Ulta Beauty Inc. (NASDAQ:ULTA)

Inventory Turnover

The inventory turnover ratio exhibits notable fluctuations across the analyzed periods, generally ranging between approximately 2.6 and 3.8. Initial values around 3.3 to 3.5 show a decline towards late 2018 and late 2021, dipping below 3 in some quarters. However, the ratio recovers in most recent quarters, rising to above 3.5 by mid-2023. This variability suggests intermittent changes in inventory management efficiency.

Receivables Turnover

Receivables turnover shows considerable volatility, with values alternating between highs near 60 to 66 and lows as low as around 31 to 36 during early 2021 and early 2022. A generally declining trend is noticed moving into 2020 and early 2021, indicating slower collection of receivables. However, since mid-2022, the ratio has been trending upward again, reaching over 60 by mid-2023, signaling improved collection efficiency.

Payables Turnover

The payables turnover ratio displays a pattern of fluctuation with values mostly oscillating between approximately 7 and 12. There are periods where payables turnover drops to notably lower levels around 6.7 in late 2021, indicating slower payment to suppliers, while recent periods show a rebound to over 12 by mid-2023, suggesting faster settlement of liabilities.

Working Capital Turnover

Working capital turnover demonstrates an overall upward trend from around 5.7 in 2018 to values exceeding 10 in 2022 and 2023. There is a significant dip in mid-2020, where the ratio falls to below 4, possibly reflecting operational challenges during that period. Post-2020, the turnover increases sharply, reaching peak values indicative of improved efficiency in generating sales from working capital.

Average Inventory Processing Period

The average inventory processing period varies primarily between 95 and 140 days. Noteworthy peaks occur near the end of 2021 and late 2022, where the period extends toward 132 to 140 days, indicating slower inventory movement. Conversely, lower values around 95 to 101 days appear in mid-2023, suggesting quicker inventory turnover during recent quarters.

Average Receivable Collection Period

This metric remains relatively stable throughout the observed periods, predominantly oscillating between 6 and 8 days. Some incremental increases are noted during early 2021 and early 2022, peaking around 11 days, indicating a temporary slowdown in receivable collections, but it reverts back to lower levels subsequently.

Operating Cycle

The operating cycle shows a close correlation with inventory and receivable periods, generally ranging between approximately 102 and 148 days. An upward spike near the end of 2021 signals an extended operating cycle, coinciding with higher inventory processing and receivables collection times, while the most recent periods show a reduction back to around 108 days, implying improved operating efficiency.

Average Payables Payment Period

The average payables payment period fluctuates between approximately 29 and 55 days. Higher values appear sporadically, such as around late 2021, indicating lengthened payment terms or delayed payments. In contrast, the period dips to the low 30s in mid-2023, reflecting quicker payment cycles towards suppliers in recent quarters.

Cash Conversion Cycle

The cash conversion cycle reflects the interplay of inventory, receivables, and payables periods, ranging from around 69 to 100 days. Values peak near 100 days in late 2022, suggesting longer working capital tied up in operations, while the lowest values occur in mid-2023, indicating enhanced liquidity management and a more efficient conversion of resources into cash.

Cost of Sales

The cost of sales exhibits notable fluctuations over the analyzed periods. Initially, there are moderate variations, but starting from early 2019, a significant increase is observed, peaking around February 2020. Following this peak, there is a sharp decline consistent with the May 2020 period, likely reflecting external challenges impacting sales or supply chain dynamics. Post this low point, the cost of sales gradually rises again, reaching higher levels by early 2023, with occasional dips but maintaining an overall upward trend by the end of the period.

Merchandise Inventories, Net

Merchandise inventories show a generally upward trend across the time frame. There are notable increases particularly in the second half of 2018 and again towards late 2021 and into 2022. The values peak around October 2022 and early 2023, suggesting an accumulation of inventory. Intermittent decreases occur but these are relatively moderate compared to the overall growth, indicating a strategic build-up of inventory levels over time.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates considerable variability throughout the periods analyzed. Early data shows a ratio fluctuating roughly between 2.8 and 3.6, indicating moderate efficiency in inventory usage. There are periodic declines in turnover, notably around late 2019 and late 2022, where the ratio dips below 3.0, suggesting slower movement of inventory during these periods. Conversely, peaks in turnover above 3.5 occur sporadically, including at the start of 2019 and multiple points in 2023, reflecting improved inventory efficiency during those quarters. Overall, the ratio does not show a consistent upward or downward trend but indicates cyclical changes in inventory management efficiency.

Summary Insights

Over the analyzed periods, the company experienced varying cost pressures with a significant peak in cost of sales before a sharp reduction in early 2020, possibly linked to market disruptions. Inventories have been progressively increasing, which may point to strategic stockpiling or challenges in inventory liquidation. The fluctuating inventory turnover ratio highlights inconsistent inventory management efficiency, with periods of both increased and decreased turnover rates. The interplay of these metrics suggests a dynamic operational environment with adjustments in sales costs and inventory strategies responsive to market conditions.

The financial data reveals distinct patterns and fluctuations across several key metrics over the analyzed periods.

Net Sales

Net sales demonstrate a generally upward trend with notable volatility. Initial values fluctuate moderately around 1.5 million US dollars (in thousands), followed by a significant increase reaching above 2.3 million by early 2020. This peak is interrupted by a sharp decline in mid-2020, likely reflecting external disruptions, before a recovery phase ensues. From early 2021 onward, net sales progressively climb to exceed 3.2 million by early 2023, indicating strong growth momentum in recent periods despite some interim variability.

Receivables, Net

The net receivables display a general increase that roughly parallels the sales pattern. Starting near 100,000 US dollars (in thousands), receivables rise steadily with some fluctuations, peaking at approximately 233,682 in early 2022. Following this peak, receivables slightly decline but remain elevated relative to earlier periods, maintaining values above 170,000 through mid-2023. This suggests expanding credit extended to customers alongside growing sales, with some moderation after the 2022 high point.

Receivables Turnover Ratio

The receivables turnover ratio exhibits considerable variation, reflecting changes in how efficiently the company collects its receivables relative to sales. Initial ratios are high, around 60 to 63, indicating rapid collection cycles. However, there is a downward trend approaching early 2021, with turnover dropping to around 31.86, suggestive of slower collections or prolonged receivables periods during that phase. The ratio recovers gradually from 2021 forward, climbing back above 60 by mid-2023, signaling improvements in credit management or collections efficiency over the latter periods.

Overall, the data suggests an expansion in business volume with growing sales and receivables balances. The fluctuations in receivables turnover highlight periods of slower collections, particularly around 2020-2021, followed by recovery and efficiency gains in recent quarters. The interplay between sales growth and receivables management will remain critical for sustaining healthy cash flows.

Cost of Sales

The cost of sales exhibits notable fluctuations over the observed periods. Initially, from May 2018 through February 2019, there was a sharp increase from approximately 983 million to 1.38 billion US dollars, followed by a decline towards mid-2019. Subsequent quarters show a pattern of rising and falling with two prominent peaks in February 2020 and January 2023, reaching above 2 billion US dollars in both instances. This volatility suggests variable operational or market conditions impacting the company's cost structure during the timeframe.

Accounts Payable

Accounts payable values demonstrate a generally upward trajectory with intermittent declines. Starting near 373 million US dollars in May 2018, the figure climbs notably by the end of 2018, reaching over 594 million in November 2019, before exhibiting oscillations. The amounts peak in October 2021 at approximately 747 million, then fluctuate around the 520 to 620 million range in subsequent periods. This pattern reflects changes in payment obligations possibly responding to purchasing volume or credit terms.

Payables Turnover Ratio

The payables turnover ratio shows significant variability, moving between lows of approximately 6.67 and highs exceeding 12. The ratio indicates the frequency with which accounts payable are settled within a period. Periodic dips around late 2019 and late 2021 correspond with lower turnover, suggesting slower payment cycles or extended credit terms. Conversely, peaks above 11, especially noted in early 2020 and early 2023, imply accelerated payment activity or shortened supplier credit terms. Overall, the ratio’s fluctuations suggest adjustments in working capital management and supplier relationships over time.

Working Capital

The working capital exhibited fluctuations over the observed periods. Initially, it remained relatively stable, ranging between approximately 840,000 and 1,070,000 thousand US dollars from mid-2018 to early 2020. A notable increase occurred around May and August 2020, where working capital surged significantly to levels above 1,600,000 thousand US dollars. However, this peak was followed by a sharp decline towards late 2020 and early 2021. Subsequently, working capital showed some recovery and relative stability through 2021 but experienced decreased levels again in early 2022. From mid-2022 onwards, it gradually trended upward, stabilizing around just over 1,000,000 thousand US dollars by mid-2023.

Net Sales

Net sales demonstrated a cyclical and generally upward trend with distinct seasonal peaks, especially notable at the beginning of each year, which likely aligns with holiday season demand. Sales increased from roughly 1,540,000 thousand US dollars in mid-2018 to peaks exceeding 2,700,000 thousand US dollars by early 2022. The magnitude of these peaks increased over time, indicating growth in revenue. Despite a sharp decline in net sales during the early to mid-2020 period, likely due to external disruptions, net sales rebounded strongly, reaching new highs in subsequent years before showing a slight decline in the latest quarters compared to the peak period.

Working Capital Turnover

The working capital turnover ratio fluctuated significantly but trended upwards over the entire period. Initially, the ratio ranged between about 5.7 and 8.6, indicating moderate efficiency in generating sales from working capital. A substantial dip was observed during mid-2020, when the ratio dropped to its lowest points near 3.7 and 4.2, reflecting reduced efficiency which coincides with the peak in working capital and depressed sales. From 2021 onward, the turnover ratio recovered markedly, peaking at nearly 12 in early 2022. It then stabilized at elevated levels around 9.3 to 10.4 in 2023, highlighting improved and sustained efficiency compared to earlier years.

Overall Insights

The financial data reveals that periods of disruption, particularly during 2020, had a pronounced impact on both working capital and sales. The substantial increase in working capital combined with a decline in sales during that period resulted in reduced turnover efficiency. However, the subsequent recovery indicates effective management of working capital relative to sales, achieving higher turnover ratios and growth in net sales. The upward trend in turnover ratio following the disruption suggests enhanced operational performance and possibly improved inventory and receivables management. Seasonal patterns in net sales are evident and consistent, with higher sales in the first quarter of each year.

Inventory Turnover Trend

The inventory turnover ratio exhibited notable fluctuations over the observed periods. Starting at 3.46 in May 2018, the ratio declined to a low of 2.60 by October 2021, indicating a reduction in the frequency of inventory being sold and replaced. Following this low, the turnover ratio improved significantly, reaching a peak of 3.84 in January 2023 before slightly moderating to around 3.58 by July 2023. This pattern suggests a period of slower inventory movement around late 2021, followed by a recovery and increased efficiency in inventory management in recent quarters.

Average Inventory Processing Period Trend

The average inventory processing period, measured in days, inversely mirrors the inventory turnover trend. Starting at 106 days in May 2018, the processing period extended to a high of 140 days in October 2021, indicating that inventory was held for a longer duration during that time. Subsequently, there was a notable decrease to 95 days by April 2023, implying improved inventory processing speed. This reduction in days held reflects improved turnover efficiency and a potentially stronger inventory management strategy.

Relationship Between Inventory Turnover and Processing Period

The data highlights an expected inverse relationship between inventory turnover and the average inventory processing period. Periods with higher turnover ratios correspond with shorter inventory holding times, and vice versa. This alignment showcases consistent operational dynamics where improvements in turnover are accompanied by reductions in the time inventory remains on hand.

Operational Insights

The observed trends suggest that there was a period of operational challenge or strategic change around 2021, reflected in reduced turnover and increased inventory holding periods. The subsequent improvements in these metrics indicate successful initiatives to enhance inventory management, possibly through better forecasting, supply chain adjustments, or changes in product mix. Maintaining turnover ratios above 3.5 in recent quarters alongside reduced processing times points to a more efficient inventory cycle supporting current business requirements.

Receivables Turnover Ratio

The receivables turnover ratio exhibits significant fluctuations over the observed periods. Initially, it remained relatively stable around the low 60s from May 2018 to November 2018, peaking at 63.79. A decline followed in early 2019, dropping to as low as 49.33. Mid-2019 periods then show a rebound to peak at 66.14. Another decline occurred through early 2020, with a notable drop to 31.86 by January 2021 — the lowest point in the series. Subsequent quarters demonstrate recovery, with the ratio progressively increasing to 61.51 by July 2023. Overall, these variations suggest alternating periods of more and less efficient collection of receivables, with the lowest efficiency around early 2021 and improvement thereafter.

Average Receivable Collection Period

The average collection period measured in days moves inversely to the receivables turnover ratio, as expected. Initially, it remained steady at about 6 days from May 2018 through early 2019, briefly extending to 7 days in some quarters. The period displays a widening range from 5 to 11 days between mid-2020 and early 2022, with the highest lengthening to 11 days in October 2020, corresponding with the lowest turnover ratio at that time. Post early 2022, the collection period appears to stabilize between 6 and 8 days through mid-2023, indicating an improvement in collections timeframe.

Overall Insights

The contrasting trends in the turnover ratio and average collection period reveal fluctuating efficiency in managing receivables. The sharp dip in turnover ratio and corresponding lengthening of the collection period around 2020-2021 suggest challenges in collecting accounts receivable during that timeframe. Improvements after this period indicate a return toward more efficient credit and collection practices. The data implies sensitivity to possibly external factors impacting collection cycles, with recovery evident in the most recent periods.

Average Inventory Processing Period

The average inventory processing period shows some variation across the observed quarters. Initially, the period fluctuates between approximately 100 and 130 days, with occasional peaks such as 140 days in late 2021 and 132 days at the end of 2022. Notably, there is a general fluctuation rather than a steady trend, with periods of increase followed by decreases. Most recently, the period has decreased to around 95-102 days, indicating a slight improvement in inventory turnover efficiency.

Average Receivable Collection Period

The average receivable collection period remains relatively stable throughout the observed time frame, consistently ranging from 5 to 11 days. There is a slight upward trend around the end of 2020 and early 2021, where the period increases to 11 days, before returning to values closer to 6-8 days in subsequent quarters. This suggests consistent efficiency in receivable collections with some temporary delays.

Operating Cycle

The operating cycle closely mirrors the fluctuations observed in the inventory and receivable periods. It fluctuates between roughly 100 and 140 days, with peaks coinciding with increased inventory processing periods, most notably in late 2021 and late 2022. There is no strong upward or downward long-term trend, but rather periodic variations. The most recent quarters show a reduction of the operating cycle towards about 102-108 days, indicating some improvement in the overall working capital management.

The analysis of the payables turnover ratio and the average payables payment period reveals several notable trends over the observed quarters.

Payables Turnover Ratio

The payables turnover ratio exhibits fluctuations throughout the periods. Initially, the ratio showed a general decline from 10.55 to a low of 7.32 between May and November 2018. Subsequently, the ratio rose sharply to 10.66 in February 2019 and remained relatively stable in the vicinity of 10 during 2019, though with intermittent drops to lower levels such as 7.73 in November 2019. The period starting in early 2020 reflected moderate variability, with ratios hovering mostly between 8 and 11. Notably, the ratio achieves its highest value of 12.48 in July 2023, indicating a stronger pace of settling payables during that quarter. Overall, the trend suggests cycles of accelerated and decelerated payables turnover, with recent quarters showing improvement in the efficiency of payables management.

Average Payables Payment Period

The average number of days that payables remain outstanding inversely mirrors the payables turnover ratio trends. The payment period started at 35 days in May 2018, rose to a peak of 50 days by November 2018, and then decreased to approximately mid-30 days during early 2019. A pattern of oscillation is apparent, with periods as high as 55 days in October 2021 and lows reaching 29 days in July 2023. This fluctuation suggests alternating strategies in managing payment timing or variations in supplier terms and cash flow considerations. The latest data point of 29 days indicates a more rapid payment cycle compared to much of the prior two years, aligning with the observed increase in the payables turnover ratio.

Relationship and Implications

The inverse relationship between the payables turnover ratio and the average payment period remains evident across all quarters. Periods with higher turnovers correspond with shorter payment durations, reflecting quicker settlement of payables. The recent trend toward increased turnover and shortened payment terms may signal enhanced operational efficiency or changes in supplier agreements. However, the variability over the timeline highlights the company's adaptive management approach to payables, potentially balancing cash preservation against supplier relations.

Inventory Processing Period

The average inventory processing period fluctuates over the observed quarters, ranging from a low of 95 days to a high of 140 days. Notably, there are periodic increases observable in late 2018 and late 2021, followed by declines in the subsequent quarters. The most prolonged period is recorded in October 2021 at 140 days, indicating a slower turnover during that quarter. Overall, while the inventory period demonstrates variability, there is no clear sustained upward or downward trend.

Receivable Collection Period

The average receivable collection period remains relatively stable, generally oscillating between 5 and 11 days. A peak is evident in January 2021 at 11 days, suggesting a temporary extension in the time taken to collect receivables. Apart from this peak, the period typically hovers close to 7 days, which indicates consistent receivables management and steady collection efficiency across the quarters.

Payables Payment Period

The average payables payment period shows significant variability, with values ranging from 29 to 55 days. Peaks are observed in November 2019 (47 days) and October 2021 (55 days), indicating intervals where the company took longer to settle its payables. The payment period tends to shorten post these peaks, evidencing adjustments in payables management. The data suggests a somewhat inconsistent approach toward payables timing, with occasional deliberate extensions.

Cash Conversion Cycle

The cash conversion cycle (CCC) exhibits fluctuations aligned with the variances in inventory, receivables, and payables periods. The CCC ranges from a low of 69 days (April 2023) to a high of 100 days (October 2022). Noticeable spikes in the CCC occur during late 2019 and 2022, coinciding with higher inventory periods and extended payables durations. The downward movement in more recent quarters indicates improved working capital efficiency, with the company managing to reduce the CCC, possibly reflecting more efficient inventory turnover, quicker receivables collection, or better payment scheduling.