Walgreens Boots Alliance, Inc. (NASDAQ: $WBA) is the largest American pharmacy retail company operating globally. The company is known for its extensive network of pharmacies and retail stores, providing a wide range of health and wellness products, prescription medications, and other related services. Walgreens was ranked 3rd on the Fortune Modern Board 25 List in 2022 and 66 on the Fortune 500 in 2023 by total revenue. It is also the 2nd largest pharmacy chain in the United States.
The company’s stock value decreased by as much as 12% on Thursday, after the news hit that it is reducing its dividend by 48%. The dividend has been cut from $0.48 per share to $0.25 per share. The move was made to strengthen its cash position in the market.
Moreover, the new CEO, Tim Wentworth, former CEO of Express Scripts CI, says that this decision was difficult and challenging, but it has received backing from the board. It’s a vital move as the company embarks on its strategy to overhaul its stores and reinforce its position as a leading retailer.
This dividend cut is one of the major changes from the new CEO, Mr. Wentworth. It is the first time in five decades that Walgreens cut its dividend.
CEO Wentworth says in the Thursday morning earning calls, “This action will free up capital to invest in driving sustainable growth in the pharmacy and healthcare businesses as well as paying down debt.”
Walgreens Posted a $67 Million Loss, Compared To $3.7 Billion A Year Earlier
In a turn around story, Walgreens posted a loss of $67 million as compared to $3.7 billion in the same quarter almost a year ago. The company shared the first quarter results of its revenue with a 10% rise year-to-year to $36.7 billion, surpassing Wallstreet’s estimate. Walgreens exceeded Street’s expectations for adjusted earnings by reporting $0.66 per share, surpassing the consensus estimate of $0.62 per share.
Walgreens has also taken measures for its healthcare services and clinical trial offerings, fueling speculation, there are suggestions that Walgreens might follow in the footsteps of its rival CVS Health Corp (NYSE: CVS) and venture into the insurance sector, similar to CVS’s acquisition of Aetna.
Mr. Wentworth told Yahoo Finance, “But I also don’t want to turn away from the store. I think one of the mistakes in the narrative (is) that we are going to, or are, turned away from the store. I think what we have to do is use the store as the point of engagement.”
The CEO also mentions that he is energized by seeing Walgreens as a trusted healthcare brand. This occurs when there is competition between retail healthcare and traditional establishments such as doctors’ offices and hospitals, with the additional challenge posed by the presence of e-commerce giant Amazon.
Walgreens Faces Labor Market Challenges
This is one of the headwinds that most companies are facing, and Walgreens is one of them. Recruiting pharmacists have become one of the challenges for Walgreens and its competitor, CVS.
The company is also confronted with challenges arising from credit card delinquencies and the resumption of student loan payments, placing pressure on consumers.
Jefferies Healthcare Services Equity Research Brian Tanquilut says upon the challenges faced by Walgreens in discussion with Yahoo Finance, “There are initiatives from companies such as Walgreens or even CVS (CVS) to partner with pharmacy schools and things like that, and then automation and trying to ease the burden of the job from the pharmacist by introducing AI, by introducing more automation.”
Walgreens Stock Update: $WBA
WBA ended up closing yesterday’s session down 5.12% at $24.26 per share. At the time of writing, the market is $22.03B, with a volume of 60,527,425. Critical areas of support and resistance have been labelled on the Walgreens (NASDAQ: $WBA) chart below:
What To Expect In The Year Ahead?
Walgreens dividend has been cut in half. However, its numbers still surpassed Wall Street estimates. The company is also facing issues with labor shrinkage and customer pressure. New CEO, Tim Wentworth, believes the company is moving in the right direction and will drive more sustainable growth in pharmacy and healthcare space. A complete revival could be in store for Walgreens and its investors in 2024.
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