Shares of Walgreen Co. fell over 3 percent on Thursday after a J.P. Morgan Chase analyst said soft consumer demand could pressure operating profits at the U.S. drugstore chain in the year ahead.

Shares of Walgreen, which operates more than 3,500 stores, ended down $1.07, or 3.13 percent, to $33.12, and are down about 21 percent for the year to date. 

The analyst, Stephen Chick, reiterated a market perform rating on Walgreen stock but said in a research report that the weak economy is intensifying competition among drug retailers for consumers' discretionary spending on nonprescription items. 

"Chains today are required to fight harder to generate front-end sales through more aggressive advertising and promotion, while circular activity has intensified," Chick wrote. 

Derek Leckow, an analyst at Barrington Research Associates, said the J.P. Morgan analyst's comments probably weighed on the stock in the absence of any other news out on the company but said he thought Walgreen was doing a good job of moving its merchandise at the front of the store. 

"I think some of the concerns about front-end profitability are overblown a bit," said Leckow, who has a buy rating on Walgreen's shares. 

J.P. Morgan lowered its first-quarter earnings-per-share estimate for Walgreen by a penny to 16 cents a share and kept its 2002 estimate at 94 cents a share, citing easier year-over-year comparisons for the second half of the year. 

Walgreen is due to report first-quarter earnings on Jan. 3.