Walgreen March sales up on Easter; pharmacy lags

By Brad Dorfman

CHICAGO (Reuters) - Walgreen Co (WAG.N: Quote, Profile, Research) posted on Wednesday a 4.4 percent increase in sales at stores open at least a year as strong demand for Easter merchandise helped offset tepid sales growth for prescription drugs.

Pharmacy same-store sales rose just 0.8 percent, hurt by lower-priced generic drugs, a slower flu season and the switch of allergy medicine Zyrtec to over-the-counter status. The number of prescriptions filled at established stores fell 0.1 percent.

Same-store sales of general, or front-end, merchandise rose 11.3 percent, helped by the early Easter, which came in March this year and April last year.

"Front-end strength was partially attributable to the earlier Easter, which is transitory," Goldman Sachs analyst John Heinbockel said in a research note.

Walgreen and rival CVS Caremark Corp (CVS.N: Quote, Profile, Research), the two largest U.S. drugstore operators, have seen sales of general merchandise hurt by the weak U.S. economy, but Walgreen said front-end sales in March exceeded expectations because of strong Easter sales.

Goldman's Heinbockel said the improvement in sales of seasonal items for Easter, compared with a weak Christmas, might be because Easter items cost less.

Total sales rose 10.6 percent to $5.11 billion in March, the company said.

Walgreen shares were down 1.5 percent to $38.34 in early Wednesday afternoon trading while CVS shares were down 1.6 percent to $40.51, both on the New York Stock Exchange.

(Reporting by Brad Dorfman, editing by Lisa Von Ahn and Tim Dobbyn)