Pharmacy chain Walgreens cuts dividend to save cash, shares slump

By Bhanvi Satija and Mariam Sunny

(Reuters) -Walgreens Boots Alliance on Thursday nearly halved its dividend payout as it attempts to conserve cash amid low consumer spending and intense competition, sending the U.S. pharmacy chain's shares down 11%.

The stock was the second-biggest drag on the blue chip Dow Jones Index, and the decline was set to wipe off more than $2 billion in Walgreens' market capitalization.

Walgreens has been grappling with waning demand for COVID vaccines and testing, and decreased spending on personal care and beauty products by inflation-weary consumers. It announced a $1 billion cost cut program in October and is aiming to win back some market share lost to rivals like CVS Health.

On Thursday, Walgreens said the hit from lower consumer spending was worse than previously expected, and forecast a low-single digit decline in same-store sales at its U.S. retail business compared to its previous forecast of flat sales.

"We have hard work ahead of us in our journey to simplify and strengthen Walgreens," said CEO Tim Wentworth, who was brought on board recently.

The 48% dividend cut to 25 cents per share could help "shore up" Walgreens' balance sheet and save about $800 million on an annual basis, Evercore analyst Elizabeth Anderson said.

Walgreens had long-term debt of $7.59 billion as of Nov. 20, 2023.

"It's still a tough year for them," said Jeff Jonas, portfolio manager at Gabelli Funds.

"Earnings are going to be down for the current year that ends in August. Hopefully, this is the bottom."

The company, however, beat profit estimates for its first full quarter under Wentworth, helped by cost cut measures and higher drug prices.

It reported a loss of $67 million, or 8 cents for the quarter. On an adjusted basis, earned 66 cents per share, compared with estimates of 61 cents per share.

(Reporting by Bhanvi Satija and Mariam Sunny in Bengaluru; Editing by Shinjini Ganguli)