NEW YORK » Drugstore operator Walgreen Co., which has four full-service retail stores in Hawaii, said yesterday its profit fell 9 percent in the fiscal third quarter despite improving sales as greater expenses, including those related to its reorganization efforts, reduced its income.

Deerfield, Ill.-based Walgreen, the country's second-largest pharmacy, aims to cut its annual expenses by $1 billion starting in 2011, which is adding to its costs this year. In the quarter ended May 31, it earned $522 million, or 53 cents a share, down from $572 million, or 58 cents a share.

Analysts were expecting 56 cents a share, according to a poll by Thomson Reuters. Revenue grew 8 percent to $16.21 billion from $15.02 billion. Analysts forecast $16.16 billion in revenue, on average.

Gross margins declined 0.8 percentage points to 27.5 percent as the company offered more discounts, sold less profitable products and set aside more money for inventory accounting. The company's selling, general and administrative expenses rose 8 percent in the quarter.