Walgreens Boots Alliance Reduces Quarterly Dividend Payment by 48%

Amid the release of its first quarter of fiscal 2024 results, Walgreens Boots Alliance Inc. (WBA) revealed that its board of directors has declared a quarterly dividend of 25 cents per share, a reduction of 48% from the previous quarter. 

“Since the start of my tenure with WBA, we have been evaluating our options across our strategies and operations, including those related to our capital allocation,” said CEO Tim Wentworth. “We have made the difficult decision to reduce our quarterly dividend payment to 25 cents per share, to strengthen our long-term balance sheet and cash position. This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and health care businesses, which we believe will ultimately improve shareholder value.” 

Wentworth took the helm at WBA in October 2023, after Rosalind Brewer stepped down from the CEO role in September in what was described as a mutual decision between her and the company’s board of directors. 

For the first quarter ended Nov. 30, 2023, WBA reported that sales increased 10.0% from the year-ago quarter to $36.7 billion, an increase of 8.7% on a constant-currency basis, reflecting sales growth in the U.S. retail pharmacy and international segments, and sales contributions from the U.S. health care segment. 

The U.S. retail pharmacy segment had Q1 sales of $28.9 billion, an increase of 6.4% from the year-ago quarter. Comparable sales increased 8.1% from the year-ago quarter.

Meanwhile, retail sales decreased 6.1% and comparable retail sales decreased 5.0% compared with the year-ago quarter, reflecting macroeconomic-driven consumer trends, a 160-basis-point direct impact from a weaker flu and respiratory season, and Thanksgiving holiday store closures.

Q1 operating loss was $39 million versus an operating loss of $6.2 billion in the year-ago quarter. The year-over-year improvement in operating loss was due to lapping the $6.5 billion pre-tax charge for opioid-related claims and litigation recorded in the year-ago quarter. Adjusted operating income was $687 million, a decrease of 33.0% on a constant- currency basis, reflecting softer U.S. retail market trends, partly offset by improved profitability in U.S. health care and international growth.

Net loss in the first quarter was $67 million, compared with a net loss of $3.7 billion in the year-ago quarter. Net loss included a $278 million after-tax charge for fair-value adjustments on financial derivatives related to the forward sale of Cencora shares. Adjusted net earnings decreased 43.1% to $571 million, down 43.7% on a constant- currency basis.

Loss per share in Q1 was 8 cents compared to loss per share of $4.31 in the year-ago quarter. Adjusted earnings per share decreased 43.1% to 66 cents reflecting a decrease of 43.7% on a constant-currency basis.

Net cash used for operating activities was $281 million in Q1. Operating cash flow was negatively affected by an anticipated inventory build for the U.S. and U.K. holiday season and timing of payor reimbursement. Free cash flow was -$788 million, a $671 million decrease compared with the year-ago quarter, primarily driven by phasing of working capital and lower earnings. Capital expenditures decreased by $104 million versus the year-ago quarter. During its previous earnings report, WBA noted that it was working to reduce expenses and keep a lid on cap ex.

"WBA delivered fiscal first-quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop,” said Wentworth. “We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities.”

Walgreen’s fiscal 2024 guidance includes maintaining fiscal 2024 adjusted EPS guidance of $3.20 to $3.50, with underlying earnings growth more than offset by lower sale and leaseback contribution, a higher tax rate, and lower COVID-19 contribution. 

“We are proud to be a trusted and independent partner of choice, delivering health care to millions of people,” added Wentworth, “and we will leverage our local, convenient presence to engage with patients and help payors, providers and pharma companies also achieve better health outcomes at an affordable cost."

The company launched Rx Savings Finder last month to help patients pay less for prescription medications. Rx Savings Finder finds free third-party discount cards, providing patients with a quick and easy way to find lower prices on their Walgreens medications. 

WBA’s dividend is payable on March 12 to stockholders of record as of Feb. 20, 2024.

WBA has approximately 12,500 locations across the United States, Europe and Latin America and employs more than 315,000 people. Brands include Walgreens, Boots, Duane Reade, the No7 Beauty Co. and Benavides. Its Deerfield, Ill.-based Walgreens brand operates nearly 9,000 retail locations across the United States, Puerto Rico and the U.S. Virgin Islands. It’s No. 5 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.