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(Bloomberg) -- Walgreens Boots Alliance Inc. is suspending the quarterly dividend it’s paid for the past 92 years in a bid to conserve cash as the troubled pharmacy chain attempts to revive the business.
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The company said the decision stems from a need to strengthen its balance sheet by reducing debt and improving free cash flow. “Cash needs over the next several years,” including litigation and debt financing, were also important considerations, Walgreens said Thursday in a statement.
The shares fell as much as 9.3% in extended New York trading. The stock has lost about half of its value in the past 12 months through Thursday’s close.
Walgreens had cut its quarterly dividend payout almost in half in early 2024, to 25 cents a share.
Suspending the dividend “is prudent and somewhat overdue,” Leerink Partners analyst Michael Cherny wrote in a research note. The move will aid turnaround efforts even though it will cause some shareholders to offload the stock in the near term.
Evercore ISI analyst Elizabeth Anderson said management is making progress on plans “to put the company in better financial shape over the next few years.” She estimates that the suspension will save about $650 million in fiscal 2025.
Walgreens has struggled as declining pharmacy reimbursements and increased competition from online retailers have dragged on revenue. The company has reportedly been in talks with private equity firm Sycamore Partners to potentially take the company private. Walgreens has also been cutting costs and saving money by closing stores and reviewing its investments.
--With assistance from Ike Swetlitz and John Lauerman.
(Updates with analyst commentary starting in fifth paragraph.)
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