When Walgreens (WBA) announced that Chief Executive Officer Rosalind Brewer resigned on Sept. 1, the drugstore stock lost 7.43%. At $23.43, shares paid an unsustainable dividend that yielded 8.19%.
WBA stock was last week’s biggest loser. Although its stores perform poorly and business prospects are worsening, Walgreens has plenty of cash. It also holds billions of dollars worth of Cencora (COR) shares. This would enable the firm to buy back stock, continue its dividend, or pay down debt. All three options would benefit shareholders.
Dollar General (DG) broke down again after posting its second straight weak quarter. The firm posted FY 2023 net sales growth in the range of 1.3% to 3.3%. This is below its previous expectation of 3.5% to 5%. DG’s poor cash flow foreshadowed the decline in earnings. It has poor inventory control and spends too much on capital expenditure.
Dollar General should not have taken on debt to repurchase shares. It overpaid for the stock and hurt its balance sheet.
Theft is an increasing problem for Dollar General and Walgreens. Until the police and politicians discourage criminal activity, these firms will struggle. These stocks could still be a buy for anyone willing to speculate on a rebound.
Fundamentals do not support a meaningful recovery in either firm.
