Walgreens Boots Alliance Inc. (NASDAQ:WBA)

The analysis of quarterly financial percentages relative to sales reveals distinct patterns in cost management, profitability, and earnings over the observed periods.

Cost of Sales

This expense as a percentage of sales exhibits a generally increasing trend, rising from approximately 71.89% in late 2013 to 81.41% by mid-2020. This gradual increase suggests a compression of gross margin, potentially indicating rising product costs or pricing pressures.

Gross Profit

Corresponding to the rise in cost of sales, gross profit margin shows a declining trend. Starting from about 28.11% in 2013, gross profit fell to 18.59% by mid-2020. This consistent reduction underscores challenges in maintaining profitability at the gross level.

Selling, General and Administrative Expenses (SG&A)

SG&A expenses as a percentage of sales fluctuate but generally trend downward from a high of 23.89% to around 17.61% in early 2020, before a sharp spike to 23.87% in the latest quarter of the dataset. This decline through most periods indicates efforts to control operating expenses despite pressures on gross profit, though the recent increase may point to one-off costs or strategic investments.

Equity Earnings (Loss) in Affiliates

Equity earnings in AmerisourceBergen appear starting in 2016 with modest but fluctuating contributions, peaking at 0.7% of sales in mid-2020. Equity earnings in Alliance Boots were only reported in early 2014, showing a decline from 0.82% to 0.38% before ceasing to appear. These variations reflect changes in earnings from allied businesses and ownership structures.

Operating Income

Operating income displays volatility, typically ranging between 2.95% and 6.5%, but with a notable negative outlier of -4.57% at mid-2020. This suggests episodic operational challenges or unusual expenses affecting profitability at the operating level.

Other Income (Expense)

Other income and expenses as a percentage of sales are generally contained within a ±2% range, with intermittent positive and negative swings. The net effect appears limited relative to core operations but may contribute to quarterly variations.

Earnings Before Interest and Tax (EBIT)

EBIT margins mirror operating income trends, with typical values mostly between 3% and 6%, but with sharp dips close to zero and a negative value (-4.67%) in the most recent period, aligning with observed operating income declines.

Interest Expense, Net

Interest expense remains relatively stable over time, consistently small at roughly 0.2% to 0.9% of sales, with a slight tendency to increase mid-period before stabilizing around 0.45% towards the end. This suggests consistent financing costs.

Earnings Before Income Tax

Pre-tax earnings largely correspond with EBIT figures, generally ranging from about 2% to 6%, but again showing a sharp downturn in the latest period to -5.12%, indicating significant earnings pressure prior to taxation.

Income Tax Provision

Income tax provisions fluctuate but hover mostly between -0.5% to -2.2% of sales, with occasional positive benefits noted, reflecting variable effective tax rates or temporary tax reliefs.

Net Earnings

Net earnings attributable to the company demonstrate considerable volatility, with highs near 7.68% (Feb 2015) and lows plunging to -4.93% (mid-2020). Overall, there is a downward trajectory in profitability ratios over the period, signaling challenges in sustaining net income margins amid rising costs and operational pressures.

In summary, the data reveals gradually increasing costs and declining gross profits, partially offset by efforts to reduce operating expenses until recent quarters. Earnings before interest and taxes have weakened, culminating in losses in the latest periods. The net effect is a deterioration in net earnings margins that may merit strategic review of cost structures and operational efficiency.