(Mark One)

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.

The number of shares issued and outstanding of the registrant's Common Stock, $.078125 par value, as of March 28, 2002 was 1,023,403,568.

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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 February 28, 2002, the Consolidated Condensed Statements of Earnings for the three and six months ended February 28, 2002 and 2001, and the Consolidated Condensed Statements of Cash Flows for the six months ended February 28, 2002 and 2001, 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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The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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The accompanying Notes to Consolidated Condensed Financial

Statements are an integral part of these Statements.

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(1) Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At February 28, 2002 and August 31, 2001, inventories would have been greater by $680.8 million and $637.6 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 $2.8 million and $7.2 million for the quarter and six-month periods ended February 28, 2002 versus $4.5 million and $9.0 million for the comparable periods a year ago.

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Net earnings for the second quarter, ended February 28, 2002, were $326.6 million or $.32 per share (diluted). This was a 10.0% increase in net earnings over last year. Included in last year's 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, earnings this quarter rose 15.3% from last year's $283.3 million or $.28 per share (diluted). Net earnings for the six months were up 12.6% to $512.5 million or $.50 per share (diluted). Both periods included gains related to the prescription drug antitrust litigation settlement, $5.5 million for the current six-month period versus the aforementioned $22.1 million for the same period a year ago. Excluding the gains, the first half earnings rose 15.3% to $509.1 million or $.49 per share (diluted). Net earnings increases resulted from improved sales and lower expense ratios, partially offset by a decrease in gross margin rates.

Net sales increased by 16.5% in the second quarter, to $7.5 billion, and rose by 16.6% to $14.0 billion for the first six 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 10.2% and 10.4% for the quarter and first six months. New store openings accounted for 9.8% and 10.0% of the quarterly and six-month sales increase. The company operated 3,678 drugstores as of February 28, 2002, compared to 3,343 a year earlier.

Prescription sales increased 21.4% for the second quarter and 21.5% for the first six months. Prescription sales in comparable stores increased 16.4% for the quarter and 16.7% for the six-month period while comparable sales in other sales categories increased 3.2% and 2.9% for the same periods. Third party sales, where reimbursement is received from managed care organizations and government and private insurance, were 90% of pharmacy sales compared to 88% 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 27.2% of sales in the quarter and 26.6% for the six-month period compared to 27.5% and 27.1% for the comparable periods last year. The decreases in gross margins were caused by a number of factors. Non pharmacy margins declined as a result of more aggressive advertising and in-store promotions. Although prescription margins increased, due in part to the shift to more generic medications, the trend continued in sales mix toward pharmacy, which carries lower margins than the rest of the store. Within the pharmacy, third party sales, which typically have lower profit margins than cash prescriptions, continue to become a larger portion of prescription sales.

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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 $20.8 million ($.02 per share) and $43.2 million ($.03 per share) for the quarter and six-month periods ended February 28, 2002 versus $26.8 million ($.02 per share) and $43.2 million ($.03 per share) for the same periods a year ago. During the quarter the company lowered its estimated annual rate from 2.50% to 2.25% primarily due to lower than projected pharmacy inflation. Last year the company raised the estimated annual rate from 2.25% to 2.75%.

Selling, occupancy and administration expenses decreased to 20.2% from 20.4% of sales in the quarter and to 20.8% from 21.1% of sales for the six months. The decreases, as a percent to sales, were principally caused by lower insurance costs and store related expenses, which were partially offset by higher occupancy costs.

The second quarter effective tax rate remained at 37.75%. Last year the effective tax rate was lowered to 38.25% from the first quarter rate of 38.50%. The decrease was principally the result of the settlement of various IRS matters.

The financial statements are prepared in accordance with generally accepted accounting principles and include amounts based on management's prudent judgments and estimates. Actual results may differ from these estimates.

Management believes that any reasonable deviation from those judgements and estimates would not have a material impact on the company's consolidated financial position or results of operations. Some of the more significant estimates include liability for closed locations, liability insurance reserves, allowance for doubtful accounts, and cost of sales. The company uses the following techniques to determine estimates:

Cash and cash equivalents were $16.1 million at February 28, 2002, compared to $74.6 million at February 28, 2001. 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.

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Net cash provided by operating activities for the first half of fiscal 2002 was $616.5 million compared to $306.5 million a year ago. The change between periods is principally due to tighter control over inventory levels. 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 $289.8 million versus $572.8 million last year. Additions to property and equipment were $493.2 million compared to $636.6 million last year. There were 210 new or relocated drugstores opened during the first half of this year compared to 238 in the same period last year. New stores are owned or leased. There were 123 owned locations opened during the first half of this year or under construction at February 28, 2002 versus 179 for the same period last year.

During the quarter the company entered into a sale-leaseback transaction. This transaction involved 42 drugstore locations and resulted in proceeds of $143 million.

Capital expenditures for fiscal 2002 are expected to reach approximately $1.3 billion. The company expects to open approximately 475 new stores in fiscal 2002 and have more than 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. During the quarter a new distribution center opened in West Palm Beach, Florida. Two new distribution centers are under construction in Ohio and the Dallas metropolitan area. Another is planned in southern California.

Net cash used for financing activities was $327.5 million compared to $328.1 million provided a year ago. The change was principally due to payments of short term borrowings during this year versus proceeds from borrowings during the same period last year. Borrowings were needed to support working capital needs and store and distribution center growth, which includes purchases of new store property, equipment and inventory. In November 2001 the company obtained a syndicated bank line of credit facility of $800 million to support the company's short-term commercial paper program and has the option to increase the facility to $850 million if required. As of February 28, 2002, there were $104.4 million of short-term borrowings compared to $324.8 million at February 28, 2001. The company also has available $100 million of unissued authorized debt securities, previously filed with the Securities and Exchange Commission.

During the first quarter the company adopted Financial Accounting Standards Board Statement No. 142, "Goodwill and other Intangible Assets." Under this pronouncement, goodwill is no longer amortized but periodically tested for impairment. No significant impact to the consolidated financial position or results of operations occurred as a result of adopting this standard. Also issued during the first quarter was SFAS NO. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This pronouncement, which is effective by the company's fiscal year 2003, may require additional disclosures. However, adoption of this pronouncement is not expected to have a material impact on the company's consolidated financial position or results of operations.

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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, 2001, could cause results to differ materially from management expectations as projected in such forward-looking statements: the impact of events related to the September 11 terrorist attacks, 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. Unless otherwise required by applicable securities laws, the company assumes no obligation to update its forward-looking statements to reflect subsequent events or circumstances.

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Item 4. Submission of Matters to a Vote of Securities Holders

Item 6. Exhibits and Reports on Form 8-K

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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.

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