SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTER ENDED MAY 31, 2001

OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to _______

Commission File Number

1-604

WALGREEN CO.

(Exact name of registrant as specified in its charter)

Illinois	36-1924025
(State of Incorporation	(I.R.S Employer Identification No.)

200 Wilmot Road, Deerfield, Illinois	60015
(Address of principal executive offices)	(Zip Code)

(847) 940-2500

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

The number of shares issued and outstanding of the registrant's Common Stock, $.078125 par value, as of June 29, 2001 was 1,018,870,523.

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WALGREEN CO. AND SUBSIDIARIES

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The consolidated condensed financial statements included herein have been prepared by the company pursuant to the rules and regulations of the Securities and Exchange Commission. The Consolidated Condensed Balance Sheet as of May 31, 2001, the Consolidated Condensed Statements of Earnings for the three and nine months ended May 31, 2001 and 2000, and the Consolidated Condensed Statements of Cash Flows for the nine months ended May 31, 2001 and 2000, have been prepared without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the company's latest annual report on Form 10-K.

In the opinion of the company the condensed statements for the unaudited interim periods presented include all adjustments, consisting only of normal recurring adjustments, necessary to present a fair statement of the results for such interim periods. Because of the influence of certain holidays, seasonal and other factors on the company's operations, net earnings for any interim period may not be comparable to the same interim period in previous years, nor necessarily indicative of earnings for the full year.

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	WALGREEN CO. AND SUBSIDIARIES
	CONSOLIDATED CONDENSED BALANCE SHEETS
	(Dollars in Millions)
				(Unaudited)
				May 31,	August 31,
				2001	2000
Assets
	Current Assets:
		Cash and cash equivalents		$ 98.7	$ 12.8
		Accounts receivable, net		785.8	614.5
		Inventories		3,263.8	2,830.8
		Other current assets		101.5	92.0
			Total Current Assets	4,249.8	3,550.1
	Property and Equipment, at cost, less
		Accumulated depreciation and amortization of
		$1,165.1 at May 31 and $991.5 at August 31		4,095.3	3,428.2
	Other Non-Current Assets			101.3	125.4
			Total Assets	$ 8,446.4	$ 7,103.7
Liabilities & Shareholders' Equity
	Current Liabilities:
		Short term borrowings		$ 357.8	$ -
		Trade accounts payable		1,445.4	1,364.0
		Other current liabilities		1,016.9	939.7
			Total Current Liabilities	2,820.1	2,303.7
	Non-Current Liabilities:
		Deferred income taxes		127.9	101.6
		Other non-current liabilities		493.3	464.4
			Total Non-Current Liabilities	621.2	566.0
	Shareholders' Equity
		Preferred stock $.0625 par value; authorized
			32 million shares; none issued	-	-
		Common stock $.078125 par value; authorized
			3.2 billion shares; issued and outstanding
			1,018,475,318 at May 31 and
			1,010,818,890 at August 31	79.6	79.0
		Paid-in capital		575.8	367.2
		Retained earnings		4,349.7	3,787.8
			Total Shareholders' Equity	5,005.1	4,234.0
			Total Liabilities & Shareholders' Equity	$ 8,446.4	$ 7,103.7

The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(In Millions Except Per Share Data)
				Three Months Ended		Nine Months Ended
				May 31,	May 31,	May 31,	May 31,
				2001	2000	2001	2000
Net Sales				$6,296.2	$5,394.1	$18,339.4	$15,826.1
Costs and Deductions:
	Cost of sales			4,644.6	3,943.1	13,428.9	11,559.4
	Selling, occupancy and
			administration	1,306.1	1,138.2	3,850.5	3,352.5
				5,950.7	5,081.3	17,279.4	14,911.9
Other (Income)Expense:
	Interest income			(1.7)	(2.1)	(3.9)	(4.7)
	Interest expense			1.7	-	3.1	.4
	Other income			-	-	(22.1)	-
				-	(2.1)	(22.9)	(4.3)
Earnings before income tax
	provision			345.5	314.9	1,082.9	918.5
Income tax provision				132.1	121.3	414.2	358.2
Net earnings				$ 213.4	$ 193.6	$ 668.7	$ 560.3
Per share-
	Basic			$ .21	$ .20	$ .66	$ .56
	Diluted			$ .21	$ .19	$ .65	$ .55
	Dividends declared			$ .03500	$ .03375	$ .10500	$ .10125
Average shares outstanding				1,018.0	1,008.3	1,015.3	1,006.5
Dilutive effect of stock
		options		12.9	12.0	13.4	12.5
Average shares outstanding
	assuming dilution			1,030.9	1,020.3	1,028.7	1,019.0

The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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	WALGREEN CO. AND SUBSIDIARIES
	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
	(Dollars in Millions)
			Nine Months Ended
			May 31,	May 31,
			2001	2000
Net cash provided by operating activities			$ 552.8	$ 654.9
Cash flows from investing activities:
	Additions to property and equipment		(905.9)	(777.9)
	Net proceeds from corporate-owned life insurance
		policies	57.5	55.1
	Other		34.9	12.2
Net cash used for investing activities			(813.5)	(710.6)
Cash flows from financing activities:
	Net proceeds from short term borrowings		357.8	-
	Proceeds from shares issued under the employee
		stock and benefit plans	103.9	65.6
	Cash dividends paid		(105.2)	(100.5)
	Other		(9.9)	(4.2)
Net cash provided by(used for) financing activities			346.6	(39.1)
Changes in cash and cash equivalents:
	Net increase(decrease) in cash and cash equivalents		85.9	(94.8)
	Cash and cash equivalents at beginning of year		12.8	141.8
Cash and cash equivalents at end of period			$ 98.7	$ 47.0

The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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WALGREEN CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(1) Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At May 31, 2001 and August 31, 2000, inventories would have been greater by $634.8 million and $574.8 million respectively, if they had been valued on a lower of first-in, first-out (FIFO) cost or market basis. LIFO inventory costs can only be determined annually when inflation rates and inventory levels are finalized; therefore, LIFO inventory costs for interim financial statements are estimated. Cost of sales is primarily derived from an estimate based upon point-of-sale scanning and adjusted based on periodic inventories.

(2) The company capitalized interest expense as part of significant construction projects. The amounts capitalized were $1.8 million and $10.8 million for the quarter and nine-month periods ended May 31, 2001 versus $1.1 million and $2.8 million for the comparable periods a year ago.

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MANAGEMENT'S DISCUSSION AND ANALYSIS

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

Net earnings for the third quarter, ended May 31, 2001, were $213.4 million or $.21 per share (diluted). This was a 10.2% increase in net earnings over last year. Net earnings for the nine months were up 19.3% to $668.7 million or $.65 per share (diluted). Included in the year to date results was a $22.1 million pre-tax gain ($.01 per share) for a partial payment of the company's share of the brand name prescription drug antitrust litigation settlement. Excluding the gain, the first nine months' earnings rose 16.9% to $655.1 million or $.64 per share (diluted). Net earnings increases resulted from improved sales and lower expense ratios, partially offset by lower gross margins.

Net sales increased by 16.7% in the third quarter, to $6.3 billion, and rose by 15.9% to $18.3 billion for the first nine months. Drugstore sales increases resulted from sales gains in existing stores and added sales from new stores, each of which include an indeterminate amount of market-driven price changes. Comparable drugstore (those open at least one year) sales were up 11.3% and 10.2% for the quarter and first nine months. New store openings accounted for 10.8% and 10.7% of the quarterly and nine-month sales increase. The company operated 3,424 drugstores as of May 31, 2001, compared to 3,051 a year earlier.

Prescription sales increased 21.4% for the third quarter and 20.8% for the first nine months. Prescription sales in comparable stores increased 18.4% for the quarter and 17.6% for the nine-month period. Third party sales, where reimbursement is received from managed care organizations and government and private insurance, were 89% of pharmacy sales compared to 86% a year ago. Pharmacy sales growth trends are expected to continue primarily because of expansion into new markets, increased penetration in existing markets, availability of new drugs, and demographic changes such as the aging population.

Gross margins were 26.2% of sales in the quarter and 26.8% for the nine-month period compared to 26.9% and 27.0% for the comparable periods last year. Contributing to the decline was the continuing shift from cash to third party prescriptions, which typically have a lower gross profit margin.

The company uses the LIFO method of inventory valuation, which can only be determined annually when inflation rates and inventory levels are finalized; therefore, LIFO inventory costs for interim financial statements are estimated. Cost of sales includes a LIFO provision of $16.8 million ($.01 per share) and $60.0 million ($.04 per share) for the quarter and nine-month periods ended May 31, 2001 versus $13.0 million ($.01 per share) and $47.5 million ($.03 per share) for the same periods a year ago. During the quarter the company lowered its estimated annual rate to 2.50% from 2.75% primarily due to lower than projected pharmacy inflation.

Selling, occupancy and administration expenses decreased to 20.7% from 21.1% of sales in the quarter and to 21.0% from 21.2% of sales for the nine months. The decreases were principally caused by lower advertising and headquarters expense which continue to decline on a percent to sales basis as they are spread over a larger sales base.

The effective tax rate was 38.25% for the quarter and nine-month period this fiscal year. During the comparable period a year ago, the rate decreased from 39.25% to 39.00%. These decreases principally resulted from the settlements of various IRS matters.

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FINANCIAL CONDITION

Cash and cash equivalents were $98.7 million at May 31, 2001, compared to $47.0 million at May 31, 2000. Short-term investment objectives are to maximize yields, while minimizing risk and maintaining liquidity. To attain these objectives, investment limits are placed on the amount, type and issuer of securities.

Net cash provided by operating activities for the first nine months of fiscal 2001 was $552.8 million compared to $654.9 million a year ago. The change between periods was principally due to increased inventory levels which increased, in part, due to opening 373 net new stores from a year ago. The company's profitability is the principal source for providing funds for expansion and remodeling programs, dividends to shareholders and funding for various technological improvements.

Net cash used for investing activities was $813.5 million versus $710.6 million last year. Additions to property and equipment were $905.9 million compared to $777.9 million last year. There were 343 new or relocated drugstores opened during the first nine months compared to 303 in the same period last year. There were 220 owned locations opened during the first nine months of the year or under construction at May 31, 2001 versus 209 for the same period last year.

Capital expenditures for fiscal 2001 are budgeted to reach $1.4 billion. The company expects to open approximately 475 new stores in fiscal 2001 and have a total of 6,000 drugstores by the year 2010. The company is continuing to relocate stores to more convenient and profitable freestanding locations. In addition to new stores, a significant portion of the expenditures will be made for technology and distribution centers. Two new distribution centers are under construction in West Palm Beach, Florida, and the Dallas metropolitan area. Another is planned in northern Ohio as well as the expansion of several existing centers.

Net cash provided by financing activities was $346.6 million compared to $39.1 million used a year ago. The change was principally due to increases in short term commercial paper borrowings. These were needed to support the company's store and distribution center growth which include purchases of new store property, equipment and inventory. Based on the company's credit rating, additional short term borrowings are readily available to support this growth. At May 31, 2001, the company had $291 million in unused bank lines of credit and $100 million of unissued authorized debt securities, previously filed with the Securities and Exchange Commission.

8

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Form 10-Q, as well as in other public filings, press releases and oral statements made by our representatives, is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes statements concerning pharmacy sales trends, prescription margins, number and location of new store openings, the level of capital expenditures, demographic trends; as well as those that include or are preceded by the words "expects,""estimates,""believes" or similar language. For such statements, we claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

The following factors, in addition to those discussed elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended August 31, 2000, could cause results to differ materially from management expectations as projected in such forward-looking statements: changes in economic conditions generally or in the markets served by the company; consumer preferences and spending patterns; competition from other drugstore chains, supermarkets, on-line retailers, other retailers and mail order companies; changes in state or federal legislation or regulations; the efforts of third party payers to reduce prescription drug costs; the success of planned advertising and merchandising strategies; the availability and cost of real estate and construction; accounting policies and practices; the company's ability to hire and retain pharmacists and other store and management personnel; the company's relationships with its suppliers; the company's ability to successfully implement new computer systems and technology; and adverse determinations with respect to litigation or other claims. The company assumes no obligation to update its forward-looking statements to reflect subsequent events or circumstances.

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PART 11. OTHER INFORMATION

Item 6. Reports on Form 8-K

No reports on Form 8-K were filed by the Registrant during the quarter ending May 31, 2001.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WALGREEN CO.
	(Registrant)
Dated July 10, 2001	/s/R.L. Polark
	R.L. Polark
	Senior Vice President
	(Chief Financial Officer)
Dated July 10, 2001	/s/W.M. Rudolphsen
	W.M. Rudolphsen
	Controller
	(Chief Accounting Officer)

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