Walgreens Boots Alliance (NASDAQ: WBA) shares fell more than 5% on Thursday following the decision by the drugstore chain to reduce its quarterly dividend to secure additional funds for business expansion.
Walgreens is cutting its dividend by nearly half. The drugstore chain aims to enhance its balance sheet and channel capital towards expanding its pharmacy and healthcare businesses.
Walgreens’ quarterly payout to shareholders will now stand at 25 cents per share, down from the previously announced 48 cents per share in October. The decision is driven by the company’s vision to prioritize growth in pharmacy and healthcare segments.
Newly appointed CEO Tim Wentworth emphasized that the dividend reduction aligns with the company’s belief that fostering growth in pharmacy and healthcare will ultimately benefit shareholders.
John Boylan, an analyst at Edward Jones, views the dividend cut as a necessary step in the financial healing process. He said in an email,
“However, this is just another step in the financial healing process, and seeing predictable and sustained growth may take time.”
Despite the dividend adjustment, Walgreens Boots Alliance (NASDAQ: WBA) announced better-than-expected fiscal first quarter results, showcasing resilience amid industry challenges.
Walgreens Boots Alliance (NASDAQ: WBA), operating a global network of around 13,000 drugstores, is strategically collaborating with VillageMD to open primary care practices next to select locations. The aim is to create synergy between drugstores and doctor’s offices for comprehensive patient care.
Like its peers, Walgreens has faced challenges, including a decline in COVID-19 vaccines and testing, prescription reimbursement constraints, and pharmacy staffing shortages. The company is steadfast in its commitment to growing its healthcare business, recognizing that it will take time to become profitable.
In the company’s earnings statement, CEO Tim Wentworth, who assumed the position in October following Rosalind Brewer’s departure in late August, highlighted the company’s focus on swift cost adjustments and increased cash flow. He further notes that the company is exploring strategic options to boost shareholder value.
Walgreens announced a fiscal first-quarter loss of $67 million. However, the company outperformed analyst estimates on both earnings and sales.
Earnings, adjusted for one-time items, stood at 66 cents per share, beating the FactSet consensus estimate of 62 cents per share. The pharmacy giant also reported a 10% growth in sales, reaching $36.7 billion, surpassing the estimated revenue of $34.95 billion.
Walgreens Boots Alliance (NASDAQ: WBA) has announced that it will uphold its guidance for the full fiscal year, as outlined in October. The company anticipates earnings to fluctuate between $3.20 and $3.50 per share for the full fiscal year. This projection marks a notable decline from the adjusted earnings of $3.98 per share reported in fiscal 2023.
The company also highlighted challenges for the new fiscal year, including lower contributions from COVID-19-related factors and a higher tax rate. Analysts, on average, are now expecting adjusted earnings of $3.32 per share for the full fiscal year.
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