Pharmacy chain Walgreens cuts dividends to save cash, and shares slump. The US drugstore chain Walgreens Boots Alliance (WBA.O.) shares fell 11% on Thursday after the company almost cut its dividend distribution to save money in the face of poor customer spending and fierce competition.
The stock was the second-biggest drag on the blue-chip Dow Jones Index (.DJI), and Walgreens’ market value was expected to drop by more than $2 billion due to the dip.
Walgreens has been struggling with declining demand from consumers sick of inflation for personal care and cosmetics and declining demand for COVID vaccinations and testing. To regain market share lost to competitors like CVS Health (CVS.N), it unveiled a $1 billion cost-cutting campaign in October.
In contrast to its earlier prediction of flat revenues, Walgreens said on Thursday that the impact of decreased consumer spending was greater than anticipated. The company also predicted a low-single-digit reduction in same-store sales at its U.S. retail division.
“We have a challenging journey ahead of us to streamline and fortify Walgreens,” stated freshly hired CEO Tim Wentworth.
According to Evercore analyst Elizabeth Anderson, Walgreens could “shore up” its financial sheet and save around $800 million annually with the 48% dividend cut to 25 cents per share.
As of November 20, 2023, Walgreens owed $7.59 billion in long-term debt. According to Gabelli Funds portfolio manager Jeff Jonas, “it’s still a tough year for them.” “During the current year, which ends in August, earnings will be lower. I hope this is the lowest point.
Nonetheless, the firm exceeded earnings projections for its first complete quarter under Wentworth, aided by cost-cutting initiatives and increased medication costs.
For the quarter, it declared a $67 million loss, or 8 cents. earned 66 cents per share on an adjusted basis, as opposed to projections of 61 cents per share.
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