Walgreens (WBA) slashed its dividend payment by nearly half for the fiscal first quarter of 2024 as the company looks to bolster its long-term balance sheet and cash position. The dividend cut pressured shares on Thursday, sending the stock down 11%.

Jefferies Healthcare Services Equity Research Brian Tanquilut joined Yahoo Finance to discuss the challenges facing Walgreens, including a shortage of pharmacists.

"Recruiting is an issue," Tanquilut explained. "There are initiatives from companies such as Walgreens and CVS (CVS) to partner with pharmacy schools... They're also introducing more automation to try and ease the burden of the job. They're putting in the effort to maximize the efficiency and capacity of their pharmacists."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: Brian, one of the headwinds that has been facing Walgreens, many of its rivals has been the labor shortage or lack of available pharmacists, their ability to find other pharmacists that they need. Any idea just in terms of how big of a challenge you see that being here in 2024 and beyond?

BRIAN TANQUILUT: Yeah, so I think-- look, I mean, I think broadly speaking, the labor market is starting to flatten out, right? To ease-- the pressures are easing a little bit. Now not to say that it's not tough, right? I mean, I think that there are initiatives from companies such as Walgreens or even CVS to partner with pharmacy schools and things like that.

And then automation and trying to ease the burden of the job from the pharmacist by introducing AI, by introducing more automation. So I think that these companies, especially the well-funded ones such as Walgreens and CVS, are putting in the right efforts to maximize the efficiency and the capacity of the pharmacists that they have. But certainly, recruiting is an issue.

But the other thing I think worth highlighting, Seana, is that they're actually reducing their store count, right. So as we think about the number of pharmacists that they have, as you take out 200 stores this year, that obviously helps address some of those issues that they're facing with labor.

SEANA SMITH: Well, when you talk about store closures, shrink comes to mind for me. And I know that Walgreens has had a lot of diverse commentary about shrink, with their former CFO talking about it, saying maybe we cried too much over shoplifting. I'm curious whether you think that in-store theft is part of that calculation or is it a little bit more pointed to the health care concerns that you mentioned?

BRIAN TANQUILUT: It actually is. That's a good point. In the sense that they called it out, that one of the challenges that they faced on the margin side for the retail side of the business is actually caused by shrink increasing further. And I can't tell if that's seasonal. I mean, obviously, in the holiday season, there are more holiday products, more seasonal products in the store. So that's obviously a concern.

I think that it's a new baseline as we think about shrink, that we're operating on going forward. And it's an industry wide issue that we're seeing across the retail space, especially in pharmacy. So I think we've reset up in terms of what those shrink levels are. And hopefully, it doesn't worsen from this point.

SEANA SMITH: Brian Tanquilut, always great to get your insight here. Walgreens shares trading lower on the heels of these results. Brian, thanks so much for joining us today.

BRIAN TANQUILUT: Thank you.