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A woman walks by a Walgreen drugstore in the Hollywood selection of Los Angeles, Monday, March 26, 2007.

Nick Ut/AP

Walgreen Co.'s quarterly profit fell less than expected as sales of general merchandise held up even as the drugstore chain fills fewer prescriptions due to the loss of a contract and a mild flu season.

Walgreen stopped filling prescriptions for patients in the Express Scripts Inc network on Dec. 31 after the companies failed to agree on a new contract.

No longer being part of the Express Scripts network cut 7 cents (U.S.) per share from fiscal second-quarter earnings, while a mild cold and flu season compared with a year earlier reduced earnings by another 3 cents per share, Walgreen said on Tuesday.

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Profit fell to $683-million, or 78 cents per share, in the fiscal second quarter ended Feb. 29, from $739-million, or 80 cents per share, a year earlier.

Analysts, on average, expected 77 cents per share, according to Thomson Reuters I/B/E/S.

Sales rose 0.8 percent to $18.65-billion. Sales at stores open at least a year, or same-store sales, fell 1.5 per cent.

The company filled 196 million prescriptions, down 4.2 per cent from a year earlier.

Leaving the Express Scripts network had a marked impact. The number of prescriptions filled at stores open at least a year fell 8.6 per cent in January and 9.5 per cent in the first 28 days of February.

While the number of prescriptions Walgreen fills has fallen, customers have been buying more general merchandise.

Prescription same-store sales fell 3.9 per cent during the quarter, while same-store sales of general merchandise rose 2.1 per cent.

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