Dollar Tree Inc. (NASDAQ:DLTR)

The financial data over the six-year period reveals several important trends and fluctuations in key operational efficiency ratios and periods.

Inventory Turnover

The inventory turnover ratio experienced fluctuations, starting at 5.00 in early 2017, declining steadily to 4.49 in 2019, then increasing to a peak of 5.17 in 2021 before dropping again to 4.26 in 2022. This pattern suggests variability in how quickly inventory is being sold and replenished, with no consistent trend toward improvement or decline over the period.

Receivables Turnover

Receivables turnover decreased notably from 252.67 in 2017 to 208.39 in 2020, indicating a slowing pace of receivables collection. The absence of data after 2020 prevents further analysis but the downward trend through 2020 is significant, potentially indicating longer collection times or changing credit policies.

Payables Turnover

The payables turnover ratio remained relatively stable from 2017 through 2021, fluctuating between about 11.21 and 12.96, before declining notably to 9.86 in 2022. This decline suggests the company is taking longer to pay its suppliers in the most recent year, which could impact supplier relationships.

Working Capital Turnover

Working capital turnover showed considerable variability. Starting at 11.31 in 2017, it increased to 12.95 in 2018, then dropped sharply to 10.39 in 2019. In 2020, there was an anomalous spike to 32.66, followed by declines to 19.32 and 18.37 in the two subsequent years. The spike in 2020 might reflect unusual operational circumstances impacting working capital efficiency.

Average Inventory Processing Period

The average inventory processing period, measured in days, generally increased from 73 days in 2017 to a peak of 86 days in 2022, with minor fluctuations along the way. The trend toward longer inventory holding periods may indicate slower inventory turnover or changes in inventory management strategies.

Average Receivable Collection Period

This measure remained very low and stable (1 to 2 days) from 2017 through 2020, implying efficient collection of receivables. Missing data beyond 2020 inhibits ongoing trend assessment.

Operating Cycle

The operating cycle in days followed a similar trend to inventory processing, increasing from 74 days in 2017 to 83 days in 2019, then slightly decreasing to 80 days in 2020. Missing data for later years limits further interpretation.

Average Payables Payment Period

The average period for paying suppliers was fairly consistent around 28 to 30 days from 2017 to 2021, then extended to 37 days in 2022. The lengthening payment period aligns with the declining payables turnover ratio and could indicate shifts in payment terms or cash management policies.

Cash Conversion Cycle

The cash conversion cycle gradually extended from 45 days in 2017 to 51 days in 2020, implying an increased net time to convert resources into cash. Data gaps beyond 2020 prevent assessing whether this trend continued.

In summary, the data reflects fluctuating efficiency in inventory management and receivables collection, with recent increases in inventory holding and payables payment periods. The anomalous spike in working capital turnover in 2020 warrants further investigation. Overall, the company appears to be experiencing slower cycles in converting inventories and payables into cash over the latter years presented.

Cost of Sales

The cost of sales exhibited a consistent upward trend from 2017 to 2022. Starting at approximately 14.32 billion US dollars in early 2017, it increased each year, reaching nearly 18.58 billion by early 2022. This represents a steady growth over the six-year period, indicative of increased sales volume, higher input costs, or expansion of operations.

Merchandise Inventories

Merchandise inventories showed an overall increase during the period, beginning at about 2.87 billion US dollars in 2017 and rising to approximately 4.37 billion by early 2022. Notably, inventories increased steadily until early 2019, with a slight dip in 2020 and 2021, before experiencing a significant rise in 2022. This pattern suggests changes in inventory management or procurement strategies, possibly influenced by market conditions or supply chain factors.

Inventory Turnover Ratio

The inventory turnover ratio, which measures how efficiently inventory is managed, generally declined from 5 in 2017 to 4.26 in 2022. The ratio decreased steadily up to 2019, showed a slight improvement in 2020 and 2021, reaching 5.17, before declining again in 2022. This fluctuation may indicate varying effectiveness in inventory movement and sales synchronization, with the decrease in 2022 potentially signaling slower inventory turnover or accumulation of stock.

Net Sales

Net sales demonstrated a consistent upward trend over the analyzed periods, increasing from $20,719,200 thousand in January 2017 to $26,309,800 thousand in January 2022. This reflects steady growth year-over-year, with the most significant increase observed between January 2020 and January 2021.

Accounts Receivable, Net

The accounts receivable balance also showed an increasing pattern from $82,000 thousand in January 2017 to $113,300 thousand in February 2020. Data for January 2021 and 2022 is missing, which limits the ability to evaluate trends in recent years.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a declining trend, starting at 252.67 in January 2017 and decreasing to 208.39 by February 2020. This indicates a slowing efficiency in collecting receivables over time up until the last known data point, with no further data for 2021 and 2022.

Overall Observations

While net sales show continuous growth suggesting increasing revenue, the declining receivables turnover ratio combined with rising accounts receivable up to 2020 may indicate a lengthening of the collection period or more sales on credit. The missing data for the latest periods in accounts receivable and turnover restricts a complete recent trend analysis. Further monitoring is recommended to assess if the collection efficiency stabilizes or further declines in line with sales growth.

Cost of Sales

The cost of sales displayed a consistent upward trend over the six-year period. Starting at $14,324,500 thousand in 2017, it increased each year, reaching $18,583,900 thousand in 2022. This steady increase indicates growing expenses directly associated with the production of goods sold, reflecting either increased sales volume, higher input costs, or both.

Accounts Payable

Accounts payable also increased over the same timeframe but showed more variability. Balances rose from $1,119,600 thousand in 2017 to $1,884,200 thousand in 2022. The increase was relatively moderate from 2017 through 2020 but accelerated in the last two years, particularly between 2021 and 2022, suggesting either extended payment terms or increased purchases on credit.

Payables Turnover Ratio

The payables turnover ratio generally declined from 12.79 in 2017 to 9.86 in 2022. This downward trend implies that the company took longer, on average, to settle its accounts payable over time. The ratio showed some fluctuation, with a slight rise in 2018 followed by a drop in 2019, a rebound in 2020, then a steady decline through 2022.

Overall Analysis

The trends suggest that while the company’s cost of sales consistently increased, the management of payables evolved towards slower payment cycles, as evidenced by the decreasing payables turnover ratio. The growing accounts payable balance supports this interpretation. This behavior could be a strategic cash flow management practice or a response to supplier terms and market conditions.

The financial data over the six-year period indicates notable fluctuations in the components analyzed.

Working Capital

The working capital shows variability, with an initial slight decrease from 1,832,100 thousand US$ in early 2017 to 1,717,200 thousand US$ in early 2018. It then increases considerably to 2,197,600 thousand US$ in early 2019, followed by a sharp decline to 722,900 thousand US$ in early 2020. After that, there is a recovery trend with gradual increases to 1,320,500 thousand US$ in early 2021 and 1,432,600 thousand US$ in early 2022.

Net Sales

Net sales consistently rise throughout the examined period, starting from approximately 20,719,200 thousand US$ in early 2017 and increasing steadily each year to reach 26,309,800 thousand US$ in early 2022. This positive trend reflects continuous growth in sales revenue.

Working Capital Turnover

The working capital turnover ratio varies significantly. It starts at 11.31 in early 2017, increases to a peak of 12.95 in early 2018, then declines to 10.39 in early 2019. A substantial spike to 32.66 is observed in early 2020, which coincides with the drop in working capital, indicating more efficient utilization or a temporary imbalance. Following this peak, the ratio decreases to 19.32 in early 2021 and then slightly lowers to 18.37 in early 2022, suggesting a normalization trend yet remaining above earlier levels.

Overall, net sales demonstrate steady growth, while working capital and its turnover show volatility, particularly a significant dip in working capital in 2020 that aligns with a substantial rise in working capital turnover. This pattern may imply changes in operational efficiency or working capital management during this time frame, recovering partially but maintaining improved turnover compared to the earlier years.

Inventory Turnover

The inventory turnover ratio exhibited a fluctuating trend over the analyzed periods. Beginning at 5 in 2017, it experienced a slight decline to 4.8 in 2018 and further decreased to 4.49 in 2019. In 2020, there was a modest recovery to 4.7, followed by an increase to 5.17 in 2021. However, this upward movement did not persist, as the ratio declined again to 4.26 in 2022. Overall, this indicates irregular efficiency in inventory management with alternating improvements and regressions.

Average Inventory Processing Period

The average inventory processing period, measured in number of days, exhibited an overall increasing trend with some variability. It started at 73 days in 2017 and increased to 76 days in 2018, then further lengthened to 81 days in 2019. There was a small reduction in 2020 to 78 days, followed by a more significant decrease to 71 days in 2021, indicating faster inventory turnover during that year. However, this trend reversed sharply in 2022, with the processing period extending to 86 days, the longest duration observed in the reviewed timeline. This suggests increased inventory holding time, which could imply slower sales or less efficient inventory management at the end of the period.

The financial data indicates a declining trend in receivables turnover over the observed periods. Specifically, the receivables turnover ratio decreased from 252.67 in January 2017 to 208.39 by February 2020. This suggests that the company is collecting its receivables less frequently within the year, indicating a potential slowdown in cash collection efficiency.

Correspondingly, the average receivable collection period, expressed in days, increased from 1 day in January 2017 and February 2018 to 2 days by February 2019 and continued at that level through February 2020. This aligns with the declining turnover ratio, reinforcing the observation that the time to collect receivables has increased slightly over these years.

Data for the periods after February 2020 are missing for both metrics, preventing analysis of more recent trends. However, the available information suggests a gradual deterioration in receivable management performance or changes in customer payment behavior over the four-year span. Monitoring and addressing this trend could be important for maintaining efficient working capital management.

Average Inventory Processing Period

The average inventory processing period exhibits fluctuations over the years. Starting at 73 days in early 2017, it increased gradually to a peak of 81 days by early 2019, followed by a slight reduction to 78 days in early 2020. In early 2021, there was a notable decrease to 71 days, suggesting improved inventory turnover. However, this was followed by a significant increase to 86 days in early 2022, indicating potential inefficiencies or changes in inventory management during that period.

Average Receivable Collection Period

The average receivable collection period remained relatively consistent but very low from 2017 to 2020, fluctuating between 1 and 2 days, indicating efficient collection practices. No data is available beyond 2020, limiting further trend analysis in this area.

Operating Cycle

The operating cycle also shows a pattern similar to the inventory processing period, beginning at 74 days in early 2017 and increasing to 83 days by early 2019. It slightly decreased to 80 days in early 2020. Data for subsequent years is missing, preventing analysis of more recent trends. The operating cycle's changes reflect the combined effects of inventory processing and receivables management.

Payables Turnover

The payables turnover ratio experienced fluctuations over the reported periods. It started at 12.79 in early 2017, showed a slight increase to 12.96 in early 2018, followed by a decline to 11.21 by early 2019. Afterward, the ratio increased to 12.4 in early 2020, then slightly decreased to 11.97 in early 2021, and fell more significantly to 9.86 by early 2022. This downward trend in the final year suggests a slower rate of paying off accounts payable.

Average Payables Payment Period

The average payables payment period, measured in days, increased over the analyzed timeframe. It started at 29 days in early 2017, slightly decreased to 28 days in early 2018, then rose notably to 33 days in early 2019. It reverted to 29 days in early 2020, increased marginally to 30 days in early 2021, and then increased more substantially to 37 days by early 2022. This indicates an increasing tendency to extend the time taken to settle payables toward the end of the period.

Summary of Trend Relationship

The inverse relationship between payables turnover and average payment period is evident. As the payables turnover ratio declined, indicating fewer turnovers of payables per year, the average payment period extended, meaning payments to suppliers are taking longer. The notable increase in average payment days and the corresponding decrease in turnover in 2022 could reflect changes in payment policies, cash flow management, or operational strategies.

Average Inventory Processing Period

The average inventory processing period demonstrates variability over the analyzed years. Initially, it increased from 73 days in early 2017 to a peak of 81 days in early 2019. After this peak, the period declined to 71 days in early 2021, indicating a potential improvement in inventory turnover efficiency. However, this trend reversed in early 2022, with the period extending sharply to 86 days, the highest in the timeframe. This suggests potential challenges in managing inventory or slower inventory movement in the most recent year.

Average Receivable Collection Period

The average receivable collection period remained relatively low and stable, fluctuating between 1 and 2 days from 2017 to 2020. No data is available for 2021 and 2022, limiting the ability to comment on recent trends. The consistently low values indicate efficient collection practices during the available periods.

Average Payables Payment Period

The average payables payment period shows moderate fluctuations. It decreased slightly from 29 days in 2017 to 28 days in 2018, then increased to 33 days in 2019. It returned to near earlier levels at 29 and 30 days in 2020 and 2021 respectively, followed by a significant increase to 37 days in 2022. This suggests a trend toward extending payment terms with suppliers more recently, possibly as a cash management strategy.

Cash Conversion Cycle

The cash conversion cycle exhibits a generally increasing pattern from 45 days in early 2017 to 51 days in early 2020. Data is unavailable for subsequent years, restricting further analysis. The upward trend during the available period indicates elongation in the time between outlay of cash and cash recovery, potentially reflecting slower working capital turnover or changes in operating efficiency.