Walgreen’s, which so many people have long dead in the water, appears to be making strong gains in the second quarter. A profit that rose 4.6% in the last quarter attests to these gains, which virtually no experts saw coming. In an industry dominated by Walmart, Walgreen’s is still able to compete.

To spur front-of-the-store sales as consumers focus on thrift, Walgreen has been removing discretionary goods and adding private-label and staple products. The company said its store revamp initiative, called Customer Centric Retailing, has been successful so far.

“It’s produced good economics for the company; we have already seen a $500 million reduction in inventory,” Mr. Wasson said. Walgreen expects to have about 2,500 to 3,000 stores in the new format by the end of fall 2010.

If Walgreen’s can continue this rate of growth, while cutting out the fat, they’ll be able to present a real alternative in the grocery industry.