Drugstore chain Walgreen Co. (WAG) on Tuesday said quarterly profit rose, helped by strong demand for prescriptions and the growth of higher-margin generic drug sales.

The retailer, which operates more than 5,000 stores, said profit rose to $345.6 million, or 34 cents per share, in the fiscal first quarter ended November 30, from $328.6 million, or 32 cents per share, in the same period a year earlier. Earnings in the most recent quarter were cut by 2 cents a share for employee stock option expenses.

Analysts, on average, expected earnings of 35 cents per share, according to Reuters Estimates.

Walgreen competes with an increasingly powerful rival in CVS Corp. (CVS), which acquired 1,200 Eckerd drugstores in 2004 and tried to buy more from grocer Albertsons Inc. (ABS) before talks broke down in December.

Both Walgreen and CVS have staked a claim to the title of largest U.S. drugstore chain — CVS has more stores, while Walgreen has higher revenue.