Investors wanted more out of

Walgreen

(WAG)

.

Shares in the nation's largest drugstore chain were selling off Wednesday after the company reported slightly disappointing August sales figures. The sales report doesn't alter the company's earnings outlook, say analysts, but the selloff underscores

worries over the company's valuation that have dogged Walgreen this year. Investors have demanded the company, which trades at over 30 times this year's estimated earnings, keep raising the bar to justify that pricey multiple.

Walgreen, based in Deerfield, Ill., reported a 7.9% jump in same-store sales in August, on the low end of analysts' projections. More importantly, the company reported a 0.7% decline in general merchandise sales, or so-called front-end items, which are more profitable than pharmacy sales and closely watched by analysts and investors.

"There may be some mild disappointment at the front-end results, but given 86 new store openings in the month, we would be surprised if there wasn't a little front-end cannibalization," Merrill Lynch analyst Mark Husson wrote in a note Wednesday. (He kept his buy rating on the stock, and does have a banking relationship with the company.) Walgreen operates nearly 3,900 stores.

Husson says he still expects Walgreen to meet his earnings estimate of 25 cents a share in the fourth quarter, which ended in August, and $1 for the full fiscal year.

Shares in the company were off lately $1.41, or 4.2%, at $32.32.

Meanwhile, rival

CVS'

(CVS) - Get Report

shares were off lately 54 cents, or 2%, at $28.05. CVS also reported a 7.9% jump in comparable store sales in August, but its front-end sales were up 1.3%, slightly better than expectations. On the year, CVS shares are off 6%, while Walgreen is off about 4%.

Sales reports from the drugstore chains were among a handful of companies that released August sales Wednesday, a day before most major retailers report. Several

apparel chains reported disappointing sales Wednesday, and Thursday shouldn't be much better. Overall, same-store sales growth is expected to decline from a year ago at the 40 largest retailers tracked by Thomson Financial/First Call, from a 3.7% gain last year to a projected 3.2% this year.