Drug Fair Inc. is considering closing some of its unprofitable stores as part of a campaign to cut costs and increase profits. President Milton L. Elsberg told shareholders yesterday.

"Marginal stores are being carefully analyzed," Elsberg said. "Those with little potential will be closed as soon as possible."

Elsberg raised the possibility that Drug Fair will shut some stores that have not responded to efforts to turn them around as the chain announced it had turned last year's $127,000 first quarter loss into a small profit this year.

Drug Fair earned $6,091 - less than a penny a share - for the three months ended April 28, which Elsberg noted "has historically been the company's worst period of the year."

"We're not overjoyed about those earnings, but they do represent an important departure from our recent pattern of declining earnings," he said.

Sales for the quarter increased 12 percent to $63.3 million from $56.4 million and sales for the four weeks ended May 26 were up 9.5 percent to $20.8 million from $19 million a year ago.

The Drug Fair chief executive described a number of cost-cutting, efficiency-improving efforts, ranging from cutting telephone bills and tightening cash handling procedures to hiring a new distribution director and reducing the number of stores supervised by each district manager.

He said a Drug Fair advertising program promoting non-brand name generic prescription drugs has produced "an increase in our sales of generics as well as an overall increase in our prescription departments."