of false advertising related to sales of cold and flu remedies similar to the Airborne cold-and-flu treatment. The FTC said Walgreens claimed its line of Wal-Born dietary supplements could prevent colds, fight germs and boost the immune system, claims the commission alleged are false. A portion of the settlement amount, $1.2 million, was already used to pay consumers who were part of a separate class-action suit against the retailer.

Shares Tuesday closed up 58 cents, or 1.6 percent, at $35.91.

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