Shares of Walgreens Boots Aliance (WBA 0.57%) fell as much as 10% earlier this week, according to data provided by S&P Global Market Intelligence, then settled down 4% as of Friday's close after a historic dividend cut overshadowed reasonably solid quarterly results from the drugstore chain.
On Walgreens' "challenging retail trends," tax headwinds
Indeed, Walgreens shares fell nearly 12% on Thursday alone following the release of its slightly stronger-than-expected fiscal first-quarter 2024 results. The company's quarterly revenue grew 10% year over year, to $36.7 billion, while its adjusted (non-GAAP) earnings simultaneously declined more than 43% to to $571 million, or $0.66 per share.
Management blamed the contracting earnings on "challenging retail market trends in the U.S.," as well as a 21 percentage-point headwind from higher taxes. Even so, both the top and bottom lines arrived above Wall Street's consensus estimates for earnings of $0.61 per share on lower revenue of $34.9 billion.
Ending a 47-year streak of dividend increases
More concerning to investors, however, was Walgreens' decision to lower its quarterly dividend payout by 48% to $0.25 per share. That's hardly a surprising move considering its steep earnings contraction over the past year. But it's especially noteworthy as the company had previously increased its dividend payments for each of the past 47 years.
In the end, it's hard to blame Walgreens' management for what appears to be an astute move to align capital disbursements to the company's underlying earnings trends. But it's also no surprise to see the stock pulling back in response to the news.
