Walgreens Boots Alliance Inc. reported fiscal first-quarter earnings and sales ahead of Wall Street expectations as its new chief executive slashed the troubled drugstore chain’s dividend and said the company is looking at further changes.
Walgreens will almost halve its quarterly dividend to 25 cents a share, CEO Tim Wentworth said Thursday. The move will help increase cash flow, freeing up capital to invest in the pharmacy and health care businesses, he said.
“We are evaluating all strategic options to drive sustainable long-term shareholder value,” Wentworth said Thursday in a statement, “focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities.”
Walgreens kept its fiscal 2024 adjusted earnings outlook for $3.20 to $3.50 a share. Investors may also welcome the dividend cut, which frees up $800 million in cash flow, and the company’s quarterly performance, Bloomberg Intelligence analyst Jonathan Palmer said in an email.
The shares rose as much as 4.7 percent before US markets opened. They lost 30 percent last year.
Walgreens and rival drugstore chain CVS Health Corp. have each shifted their focus from less-profitable retailing toward more lucrative aspects of the industry, such as primary care and home health. Walgreens’ diversification has yet to pay off, leading to investor dissatisfaction and the departure of former CEO Roz Brewer, who saw the shares lose about half their value under her tenure.
After Wentworth replaced Brewer in late October, the company announced a $1 billion cost-cutting programme, closing unprofitable locations and putting the brakes on non-essential projects. Executives also said they aimed to reduce capital expenditures by about $600 million, with the expectation of seeing the cost reductions’ impact beginning in early 2024.
The company has also revived discussions on a potential sale of its international Boots chain, which could bring in about $8.8 billion, Bloomberg reported last month, citing people with knowledge of the matter. It had abandoned a plan to sell the unit in 2022 after failing to secure the desired valuation.
Adjusted earnings for the quarter that ended Nov. 30 were 66 cents a share, Walgreens said Thursday in a statement, while analysts surveyed by Bloomberg had estimated 62 cents. Revenue rose 10 percent from the year earlier to $36.7 billion, beating the average estimate of $35 billion.
Walgreens’ US retail pharmacy unit posted quarterly revenue of $28.9 billion, handily beating estimates, in part because of branded drug inflation and an increase in prescriptions filled. Sales in the US health-care unit, which includes primary-care provider VillageMD, missed at $1.93 billion.
By Fiona Rutherford
Learn more:
Boots Owner in Talks to Offload £7 Billion UK Pharmacy Chain
Walgreens Boots Alliance Inc. is reviving discussions on a potential exit from its UK drugstore chain Boots, people with knowledge of the matter said, nearly 18 months after a sale process was scrapped.
