Walgreen earnings up 11 percent.(Chicago Tribune)

Walgreen Co.'s fiscal fourth-quarter earnings climbed 11 percent, despite the drag of a promotional-pricing strategy that thinned profit margins at the nation's biggest drugstore chain.

The Deerfield, Ill., retail giant also said Monday that, even in the face of a weakening economy, Walgreens doesn't intend to throttle back a high-powered expansion program under which it opened a new store every 18 hours last year.

"Our expansion plans are absolutely on target, even as the overall economy tightens," said director of finance Rick Hans. "This is opportunity to keep growing." The company intends to open 475 new stores next year, one more than it did in the latest year, as it pushes toward a goal of operating 6,000 stores by year 2010.

At the end of the latest quarter, Walgreens was operating 3,520 drugstores, 11 percent more than the 3,165 it had open a year ago. Because the company has been shuttering some of its oldest outlets, the net number of stores in operation increased by a more modest 355 last year even though it opened 474 new branches.

For the quarter ended Aug. 31, Walgreens matched analysts' expectations by reporting net income of $216.9 million, or 21 cents a diluted share. In the year-earlier period, the company had underlying earnings of $196.0 million, or 19 cents a share, before a onetime gain from a legal settlement boosted final net to $216.6 million, or 21 cents a share.

Sales climbed 17 percent in the latest quarter, to $6.28 billion from $5.38 billion.

Profits grew less than sales did, Walgreens said, in part because the company has cut costs in order to pull in customers. "We've lowered prices on thousands of items in cosmetics and promotional categories, and it's helping drive more customers into our stores," said chairman Dan Jorndt.