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Walgreens Boots Alliance Inc. (NASDAQ:WBA)

This company has been moved to the archive! The financial data has not been updated since July 9, 2020.

Common-Size Income Statement

Walgreens Boots Alliance Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
Sales 100.00 100.00 100.00 100.00 100.00 100.00
Cost of sales -78.03 -76.59 -75.33 -74.54 -73.97 -71.77
Gross profit 21.97% 23.41% 24.67% 25.46% 26.03% 28.23%
Selling, general and administrative expenses -18.44 -18.68 -20.08 -20.37 -21.82 -23.55
Equity earnings in AmerisourceBergen 0.12 0.15 0.11 0.03 0.00 0.00
Equity earnings in Alliance Boots 0.00 0.00 0.00 0.00 0.30 0.81
Operating income 3.65% 4.88% 4.70% 5.11% 4.51% 5.49%
Gain on previously held equity interest 0.00 0.00 0.00 0.00 0.54 0.00
Other income (expense) 0.17 0.13 -0.01 -0.22 0.66 -0.63
Earnings before interest and income tax provision 3.82% 5.01% 4.69% 4.89% 5.72% 4.86%
Interest expense, net -0.51 -0.47 -0.59 -0.51 -0.58 -0.20
Earnings before income tax provision 3.31% 4.54% 4.11% 4.38% 5.13% 4.66%
Income tax provision -0.43 -0.76 -0.64 -0.85 -1.02 -2.00
Post tax earnings from other equity method investments 0.02 0.04 0.01 0.04 0.02 0.00
Net earnings 2.89% 3.82% 3.47% 3.57% 4.14% 2.66%
Net (earnings) loss attributable to noncontrolling interests 0.01 -0.01 -0.02 -0.02 -0.06 -0.13
Net earnings attributable to Walgreens Boots Alliance, Inc. 2.91% 3.82% 3.45% 3.56% 4.08% 2.53%

Based on: 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-31), 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31).

Between 2014 and 2019, a consistent compression of gross margins is evident, though this was partially mitigated by a disciplined reduction in operating expenses relative to total sales.

Gross Margin Trends
The cost of sales increased steadily from 71.77% of sales in 2014 to 78.03% in 2019. This upward trajectory led to a significant decline in gross profit, which fell from 28.23% to 21.97% over the period, indicating an increase in the direct costs associated with generating revenue.
Operating Expense Management
Selling, general, and administrative expenses exhibited a consistent downward trend, decreasing from 23.55% of sales in 2014 to 18.44% in 2019. This suggests a successful effort to improve operational efficiency and contain overhead costs to counteract the erosion of gross margins.
Operating Income Performance
Operating income remained volatile, beginning at 5.49% in 2014 and ending at 3.65% in 2019. Although the reduction in SG&A expenses provided a partial offset, it was insufficient to fully neutralize the impact of the rising cost of sales, resulting in an overall decrease in operating profitability.
Net Profitability and Tax Impact
Net earnings attributable to the company peaked in 2015 at 4.08% of sales before declining to 2.91% by 2019. A notable factor in the net result was the decrease in the income tax provision, which fell from 2.00% of sales in 2014 to 0.43% in 2019, providing a tailwind to the bottom line despite the operating margin pressures.
Other Financial Factors
Interest expenses remained relatively stable as a percentage of sales, fluctuating between 0.20% and 0.59%. Other income and equity earnings remained marginal, contributing minimally to the overall percentage of net earnings over the analyzed timeframe.

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