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Walgreen Profit Exceeds Estimates as New Products Boost Sales

March 27 (Bloomberg) -- Walgreen Co., the largest U.S. drugstore chain, reported second-quarter profit that topped analysts’ estimates after new grocery and household items boosted sales.

Net income in the quarter ended Feb. 29 declined 7.6 percent to $683 million, or 78 cents a share, from $739 million, or 80 cents, a year earlier, Deerfield, Illinois-based Walgreen said today in a statement. Analysts projected 77 cents, the average of estimates compiled by Bloomberg.

Chief Executive Officer Greg Wasson increased general merchandise sales in stores open at least a year by 2.1 percent after introducing food and packaged-goods products to attract budget-conscious shoppers. The demand helped widen the company’s gross margin, which analysts had expected to narrow after the Dec. 31 expiration of a contract to provide Express Scripts Inc. customers with prescription drugs.

The stronger gross margin “was driven by convenience/fresh food, household and personal care categories,” Deborah Weinswig, a New York-based analyst at Citigroup Inc., wrote today in a note to clients. She recommends selling Walgreen shares.

Walgreen’s gross margin, or gross profit as a percentage of sales, widened to 28.9 percent from 28.8 percent. Analysts had projected the measure would narrow to 28.7 percent, according to data compiled by Bloomberg.

Total net sales rose 0.8 percent to $18.7 billion. The average estimate of 10 analysts was $18.6 billion.

Walgreen rose 1.4 percent to $34.86 at 10:34 a.m. in New York. The shares gained 4 percent this year before today.

(The company held a conference call for analysts. For the replay, click WAG US <Equity> EVT <GO>.)

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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