Walgreens posts earnings beat but slashes quarterly dividend nearly in half

Walgreens reported fiscal first-quarter adjusted earnings and revenue that topped expectations on Thursday, but cut its quarterly dividend nearly in half. 

The retail pharmacy giant slashed its dividend to 25 cents per share from 48 cents per share to “strengthen [its] long-term balance sheet and cash position,” CEO Tim Wentworth, who officially took the helm during the quarter, said in a statement. 

Walgreens’ dividend yield is now 3.9%, based on Wednesday’s closing price. That’s down significantly from its prior yield of more than 7%, which made the company the highest-paying dividend stock in the Dow Jones Industrial Average. 

It also marks the company’s first dividend cut in nearly five decades. The dividend will be payable on March 12.

The dividend reduction comes as Wentworth, a health-care industry veteran, tries to steer the company out of a rough spot. 

Shares of Walgreens plummeted 30% last year as the company grappled with weakening demand for Covid products, low pharmacy reimbursement rates, increased pressure from online retailers, labor unrest among pharmacy staff in the fall, an uneven push into health care and a challenging macroeconomic environment.

But Thursday’s earnings beat marks a turnaround from October, when Walgreens missed earnings estimates for two straight quarters for the first time in nearly a decade.

Here’s what Walgreens reported for the three-month period ended Nov. 30 compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 66 cents per share adjusted vs. 61 cents expected
• Revenue: $36.71 billion vs. $34.86 billion expected

The company reported a net loss of $67 million, or 8 cents per share, for the fiscal first quarter.

That compares with a net loss of $3.7 billion, or $4.31 per share, during the same period a year ago, when Walgreens was ordered to pay a multibillion-dollar settlement for litigation alleging the company helped fuel the nation’s opioid crisis. 

The net loss in the most recent quarter included a $278 million after-tax charge related to Walgreens’ forward sale of shares of drug distributor Cencora, formerly known as AmerisourceBergen. 

Excluding certain items, adjusted earnings per share were 66 cents for the fiscal first quarter. 

Walgreens booked sales of $36.71 billion in the quarter, a roughly 10% jump from the same period a year ago. 

The company said revenue growth in its U.S. retail pharmacy and international business segments, and sales contributions from its U.S. health-care division, drove the increase. Walgreens is making significant investments to transform from a major drugstore chain to a large health-care company. 

Despite the quarterly beats, Walgreens reiterated its fiscal 2024 adjusted earnings guidance of $3.20 to $3.50 per share. 

Walgreens expects lower Covid-related sales, along with a higher tax rate and lower sale and leaseback contributions, to offset earnings growth. 

The company did not indicate in the earnings release whether it would also maintain its previous revenue guidance of $141 billion to $145 billion. 

Walgreens said during its quarterly earnings call in October that the company expects more than $1 billion in savings during fiscal 2024 due to its ongoing cost-cutting initiative, which involves closing unprofitable stores and using artificial intelligence to drive supply chain efficiencies, among other efforts.

Walgreens’ U.S. retail pharmacy segment generated $28.94 billion in sales in the fiscal first quarter, an increase of more than 6% from the same period last year. Comparable sales at pharmacy locations rose 8.1%. 

That segment operates more than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs as well as health and wellness, beauty, personal care, and food products. 

Pharmacy sales for the quarter rose 10.7% compared with the fiscal first quarter of 2023, as comparable sales climbed more than 13% due to price inflation in brand medications and “strong execution” in pharmacy services, Walgreens said. 

Total prescriptions filled in the quarter including immunizations totaled 311.6 million, which is flat compared with the same period a year ago. 

Walgreens cited a weaker respiratory virus season this fall, which is blunting demand for medications and vaccines. The company also pointed to Medicaid redeterminations, which are routine reviews each state’s Medicaid agency conducts to determine whether beneficiaries still qualify for coverage. 

Retail sales for the quarter fell 6.1% from the same period a year ago, and comparable retail sales declined 5%. Walgreens pointed to the weaker respiratory season as well as “macroeconomic-driven consumer trends” and Thanksgiving holiday store closures – a first for the company last year — to explain the decrease. 

Meanwhile, the company’s international segment, which operates more than 3,000 retail stores abroad,  racked up $5.83 billion in sales in the fiscal first quarter. That’s a rise of more than 12% from the same period a year ago. 

The company said sales from Walgreens’ U.K. subsidiary, Boots, grew more than 6%.

Revenue from Walgreens’ U.S. health-care segment came in at $1.93 billion, up from $989 million in the same period last year. 

That division includes primary-care provider VillageMD, which includes urgent-care provider Summit Health, and CareCentrix, which coordinates home care for patients after they’re discharged from the hospital. 

Walgreens will hold an earnings call with investors at 8:30 a.m. ET.

— CNBC’s Bertha Coombs and Robert Hum contributed to this report.

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