Walgreens (NASDAQ:WBA), the drugstore chain, has decided to significantly reduce its quarterly dividend by almost half, bringing it down to 25 cents per share. The move is aimed at bolstering the company’s financial position and redirecting capital towards the expansion of its pharmacy and healthcare ventures. The decision was announced on Thursday, with the new dividend amount a notable decrease from the 48 cents per share declared in October.
According to the new CEO, Tim Wentworth, this strategic adjustment is intended to support the growth of Walgreens’ pharmacy and healthcare businesses, ultimately enhancing shareholder value. Edward Jones analyst John Boylan noted that while the dividend cut was a necessary measure, achieving sustained growth might take some time as part of the company’s broader financial recovery process.
Walgreens Boots Alliance Inc., operating a global network of approximately 13,000 drugstores, revealed better-than-expected fiscal first-quarter results on the same day. The company’s primary focus remains its drugstore business, although it has been exploring partnerships, such as with VillageMD, to establish primary care practices adjacent to some locations.
Despite facing challenges related to a decline in COVID-19 vaccine and testing demand, reimbursement issues, and pharmacy staffing shortages, Walgreens is actively working to expand its healthcare segment. The company acknowledges that developing and making this segment profitable will be a gradual process.
CEO Wentworth emphasized the company’s commitment to taking swift actions to manage costs and increase cash flow, exploring various strategic options to enhance shareholder value. The recent leadership change saw Wentworth taking over as CEO in October after the departure of former leader Rosalind Brewer in late August.
In the fiscal first quarter, Walgreens reported a loss of $67 million, with adjusted earnings of 66 cents per share and a 10% growth in sales to $36.7 billion. While the company maintained its full fiscal year guidance outlined in October, anticipating earnings between $3.20 and $3.50 per share, this represents a decline from the adjusted earnings of $3.98 per share reported in fiscal 2023. Challenges in the new fiscal year include lower contributions from COVID-19-related activities and a higher tax rate. Analysts are expecting adjusted earnings of $3.32 per share.
Following the announcement, shares of the Deerfield, Illinois-based company experienced a 7.2% decline, reaching $23.74 in early trading.
Featured Image: Unsplash @ sachinajch
Author Stephanie Bédard-Châteauneuf 
