Walgreens Boots Alliance Suspends Quarterly Cash Dividend

(Reuters) – Walgreens Boots Alliance has suspended its quarterly cash dividend amid restructuring efforts, according to the U.S. pharmacy chain operator on Thursday. This decision caused shares to drop nearly 8% in extended trading.

The company stated that its cash needs over the next several years, particularly related to litigation and debt refinancing, were significant factors in the decision to suspend the dividend.

Leerink Partners analyst Michael Cherny described the suspension as “prudent and somewhat overdue.” He noted, “We see this as the right move for Walgreens’ ability to reboot the business, but the near-term dynamic is the forced technical selling that will likely occur since the company will no longer be income-generating.”

Walgreens had been exploring a sale to private equity firm Sycamore Partners and had also contacted other potential buyers, though the company declined to comment on these reports.

This decision comes shortly after the U.S. Department of Justice filed a lawsuit against Walgreens, alleging that the pharmacy chain knowingly filled millions of prescriptions lacking a legitimate medical purpose. If found liable, Walgreens could face civil penalties of up to $80,850 for each unlawful prescription, as stated by the Justice Department.

Operating the second-largest pharmacy chain in the U.S., Walgreens has indicated plans to close thousands of stores due to persistently low drug reimbursement rates and consumers shunning high-priced grocery items.

CEO Tim Wentworth has introduced a series of changes, including a $1 billion cost-cutting program and exploring options for its non-core businesses, all aimed at revitalizing growth and restoring investor confidence.