Walgreen Monday unexpectedly posted its first quarterly profit decline in almost 10 years, citing lower reimbursements for some generic drugs and higher salary and other expenses, sending its shares down more than 11 percent in pre-market trade.
Walgreen, one of the largest U.S. drugstore chains, said lower gross profit from drugs such as simvastatin -- the generic form of the cholesterol drug Zocor -- weighed on earnings.
Blockbuster generic drugs typically are most profitable for drugstores in their first few months and simvastatin has been on the market since June 2006, the company said.
Higher expenses for salaries, advertising and store operations also pressured profit, raising concerns about whether Walgreen is losing control over costs as it continues its aggressive expansion.
"What's going on with Zocor is out of Walgreen's control," said Mitchell Corwin, analyst at Morningstar. "The higher store expenses, that's within their control."
Walgreen said profit for its fourth quarter ended Aug. 31 was $396.5 million, or 40 cents a share, compared with $412.3 million, or 41 cents a share, a year earlier.
Analysts on average forecast 47 cents a share, according to Reuters Estimates.