Walgreens suspends quarterly dividend to reallocate cashWalgreens suspends quarterly dividend to reallocate cash

Walgreens Boots Alliance said Thursday it has suspended its quarterly cash dividend for shareholders, citing its need for cash to refinance debt and deal with litigation. The Deerfield, Ill.-based retailer said it was reevaluating its capital allocation as a part of its broad turnround effort. Walgreens had been paying a dividend to shareholders every quarter since 1933, according to reports.

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The suspension of the quarterly stock dividend comes as the U.S. Department of Justice recently sued Walgreens, accusing it of illegally selling opioid and other prescriptions, and of illegally seeking federal reimbursement for some of them. It also comes amid turnaround efforts at both Walgreens and rival CVS, which include widespread store closures. Other elements of Walgreens’ turnaround effort include the potential sale of its stakes in clinic operators VillageMD and Summit Health+CityMD and the rethinking of its merchandising strategy to include more private label products and a streamlined network of suppliers.

By the numbers

• Elizabeth Anderson, an analyst with Evercore Securities, said she sees the suspension of the dividend as a way to put the company in a better financial position as it works through its new strategic plan. In a research note provided to Supermarket News, she estimated that the move could save the company about $650 million in fiscal 2025 and closer to $850 million in fiscal 2026

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• As Walgreens rethinks its ownership of clinic operators VillageMD and Summit Health+CityMD, another clinic operator, Advocate Health, said it is shuttering its 47 locations inside Walgreens stores in the Chicago area and eight clinics inside Wisconsin Walgreens that were branded as Aurora Health Care, all effective Feb. 6

• Walgreens’s stock had been on an upward trajectory in January after reporting better-than-expected first-quarter results and citing progress on its strategic plan, but the share price fell after news about the federal opioid lawsuit and subsequent reports that a potential sale of the company to Sycamore Partners would likely not come to fruition

• The company on Jan. 10 reported adjusted first-quarter operating income of $168 million, up 16.1% from a year ago, and sales of $6.4 billion, up 6.5%

In their own words

“Although there could be a negative immediate stock reaction to the [dividend] cut as some holders are forced to sell, we see it as a sign that management is working through the strategic plan to put the company in better financial shape over the next few years.” — Elizabeth Anderson, analyst, Evercore

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