By Shailaja Sharma

(Reuters) - Walgreen Co (WAG.N), the largest U.S. drugstore operator, withdrew its profit and revenue forecasts for 2016, saying it had yet to work out several aspects of its planned acquisition of European drug retailer Alliance Boots Holdings Ltd [ABN.UL].

Walgreen, which bought 45 percent of Alliance Boots in 2012, said it would update investors about the proposed purchase of the rest of the Europe's largest pharmacy chain owner and issue a new forecast by late July or early August.

The company, whose shares fell as much as 2.7 percent on Tuesday, also reported a lower-than-expected quarterly profit due to a slowdown in the introduction of high-margin generic drugs and lower reimbursement by insurers.

Walgreen has finally acknowledged the fact that targets for 2016 were overly ambitious, Ross Muken, senior managing director and partner at ISI Group LLC, told Reuters.

Both businesses have not performed as expected, he said, adding that the deal would likely go ahead.

Walgreen, which has an option to buy all of the Switzerland-based company in 2015, had forecast 2016 combined revenue of $130 billion and adjusted operating income of $9-$9.5 billion when it bought a stake in Alliance Boots.

"Most investors have believed for a while now that the goals were less likely to be obtained," UBS Equities analyst Steven Valiquette wrote in a note.

Walgreen Chief Executive Greg Wasson said management was working on the timing and structure of the deal as well as on how to combine management teams, cut costs and work out potential changes in the company's capital structure.

The company has been under pressure from some shareholders to do so-called "tax inversion" deal with Alliance Boots that would shift Illinois-based Walgreen's tax domicile overseas and reduce its tax bill.

Walgreen did not directly address the issue in its post-earnings conference call. But Wasson said the structure of any deal would be assessed for what it could do "as far as our effective tax rate."

Walgreen raised its cost savings estimate from the existing partnership this year by $25 million, to $400-$450 million.

THIRD QUARTER FALLS SHORT

Helped by a lower tax rate, Walgreen's net income rose about 16 percent to $722 million, or 75 cents per share, in the quarter ended May 31, from $624 million, or 65 cents per share, a year earlier.

Excluding items, the company earned 91 cents per share, falling short of the average analyst estimate of 94 cents, according to Thomson Reuters I/B/E/S.

Sales rose 5.9 percent to $19.40 billion, below the average estimate of $19.48 billion.

Walgreen, whose competitors include Rite Aid Corp (RAD.N) and CVS Caremark Corp (CVS.N), said customer traffic fell 0.7 percent.

Walgreen's shares were down 2 percent at $72.23 on the New York Stock Exchange. They have gained about 12 percent since the company reported quarterly results in March.

(Additional reporting by Sweta Singh in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian)