Why Walgreens Boots Alliance stock fell 4% this week

stock Walgreens Boots Alliance (W.B.A. 3.09%) The stock fell as much as 10% earlier this week and was down 4% as of Friday’s close after a historic dividend cut overshadowed the pharmacy chain’s reasonable quarterly results, according to data provided by S&P Global Market Intelligence.

Tax backlash to Walgreens’ “challenging retail trends”

In fact, Walgreens shares fell nearly 12% on Thursday alone after the company reported slightly better-than-expected fiscal 2024 first-quarter results. The company’s quarterly revenue increased 10% year-over-year to $36.7 billion, while adjusted (non-GAAP) earnings fell more than 43% to $571 million, or $0.66 per share.

Management blamed the revenue decline on “challenging retail market trends in the U.S.” and a 21-percentage-point increase in headwinds from higher taxes. Still, both the top and bottom lines topped Wall Street’s consensus estimates for low-end sales of $34.9 billion and earnings of $0.61 per share.

Ends 47 consecutive years of dividend increases

But more concerning to investors was Walgreens’ decision to lower its quarterly dividend payment by 48% to $0.25 per share. Considering the sharp decline in revenue over the past year, this isn’t a particularly surprising move. However, it’s especially notable because the company has previously increased its dividend payments over the last 47 years.

In the end, it’s hard to blame Walgreens’ management for what appears to be a shrewd move to align capital spending with the company’s underlying earnings trends. However, it is not surprising that stock prices fall in response to the news.