Walgreens Boots Alliance announced on Thursday that it suspended its practice of paying cash dividends to shareholders – the first time that it will not pay a quarterly dividend in 92 years.
The change comes in the middle of the difficulties for the retail giant based in Deerfield. Walgreens announced in October 1,200 stores in October in the next three years, notably in Chicago. Walgreens has reduced costs for years, especially thanks to layoffs in Illinois and other places.
Walgreens said in a press release on Thursday that he suspended quarterly dividends “while management continues to assess and refine its capital allowance policy in accordance with the wider long -term recovery efforts from the company. “”
Before now, Walgreens Boots Alliance and his predecessor company, Walgreen Co., had paid quarterly dividends to the shareholders for 368 consecutive quarters, 92 years.
The change aims to improve Walgreens’ finances by reducing debt over time and improving cash flows, Walgreens said in the press release. “The company’s cash needs in the coming years, in particular with regard to disputes and the refinancing of the debt, have been important considerations in the context of the decision to suspend the dividend,” said Walgreens in the press release.
Walgreens suffered a net loss of $ 265 million in the first quarter of this year, against a net loss of $ 67 million in the same quarter of the previous year.
As part of the previous CEOs, Walgreens had sought to become more a health care destination, in particular by investing billions of dollars in the Primary Care Supplier Villagemd with plans to put village clinics in 1000 of its stores ‘here 2027. Walgreens, however, reversed the courses on the course on this plan, affirming in a file of August with the Securities and Exchange Commission which he planned to sell all or part of his Villagemd activities. The current CEO, Tim Wentworth, said that Walgreens wanted to refocus on being a “company led by retail”.
Walgreens also had trouble for years with problems related to the reimbursement of drugs and the evolution of consumer habits, among other challenges.
Although the company had a net loss during its last quarter, part of the operating loss was linked to the costs of store closures, and sales increased by 7.5% in the quarter compared to the same quarter of the previous year.
“Although our turnaround takes time, our first progress strengthens our belief in a sustainable exploitation model and led by the pharmacy,” Wentworth said in a press release on income earlier this month.
It is not surprising that Walgreens chose to suspend his dividend as a way to release money, repay the debt and focus on repairing his operations, wrote John Boylan, a main analyst in shares for Edward Jones, in a note to investors on Thursday.
“We consider this as a cautious step to improve its cash flows and its financial structure,” wrote Jones in the note. “Overall, we believe that the management’s recovery strategy seems solid, but it will take time to take place and are not without risk in a highly competitive pharmacy industry.”
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