Walgreens posts earnings beat but slashes quarterly dividend nearly in half

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

The retail pharmacy large slashed its dividend to 25 cents per share from 48 cents per share to “strengthen [its] long-term steadiness sheet and money place,” CEO Tim Wentworth, who officially took the helm throughout the quarter, stated in a press release. 

Walgreens’ dividend yield is now 3.9%, primarily based on Wednesday’s closing value. That’s down considerably from its prior yield of greater than 7%, which made the corporate the highest-paying dividend stock in the Dow Jones Industrial Average. 

It additionally marks the corporate’s first dividend reduce in nearly five decades. The dividend might be payable on March 12.

The dividend discount comes as Wentworth, a health-care industry veteran, tries to steer the corporate out of a tough spot. 

Shares of Walgreens plummeted 30% final 12 months as the corporate grappled with weakening demand for Covid merchandise, low pharmacy reimbursement charges, elevated stress from on-line retailers, labor unrest among pharmacy employees in the autumn, an uneven push into well being care and a difficult macroeconomic atmosphere.

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

Here’s what Walgreens reported for the three-month interval ended Nov. 30 in contrast with what Wall Street was anticipating, primarily based on a survey of analysts by LSEG, previously generally known as Refinitiv:

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

The firm reported a internet lack of $67 million, or 8 cents per share, for the fiscal first quarter.

That compares with a internet lack of $3.7 billion, or $4.31 per share, throughout the identical interval a 12 months in the past, when Walgreens was ordered to pay a multibillion-dollar settlement for litigation alleging the corporate helped gas the nation’s opioid crisis. 

The internet loss in the newest quarter included a $278 million after-tax cost associated to Walgreens’ forward sale of shares of drug distributor Cencora, previously generally known as AmerisourceBergen Corp. 

Excluding sure gadgets, adjusted earnings per share have been 66 cents for the fiscal first quarter. 

Walgreens booked gross sales of $36.71 billion in the quarter, a roughly 10% bounce from the identical interval a 12 months in the past. 

The firm stated income development in its U.S. retail pharmacy and worldwide enterprise segments, and gross sales contributions from its U.S. health-care division, drove the rise. Walgreens is making important investments to remodel from a serious drugstore chain to a big health-care firm. 

Despite the quarterly beats, Walgreens reiterated its fiscal 12 months 2024 adjusted earnings steering of $3.20 to $3.50 per share. 

Walgreens expects decrease Covid-related gross sales, together with the next tax charge and decrease sale and leaseback contributions, to offset earnings development. 

The firm didn’t point out in the earnings launch whether or not it could additionally preserve its earlier income steering of $141 billion to $145 billion. 

Walgreens stated throughout its quarterly earnings name in October that the corporate expects over $1 billion in financial savings throughout fiscal 12 months 2024 as a result of its ongoing cost-cutting initiative, which entails closing unprofitable shops and utilizing AI to drive supply-chain efficiencies, amongst different efforts.

Walgreens’ U.S. retail pharmacy segment generated $28.94 billion in gross sales in the fiscal first quarter, a rise of greater than 6% from the identical interval final 12 months. Comparable gross sales at pharmacy places rose 8.1%. 

That phase operates greater than 8,000 drugstores throughout the U.S., which promote prescription and non-prescription medication in addition to well being and wellness, magnificence, private care and meals merchandise. 

Pharmacy gross sales for the quarter rose 10.7% in contrast with the fiscal first quarter of 2023, as comparable gross sales climbed greater than 13% as a result of value inflation in model medicines and “sturdy execution” in pharmacy companies, Walgreens stated. 

Total prescriptions stuffed in the quarter together with immunizations totaled 311.6 million, which is flat in comparison with the identical interval a 12 months in the past. 

Walgreens cited a weaker respiratory virus season this fall, which is blunting demand for medicines and vaccines. The firm additionally pointed to Medicaid redeterminations, that are routine critiques every state’s Medicaid company conducts to find out whether or not beneficiaries nonetheless qualify for protection. 

Retail gross sales for the quarter fell 6.1% from the identical interval a 12 months in the past, and comparable retail gross sales fell 5%. Walgreens pointed to the weaker respiratory season in addition to “macroeconomic-driven shopper traits” and Thanksgiving holiday store closures – a primary for the corporate final 12 months — to elucidate the lower. 

Meanwhile, the corporate’s international segment, which operates greater than 3,000 retail shops overseas,  racked up $5.83 billion in gross sales in the fiscal first quarter. That’s up greater than 12% from the identical interval a 12 months in the past. 

The firm stated gross sales from Walgreens’ U.Ok. subsidiary, Boots, grew greater than 6%.

Revenue from Walgreens’ U.S. health-care phase got here in at $1.93 billion, up from $989 million in the identical interval final 12 months. 

That division contains primary-care supplier VillageMD, which incorporates urgent-care supplier Summit Health, and CareCentrix, which coordinates residence look after sufferers after they’re discharged from the hospital. 

Walgreens will maintain an earnings name with buyers at 8:30 a.m. ET.

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

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