Walgreens Boots Alliance Inc (WBA)
Profitability ratios
Return on sales
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 19.27% | 21.26% | 21.28% | 18.76% | 20.68% |
| Operating profit margin | -4.90% | 1.04% | 1.78% | 0.71% | 3.50% |
| Pretax margin | -3.52% | 3.24% | 2.43% | 0.57% | 3.35% |
| Net profit margin | -2.19% | 3.26% | 1.93% | 0.33% | 2.92% |
Profitability ratios provide insights into a company's ability to generate earnings in relation to its sales and operational activities. Let's analyze Walgreens Boots Alliance Inc's profitability ratios based on the provided data.
Gross profit margin:
The gross profit margin measures the percentage of revenue that exceeds the cost of goods sold. Walgreens' gross profit margin has seen a slight decline over the last five years, from 21.97% in 2019 to 19.46% in 2023. This indicates a potential pricing pressure or increased cost of goods sold, impacting the company's ability to generate profit from its core business operations.
Operating profit margin:
The operating profit margin reflects the percentage of revenue that translates into operating income after accounting for operating expenses. Walgreens' operating profit margin has exhibited a declining trend, moving from 3.53% in 2019 to -5.13% in 2023. This suggests that the company's operating expenses may have outpaced its revenue growth, leading to negative profitability at the operating level in 2023.
Pretax margin:
The pretax margin indicates the percentage of revenue that remains as pretax income after accounting for all expenses except for income taxes. Walgreens' pretax margin has fluctuated over the past five years, with a notable decline to -3.87% in 2023 from 3.32% in 2019. This implies that non-operating expenses or losses may have impacted the company's profitability before taxes in 2023.
Net profit margin:
The net profit margin measures the percentage of revenue that represents the bottom-line net income after accounting for all expenses, including taxes. Walgreens' net profit margin has also experienced a downward trend, decreasing from 2.91% in 2019 to -2.21% in 2023. This indicates that the company's net income as a proportion of revenue has turned negative in 2023, implying challenges in managing overall expenses and tax implications.
Overall, the declining trend in profitability ratios for Walgreens Boots Alliance Inc raises concerns about its ability to efficiently convert revenue into profits. The negative operating and net profit margins in 2023 indicate potential operational and financial challenges that may require management's attention to improve the company's overall profitability.
Return on investment
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | -7.12% | 1.54% | 2.88% | 1.13% | 7.05% |
| Return on assets (ROA) | -3.19% | 4.81% | 3.13% | 0.52% | 5.89% |
| Return on total capital | -15.47% | 13.12% | 13.23% | 4.29% | 15.05% |
| Return on equity (ROE) | -15.38% | 17.16% | 10.85% | 2.21% | 16.94% |
Based on the provided data, we can analyze the profitability ratios of Walgreens Boots Alliance Inc over the last five years.
Starting with the Operating Return on Assets (Operating ROA), which measures the company's operating income as a percentage of its total assets, we observe a declining trend. The Operating ROA stood at -7.38% in 2023, decreasing significantly from 1.08% in 2022 and 2.88% in 2021. This negative trend suggests that the company's operating income generated from its assets has deteriorated over the years, indicating potential inefficiencies in the utilization of assets to generate operating profits.
Moving on to the Return on Assets (ROA), which signifies the company's net income as a percentage of its total assets, we notice a fluctuating pattern. The ROA was -3.19% in 2023, a notable decline from 4.81% in 2022 and 3.13% in 2021. This inconsistency highlights the company's challenges in generating profits from its total asset base, reflecting varying levels of asset efficiency and net income performance over the years.
The Return on Total Capital computes the company's net income as a percentage of its total capital, encompassing both equity and debt. The data shows a considerable decrease in this ratio over the five-year period, with a negative return of -23.55% in 2023, down from 3.89% in 2022 and 9.16% in 2021. This suggests a substantial decrease in the company's ability to generate profits in relation to its total capital employed, signifying potential financial strain and inefficiencies in capital utilization.
Finally, the Return on Equity (ROE) measures the company's net income as a percentage of its total equity. The ROE exhibited a negative trend, with -15.38% in 2023, aligning with the declining profitability observed in the other ratios. This signifies a decrease in the company's ability to generate profits from shareholder equity, indicating potential challenges in delivering returns to equity investors.
In conclusion, the analysis of Walgreens Boots Alliance Inc's profitability ratios demonstrates a concerning trend of declining profitability and efficiency in utilizing assets and capital to generate returns. This suggests the potential need for strategic measures to enhance operational performance and restore profitability in the coming periods.