UPDATE 3-Shoppers Drug profit rises, but worries dog stock

* EPS C$0.79 vs consensus view C$0.80

* Revenue rises 7.9 pct to C$3.01 bln

* Shares down 1.6 percent at C$43.79 (Adds company comments)

By Scott Anderson

TORONTO, Nov 11 (Reuters) - Shoppers Drug Mart (SC.TO), Canada's biggest pharmacy chain, reported a higher quarterly profit on Wednesday, helped by stronger sales of prescription drugs and beauty care products.

But its shares dropped 1.6 percent as investors worried about likely changes to rules on drug costs and prescription fees in the province of Ontario and the chance of similar changes in Alberta.

Ontario, Canada's most populous province, is reviewing the legislation and is expected to enact changes early next year.

"It is a very complex discussion (in Ontario), obviously," chief executive Jurgen Schreiber told a conference call.

"There is nothing to be speculated ... about any kind of impact. We are still together and negotiating and everything is in line with our expectations at this point in time."

Analysts see a hit to earnings between 20 Canadian cents and 35 Canadian cents a share if reforms go through.

"The stock is going to remain range-bound until something comes out from Ontario on what is going to happen with this drug reform," said Brian Yarbrough, an analyst at Edward Jones, in St. Louis, Missouri.

Shoppers shares, which have fallen about 7 percent in the past year, were down 1.6 percent at C$43.79 on the Toronto Stock Exchange.

Shoppers earned C$170.9 million ($163.5 million), or 79 Canadian cents a share, for the quarter to Oct 10, up from C$160.3 million, or 74 Canadian cents a share, in the year-before quarter.

Revenue climbed 7.9 percent to C$3.01 billion, with same-store sales rising 4.8 percent.

Analysts had expected, on average, earnings per share of 80 Canadian cents before items and revenue of C$3.00 billion, according to Thomson Reuters I/B/E/S.

Prescription drug sales on a same-store basis gained 5.8 percent. Total prescription sales climbed 9.7 percent to C$1.48 billion, accounting for 49.1 percent of the sales mix, up from 48.3 percent for the same period last year.

Front-of-store sales, including things like cosmetics, candy and over-the-counter medications, jumped 6.2 percent to C$1.53 billion, excluding tobacco, on a same-store basis.

"They continue to do a great job driving pharmacy sales and front-end sales continue to be strong," Yarbrough said. "It's pretty impressive, compared with what else is going on out there in retail."

The results included only minimal sales from cold and flu remedies and hand sanitizers, but Schreiber expected this to pick up dramatically this quarter as the full effects of the H1N1 flu pandemic takes hold.

Shoppers opened or bought 37 drug stores in the quarter, including 15 relocations. At the end of the quarter, it had 1,282 stores -- 1,212 drug stores, 66 Shoppers Home Health Care stores, which supply medical equipment and devices, and four Murale stores, a luxury beauty brand launched last year. ($1=$1.05 Canadian) (Reporting by Scott Anderson; editing by Janet Guttsman)