Constellation Brands Inc. (NYSE:STZ)

Inventory Turnover

The inventory turnover ratio shows an initial decline from 1.94 in 2017 to 1.81 in 2018, followed by a slight recovery to 1.89 in 2019. A significant improvement is observed in 2020 and 2021, reaching 3.05 and 3.21 respectively, before declining to 2.61 in 2022. This indicates more efficient inventory management during 2020 and 2021, with some decrease in efficiency in the latest year.

Receivables Turnover

The receivables turnover ratio remains relatively stable over the years, fluctuating slightly around the range 9.58 to 10.97. Notably, it peaks in 2021 at 10.97, indicating improved collection of receivables that year, before reverting closer to previous levels in 2022.

Payables Turnover

This ratio shows moderate variation, with a slight decrease from 6.79 in 2017 to 6.36 in 2018, followed by incremental increases to 9.02 in 2021. However, there is a sharp decline in 2022 down to 4.57, which suggests a substantial slowdown in the rate of paying suppliers during the latest year.

Working Capital Turnover

The working capital turnover ratio is quite volatile, with a notable drop from 13.77 in 2017 to 4.96 in 2018, then rising sharply to 15.6 in 2019. It declines again in 2020 and 2021 to 7.12 and 4.85, respectively, before surging back to 13.98 in 2022. This pattern suggests considerable fluctuation in the efficiency of working capital utilization across the period.

Average Inventory Processing Period

The number of days inventory is held decreases substantially from 188 days in 2017 to 114 days in 2021, indicating faster inventory turnover. This figure, however, increases again to 140 days in 2022, showing some regression in inventory processing efficiency.

Average Receivable Collection Period

The receivable collection period is generally stable, hovering around 37-38 days from 2017 to 2019 and in 2022. It dips to a low of 33 days in 2021, reflecting an improvement in collection speed during that year.

Operating Cycle

The operating cycle, combining inventory and receivables periods, shows a decreasing trend from 225 days in 2017 to 147 days in 2021, indicating increasingly efficient operations. There is a slight increase to 177 days in 2022, which might suggest some easing in operational efficiency.

Average Payables Payment Period

The days taken to pay suppliers remained mostly stable around mid-50s between 2017 and 2019, then shortened notably to 40 days in 2021, implying quicker payments. However, in 2022, this period lengthened sharply to 80 days, pointing to slower payments to suppliers.

Cash Conversion Cycle

The cash conversion cycle demonstrates an overall improving trend, decreasing from 171 days in 2017 to 97 days in 2022, with slight fluctuations in intermediate years. The reduction in this metric reflects enhanced efficiency in converting expenditures into cash flows over time.

Cost of Product Sold

The cost of product sold demonstrates a generally stable pattern over the six-year period. Beginning at approximately $3.8 billion in 2017, it remains close to this range with minor fluctuations, peaking at about $4.19 billion in 2020 before marginally declining to $4.11 billion by 2022. This indicates modest volatility but overall consistency in the cost structure related to product sales.

Inventories

Inventories show a varying trend with an initial increase from $1.96 billion in 2017 to a peak of $2.13 billion in 2019. However, in 2020, there is a notable decline to approximately $1.37 billion, followed by a continued decrease to about $1.29 billion in 2021. The year 2022 sees a partial recovery to $1.57 billion. This pattern may reflect strategic inventory management adjustments or changing demand conditions impacting stock levels.

Inventory Turnover

The inventory turnover ratio fluctuates over the periods, suggesting changes in operational efficiency regarding inventory management. Starting at 1.94 in 2017, it decreases slightly in the next year to 1.81, then recovers to 1.89 in 2019. A sharp increase to 3.05 and 3.21 in 2020 and 2021 occurs, indicating faster inventory turnover during these years, likely correlating with the significant inventory reduction noted earlier. The ratio decreases again to 2.61 in 2022, reflecting a slowdown in turnover compared to the previous two years but still above the levels observed from 2017 to 2019.

Summary

Overall, the financial data reveal a stable cost of product sold alongside a dynamic inventory profile. The inventory reductions in 2020 and 2021, coupled with the increased turnover ratios during the same period, suggest heightened efficiency or changes in sales volume and inventory management practices. The partial rebound in inventories accompanied by a decline in turnover ratio in 2022 may indicate a strategic recalibration in stock levels or market conditions. Continuous monitoring of these metrics is recommended to evaluate operational efficiency and cost control effectiveness.

Net Sales

Net sales demonstrated a consistent upward trend over the six-year period. Starting at approximately 7.33 billion USD in 2017, sales increased each year, reaching approximately 8.82 billion USD by 2022. The growth was steady, with no years showing a decline, indicating continual expansion or increased revenue generation during this timeframe.

Accounts Receivable

Accounts receivable values also showed a general increasing trend, rising from 737 million USD in 2017 to 899 million USD in 2022. However, there was a noticeable decline in 2021 when receivables dropped to 785.3 million USD before rising again in 2022. This fluctuation could reflect changes in credit policy, collection efficiency, or sales composition affecting receivables management.

Receivables Turnover Ratio

The receivables turnover ratio fluctuated modestly during the period, indicating variations in the efficiency of collections. Starting at 9.95 in 2017, it slightly decreased to 9.58 by 2019, suggesting a gradual slowing in the collection of receivables. There was a peak at 10.97 in 2021, indicating enhanced turnover efficiency, followed by a decline to 9.81 in 2022. These changes imply intermittent shifts in how quickly the company converts receivables into cash, which could be influenced by customer payment behavior or credit practices.

Cost of product sold

The cost of product sold generally increased from 3,802,100 thousand USD in February 2017 to 4,193,600 thousand USD in February 2020, showing a rising trend over this four-year period. However, starting in fiscal year 2021, the cost slightly decreased, first to 4,148,900 thousand USD and then to 4,113,400 thousand USD in 2022, indicating a stabilization or mild reduction in costs after the peak in 2020.

Accounts payable

Accounts payable figures fluctuated across the years. From 559,800 thousand USD in 2017, there was a moderate increase reaching 616,700 thousand USD in 2019. Subsequently, a decline took place, dropping to 460,000 thousand USD in 2021. Notably, in 2022, there was a significant jump to 899,200 thousand USD, which marks the highest level across the observed periods. This sharp increase in payables in the latest year suggests a change in payment practices or supplier credit terms.

Payables turnover ratio

The payables turnover ratio experienced considerable variation. Starting at 6.79 in 2017, it declined slightly to 6.36 in 2018, then increased modestly to 6.54 in 2019. After a more pronounced rise to 9.02 in 2021, which shows faster payment to suppliers or reduced reliance on credit, the ratio then fell substantially to 4.57 in 2022. This drop in turnover ratio coincides with the sharp rise in accounts payable, indicating slower payments or higher amounts of outstanding obligations during the most recent fiscal year.

The analysis of the financial data reveals varying trends in working capital, net sales, and working capital turnover ratios over the six-year period.

Working Capital

Working capital experienced significant fluctuations throughout the years. It increased from 532,400 thousand USD in 2017 to a peak of 1,775,400 thousand USD in 2021, indicating an expansion of short-term assets relative to liabilities. However, in 2022, working capital declined sharply to 630,900 thousand USD, reflecting a reduction in liquidity or changes in asset and liability composition.

Net Sales

Net sales demonstrated a consistent upward trend during the period analyzed. Starting at 7,331,500 thousand USD in 2017, sales increased progressively each year, reaching 8,820,700 thousand USD in 2022. This steady growth suggests expanding market demand or effective sales strategies.

Working Capital Turnover

The working capital turnover ratio displayed volatility. It started high at 13.77 in 2017, dropped significantly to 4.85 by 2021, and then rose again to 13.98 in 2022. These fluctuations suggest varying efficiency in utilizing working capital to generate sales. The low ratios in several years indicate that the company might have held relatively high working capital compared to sales, potentially impacting asset utilization efficiency.

Overall, while net sales grew steadily, working capital and its turnover ratio presented irregular patterns, implying shifts in liquidity management and operational efficiency that warrant further investigation.

Inventory Turnover

The inventory turnover ratio initially declined from 1.94 in 2017 to 1.81 in 2018, indicating a slower rate of inventory movement. However, the ratio improved notably in the following years, reaching a peak of 3.21 in 2021. This increase suggests enhanced operational efficiency and faster inventory sales during that period. In 2022, the ratio decreased to 2.61, signaling a slight slowdown in inventory turnover compared to the previous year, but it remained higher than in the initial years.

Average Inventory Processing Period

The average inventory processing period exhibited a general downward trend from 188 days in 2017 to 114 days in 2021, reflecting quicker inventory turnover and more efficient inventory management. This trend is consistent with the rising inventory turnover ratio observed in the same timeframe. However, in 2022, the processing period increased to 140 days, indicating a lengthening of the time inventory remains on hand, which aligns with the reduction in inventory turnover ratio that year.

Overall Analysis

Between 2017 and 2021, there was a clear improvement in inventory management, characterized by increased turnover and decreased inventory holding days. This implies more effective sales and order fulfillment processes. The reversal of these trends in 2022, with reduced turnover and increased processing days, may suggest emerging challenges such as supply chain disruptions, changes in demand, or inventory build-up.

Receivables Turnover

The receivables turnover ratio remained relatively stable from 2017 to 2020, with values fluctuating slightly between 9.58 and 9.95. A noticeable increase occurred in 2021 reaching 10.97, indicating improved efficiency in collecting receivables during that year. However, this ratio declined again to 9.81 in 2022, suggesting a return toward prior levels of collection efficiency.

Average Receivable Collection Period

The average collection period was steady at 37 to 38 days from 2017 through 2020, reflecting consistent payment collection terms or patterns. In 2021, this period shortened significantly to 33 days, aligning with the observed peak in the receivables turnover ratio, implying faster collections during that year. The collection period extended back to 37 days in 2022, indicating a moderation from the improved efficiency noted in 2021.

Overall Trend Analysis

Over the six-year period, the company's receivables management efficiency showed limited variability with a notable improvement in 2021. This year was marked by faster receivable collections as evidenced by both a higher turnover ratio and a reduced collection period. The subsequent year saw a reversion toward prior levels, suggesting that the improvements in 2021 might have been influenced by specific conditions or operational changes during that period. Maintaining a collection period closer to the mid-30 day range and turnover ratio near 10 appears characteristic of the company's receivables cycle across most years.

Average Inventory Processing Period

The average inventory processing period showed a general decrease from 188 days in 2017 to 140 days in 2022, though this trend was not entirely linear. The period increased to 202 days in 2018 before gradually declining to a low of 114 days in 2021. There was a slight increase again in 2022, indicating some variability in inventory turnover efficiency over the years.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the six-year span. It fluctuated narrowly between 33 and 38 days. The lowest point was in 2021 at 33 days, suggesting an improvement in collections efficiency that year, but it reverted to 37 days in 2022. Overall, the company maintained consistent receivable management.

Operating Cycle

The operating cycle experienced a notable reduction over the observed period, declining from 225 days in 2017 to a minimum of 147 days in 2021. This indicates an improvement in the time taken to convert inventory and receivables into cash. However, in 2022, the operating cycle lengthened to 177 days, which suggests some regression in operational efficiency compared to the previous year, though still significantly better than earlier years.

Payables Turnover

The payables turnover ratio displays variability over the observed years. Starting at 6.79 in 2017, it declined slightly to 6.36 in 2018 before experiencing a marginal increase to 6.54 in 2019. Thereafter, the ratio rose more notably to 7.52 in 2020, peaking at 9.02 in 2021. In the most recent year, 2022, the ratio fell sharply to 4.57. These fluctuations suggest changing efficiency in managing payables, with an overall increase until 2021 followed by a significant decline.

Average Payables Payment Period

The average payables payment period, expressed in days, shows an inverse trend relative to the payables turnover. The period increased slightly from 54 days in 2017 to 57 days in 2018, then decreased gradually to 56 days in 2019, 49 days in 2020, and further to 40 days in 2021. However, in 2022, this period rose substantially to 80 days, which indicates a considerable extension in the time taken to settle payables compared to previous years.

Combined Analysis

There is a clear inverse relationship between payables turnover and the average payables payment period across the period under review. As the payables turnover ratio increased from 2018 through 2021, the payment period decreased, indicating faster payments to suppliers. Conversely, in 2022, the payables turnover ratio decreased sharply while the payment period increased significantly, suggesting a slowdown in payment activity and a possible strategic or operational shift affecting accounts payable management during that year.

Average Inventory Processing Period

The average inventory processing period showed variability over the analyzed years. It increased from 188 days in 2017 to a peak of 202 days in 2018, then declined to 193 days in 2019. A significant reduction occurred in 2020 and 2021, reaching 120 and 114 days respectively, indicating improved inventory turnover. However, in 2022, there was a rise to 140 days, suggesting a slight slowdown in inventory processing efficiency compared to the previous two years.

Average Receivable Collection Period

The average receivable collection period remained relatively stable across the period. It was 37 days in 2017 and 2018, increased marginally to 38 days in 2019 and 2020, then improved to 33 days in 2021, indicating faster collection of receivables. In 2022, it reverted to 37 days, aligning closely with the levels seen in earlier years, showing a return to the prior collection pace.

Average Payables Payment Period

The average payables payment period exhibited fluctuations during the review period. It increased slightly from 54 days in 2017 to 57 days in 2018, then marginally decreased to 56 days in 2019. A downward trend followed in 2020 and 2021, falling to 49 and 40 days respectively, reflecting faster payments to suppliers. Notably, in 2022, there was a considerable increase to 80 days, suggesting a strategic extension in payment terms or delayed payments.

Cash Conversion Cycle

The cash conversion cycle generally trended downward, indicating overall improved cash flow management. From 171 days in 2017, it increased slightly to 182 days in 2018, then decreased modestly to 175 days in 2019. A significant improvement occurred in 2020 and 2021, with the cycle shortening to 109 and 107 days respectively. By 2022, it further declined to 97 days, the lowest in the period reviewed, demonstrating enhanced efficiency in managing the cash conversion process.