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(Reuters) -U.S. pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA) on Thursday nearly halved its dividend to save more money, sending its shares tumbling down nearly 10% in early trading.
This comes after the company reported a better-than-expected profit in the first quarter, helped by cost-cut measures and higher drug prices.
Walgreens has been grappling with fierce competition, sharply lower sales from COVID vaccines and testing, and decreased discretionary spending by inflation-weary consumers.
The company was forced to close unprofitable stores and cut jobs to reduce costs in a tough environment.
Walgreens first-quarter performance reflects “disciplined execution in a challenging consumer backdrop,” said CEO Tim Wentworth.
Wentworth said the company was evaluating all strategic options and focusing “on swift actions to right-size costs and increase cash flow.”
The healthcare industry veteran was appointed in October to take the reigns of the company, which has been looking to emerge from the troubles surrounding it and expand its footprint in healthcare services.
The dividend cut could help “shore up” Walgreens’ balance sheet and save about $800 million on an annual basis, Evercore analyst Elizabeth Anderson said.
Walgreens, which has been shifting its focus on healthcare services from pharmacy, reiterated its profit forecast of $3.20 to $3.50 per share in fiscal 2024.
Evercore’s Anderson said this was an “upside surprise” for investors.
The healthcare services unit, however, missed first-quarter revenue estimates. It reported revenue of $1.93 billion compared with estimates of $2.03 billion, according to LSEG data.
Walgreens’ U.S. retail pharmacy unit brought in revenue of $28.94 billion, above estimates of $27.26 billion. Same-store sales at its U.S. pharmacies jumped 13.1% year-over-year.
On an adjusted basis, the company earned 66 cents per share, compared with estimates of 61 cents per share.
