Walgreens Q1 tops expectations; slashes dividend to boost cash flow

Walgreens Boots Alliance reported a better-than-expected first quarter amid cost-cutting and higher prescription drug prices.

The pharmacy and health care services company also said it was cutting its dividend nearly in half, down to $0.25 per share from $0.48 per share to “strengthen [its] long-term balance sheet and cash position,” stated Tim Wentworth, who was appointed CEO in October. 

“This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and healthcare businesses, which we believe will ultimately improve shareholder value,” he added. 

Walgreens reported a net loss of $67 million, or $0.08 cents a share for the quarter ended Nov. 30, compared to a loss of  $3.72 billion, or $4.31 a share, in the year-ago quarter (during which it had to pay a mutibillion-dollar settlement for litigation related to the company’s alleged role in helping fuel the opiod crisis). Adjusted earnings were $0.66 cents a share, topping estimates of $0.62 a share.

Sales rose 10% to $36.71 billion, easily beating estimates of $34.95 billion,  reflecting growth in the company’s U.S. retail pharmacy and international segments, and sales contributions from the U.S. healthcare segment.

“WBA delivered fiscal first quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop,” stated 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.”

U.S. retail pharmacy sales rose 6.4% to $28.94 billion; same-store sales were up 8.1%. Pharmacy sales increased 10.7%, helped by higher prices on branded drugs. Retail sales decreased 6.1%; comps fell 5% amid a weaker flu and respiratory season, and Thanksgiving holiday store closures. 

Walgreens’ U.S. healthcare sales jumped 95.2% to $1.93 billion, reflecting the acquisition of Summit Health by VillageMD and growth in all businesses.

International sales rose 12.4% to $5.8 billion.  Boots UK comparable retail sales increased 9.8% with growth across all categories and formats, and increased total retail market share for the 11th consecutive quarter.  Comparable pharmacy sales edged up 0.8%.

Walgreens is 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. The company is maintaining U.S. healthcare adjusted EBITDA to be breakeven at the midpoint of the guidance range of ($50) million to $50 million.

Walgreens operates approximately 12,500 locations across the U.S., Europe and Latin America.