Walgreens (WBA) the stock was down about 2% in premarket trading following the announcement that the company was cutting its dividend 48% to 25 cents per share, from 48 cents per share, for the first quarter tax 2024.
New CEO Tim Wentworth, former CEO of pharmacy benefits manager Express Scripts (THIS), said the move was a difficult decision supported by the board and necessary as the company continues its strategy of revamping stores and doubling down as a retail giant.
For now, that strategy isn’t a complete move away from a focus on retail stores, Wentworth said.
The company announced that its first quarter sales, for the period ending November 30, 2023, increased 10% year over year, totaling $36.7 billion, beating Wall Street expectations. Walgreens also beat the Street in adjusted earnings per share, at 66 cents per share, compared to a consensus of 62 cents per share.
The adjusted earnings per share resulted from a tax impact on the sale of shares of Cencora, formerly AmeriSource Bergen. The company maintains its 2024 forecast of earnings per share of $3.20 to $3.50.
Walgreens, the second-largest retail pharmacy chain, has recently made moves into health care services and clinical trial offerings, sparking speculation that the company will emulate rival CVS (CVS) â and get into the insurance business like CVS did by acquiring Aetna.
âI donât want to buy insurance, I donât know why we would,â Wentworth said.
“But I also don’t want to turn away from the store. I think one of the fallacies of the narrative (is) that we are going to, or are, being turned away from the store. I think what we need to do is use the store as an engagement point,â he told Yahoo Finance.
Wentworth said he is invigorated by Walgreens’ potential as a trusted healthcare brand. The pharmacy counter, he added, is where trust begins, as evidenced by customers’ willingness to “put a needle in their arm” or consult for medical needs. (Wentworth also said COVID-19 vaccine volumes were not as low as expected during the quarter.)
All of this comes at a time when retail healthcare is competing with traditional establishments like doctors’ offices and hospitals, as well as e-commerce giant Amazon (AMZN).
But Wentworth believes it’s still possible to win the battle if he can redefine how the store operates. He sees three ways to proceed:
Reduce yourself. âWe definitely have too many choices,â he said. âAnd thatâs ineffective for many reasons⊠national brands would start to compete to be the ones on our shelves alongside our own brand.
The Walgreens brand. Walgreens is in a great position to be trusted as a private label, but it needs repackaging, Wentworth said â and pharmacists could help with sales by recommending Walgreens-brand products if necessary.
âLet go of the store managers.â Currently, managers are not paid based on store performance, but Wentworth wants to change that.
International positive point
Despite recent reports that Walgreens was considering shedding its British Boots chain, Wentworth said all options were still on the table. âI have nothing at all to share on a decision,â Wentworth said, noting that it is one of the companyâs highest-performing assets.
But, he added, âeverything is on the table.â
Walgreens considered getting rid of Boots two years ago when market conditions were poor, but that is no longer the case.
The international segment, meanwhile, performed well with first-quarter sales of nearly $6 billion, an increase of 12.4% year-on-year. Boots.com reported sales growth of 17.5%, accounting for 19% of Boots’ total retail sales, Walgreens reported.
Anjalee Khemlani is a senior health reporter at Yahoo Finance, covering all things pharma, insurance, healthcare, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
Read the latest financial and business news from Yahoo Finance
