Constellation Brands Inc. (NYSE:STZ)

Inventory turnover

The inventory turnover ratio demonstrates a gradual upward trend from May 31, 2017, starting near 1.7 to a peak above 3.2 by early 2021. After reaching this peak, the ratio declines moderately, settling around 2.6 toward the end of 2022. This pattern indicates an improvement in inventory management efficiency through 2020, followed by some easing in turnover speed in recent quarters.

Receivables turnover

The receivables turnover ratio fluctuates between approximately 8.3 and 11.7, without a clear linear trend. There are notable peaks in August 2020 and February 2017, with the highest values around 11.7. The oscillations suggest varying effectiveness in collecting receivables, but generally maintaining a range indicative of consistent but fluctuating collection performance.

Payables turnover

Payables turnover shows a downward trend overall. Starting around 6.8 in mid-2016, it declines to average values closer to 4.3-5.0 in the last periods of 2022. The most significant drops appear in 2018 and late 2021, indicating an elongation of payment periods, which may signal extended vendor payment terms or strategic management of payables.

Working capital turnover

Working capital turnover exhibits considerable volatility. It plummets to as low as 4.77 in mid-2017 and then surges to an unusually high 29.39 in early 2019 before trending downward again. This spike likely reflects significant operational changes or seasonal effects. Post-2019, the turnover stabilizes to the range of 6 to 14, reflecting moderate fluctuations in how effectively working capital is used to generate sales.

Average inventory processing period

The inventory processing period in days increases from approximately 188 days in 2016 to over 214 days in early 2017, suggesting slower inventory movement initially. This is followed by a steady decrease to about 114 days by late 2021, indicative of improved inventory efficiency. However, slight increases appear in late 2022, settling around 134-142 days, which could indicate marginally slower inventory turnover recently.

Average receivable collection period

This period remains relatively steady between 31 and 44 days, with minor fluctuations. It is shortest around February 2020 (31 days) and longest near November 2016 and late 2020 (42-44 days). The general stability suggests consistent credit policies and collection performance over time.

Operating cycle

The operating cycle remains fairly constant around 225-252 days from 2016 through early 2018, then declines sharply to a range near 147 to 158 days from 2019 onwards. This reduction indicates a quicker overall operational process, combining improvements in inventory processing and receivables collection periods. Late 2021 and 2022 see a slight uptick, but values remain considerably lower than earlier periods.

Average payables payment period

The payables payment period experiences an increase from the mid-50 day range in 2016 to a peak of approximately 84 days by early 2022, indicating longer payment durations to suppliers. A notable shortening occurs around February 2020 (49 days), potentially reflecting cash flow management decisions. Overall, the lengthening trend suggests strategic extension of creditor payment terms.

Cash conversion cycle

The cash conversion cycle shows a downward trend from about 171 days in mid-2016 to a low near 84 days by late 2021, signaling improved liquidity management and faster conversion of investments into cash. Some variability appears through 2022, with the cycle fluctuating between 90 and 101 days, but remaining substantially below earlier levels, reflecting sustained operational efficiency gains in working capital management.

The cost of products sold exhibits variability over the analyzed periods, fluctuating between approximately $840 million and $1.33 billion. Initial values around 2016 show moderate peaks and troughs, with increases generally observed towards the latter part of the dataset, reaching highs above $1.2 billion in late 2022. This suggests periods of higher sales or increased production costs, with notable peaks in November 2022.

Inventories demonstrate some volatility, starting near $1.9 billion and fluctuating with a mix of increases and decreases over time. Early periods show increases with peaks near $2.2 billion, followed by a decline around 2019 to roughly $1.3 to $1.5 billion. Later quarters reflect a gradual rebound, reaching approximately $1.8 billion by the end of the data series. This pattern indicates inventory management adjustments, possibly in response to changing sales demand or supply chain conditions.

Inventory turnover ratio, available from February 2017 onwards, shows meaningful trends. Initially, the ratio remains relatively stable near 1.9 until around early 2019. Subsequently, a sharp increase is observed, climbing above 3.0 during 2019 and early 2020, indicating improved efficiency in inventory utilization and faster movement of stock. However, after this peak, the ratio trends downward moderately, settling between 2.5 and 2.7 in the most recent quarters. This could reflect changes in sales velocity or inventory holding strategies post-peak efficiency.

Overall, the data suggests that the company experienced a period of optimization in inventory turnover around 2019 and early 2020, coinciding with reductions in inventory levels. Cost of product sold displayed cyclical tendencies but rose significantly towards late 2022. Inventory levels had notable declines followed by partial recoveries, while inventory turnover experienced an initial improvement with a recent modest decline, highlighting dynamic adjustments in operational management over the examined time frame.

Cost of Product Sold

Varied with peaks and valleys; highest levels recorded in late 2022, indicating increased sales activity or cost pressures.

Inventories

Fluctuated between $1.3 billion to over $2 billion; showed a general decline around 2019 followed by a gradual rise in subsequent years.

Inventory Turnover Ratio

Improved substantially around 2019 to above 3.0 indicating better inventory efficiency; moderated to around 2.5-2.7 recently, suggesting a slight easing in inventory management efficiency.

The net sales figures over the examined quarters reveal a fluctuating but generally upward trend with several periods of decline. Starting from approximately 1.87 billion US dollars in May 2016, sales experienced growth peaks reaching close to 2.65 billion by August 2022. Notably, intermittent decreases occur, such as from August 2018 to February 2019 and from November 2021 to May 2022, indicating short-term volatility that may relate to seasonal factors or market conditions. Overall, despite these dips, the trajectory across the time span demonstrates resilience and moderate growth.

Accounts receivable show variability without a clear long-term direction but tend to follow a pattern somewhat mirroring the sales fluctuations. Beginning with 773.3 million US dollars in May 2016, the receivables increased to highs above 970 million in certain quarters like August 2018 and August 2021 before decreasing again. This pattern suggests varying collection cycles or credit policies applied over different periods. The relatively consistent oscillation implies ongoing management of receivables without significant deterioration or improvement over the full term.

Receivables turnover ratio

The receivables turnover ratio displays notable volatility yet remains within a general range between approximately 8.3 and 11.7 over the periods available. This ratio is indicative of the efficiency with which the company collects its receivables. Peaks such as 11.72 in February 2021 suggest periods of improved collection efficiency, while lows near 8.32 in November 2018 indicate slower turnover. The variability in this ratio correlates with fluctuations in both net sales and accounts receivable. Despite the oscillations, the turnover ratio does not show a persistent upward or downward trend but rather short-term fluctuations, potentially reflecting changes in payment terms, credit risk, or seasonal sales impacts.

In summary, the company’s net sales manifest overall growth marked by periodic declines. Accounts receivable follow a somewhat related fluctuating pattern, while the receivables turnover ratio indicates variable but generally stable collection efficiency. The data reflect a dynamic operating environment with recurring fluctuations but no evident structural deterioration in financial performance or asset management during the observed periods.

Cost of Product Sold

The cost of product sold demonstrates a certain degree of variability over the examined periods. Initially, there is a notable decline from 990,500 thousand US$ in May 2016 to 840,300 thousand US$ in February 2017. This decrease is followed by an overall upward trend reaching a peak of 1,169,900 thousand US$ in November 2020. Subsequently, the figure fluctuates, settling around a slightly lower range in 2022, ending at 1,209,600 thousand US$ in November 2022. The pattern indicates seasonal and market influences affecting costs, with an overall tendency towards increase in the longer term.

Accounts Payable

Accounts payable displays considerable fluctuations across the quarters. Starting at 558,500 thousand US$ in May 2016, the value trends upwards with notable peaks at 945,400 thousand US$ in November 2021, followed by a marginal decline towards late 2022 where it reaches 1,008,100 thousand US$ in November 2022. The payables amount often correlates with cost of product sold, evidencing periods of increased procurement or payment deferrals. A drop around mid-2021 is particularly evident, contrasting with a strong rise thereafter.

Payables Turnover Ratio

The payables turnover ratio exhibits significant variation, ranging between approximately 4.34 and 9.02 throughout the periods. Higher turnover ratios, such as 9.02 observed in May 2021, indicate quicker payment cycles, while lower ratios, near 4.34 in November 2022, suggest slower payments or increased payables compared to cost of goods sold. The ratio generally fluctuates in response to operational or cash flow strategies, with no clear long-term upward or downward trend but showing periodic shifts that reflect changes in payment policies or supplier negotiations.

The quarterly financial data reveals several notable trends regarding working capital, net sales, and working capital turnover ratios over the observed periods.

Working Capital

Working capital exhibits substantial fluctuations throughout the timeframe. Initially, it starts at a moderate level and then experiences significant increases and declines, with peaks around August 2017 (approximately 1,283,400 thousand USD) and again in May 2020 (approximately 1,643,800 thousand USD). Noteworthy troughs appear in November 2018 (275,100 thousand USD) and May 2022 (630,900 thousand USD). The pattern suggests episodic changes potentially linked to operational or seasonal factors affecting current assets and liabilities.

Net Sales

Net sales show a generally positive trajectory across the periods, with periodic declines. From roughly 1,871,800 thousand USD in May 2016, net sales rise to over 2,650,000 thousand USD by August 2022, indicating growth in revenue generation. Despite this upward trend, some quarters experience drops, such as February 2017 and May 2020, suggesting sensitivity to external economic conditions or business cycles.

Working Capital Turnover Ratio

The working capital turnover ratio displays considerable volatility, reflecting changes in the efficiency with which working capital is utilized to generate sales. The ratio varies widely, reaching peaks such as 29.39 in November 2018 and 13.98 in May 2022, while also showing lower levels around 4.77 in May 2018 and similar points. High spikes typically correspond to quarters with relatively low working capital accompanied by sustained or relatively high net sales, indicating periods of more efficient asset management or reduced capital investment relative to sales revenue.

In summary, the data indicates cyclical variations in working capital management and sales performance. While net sales generally trend upward, working capital levels fluctuate markedly, influencing turnover efficiency measurably. The peaks in working capital turnover suggest episodic improvements in operational efficiency or liquidity management, whereas the dips point to periods of increased capital held relative to sales generated. These patterns merit further detailed investigation to ascertain underlying drivers such as inventory levels, receivables management, or external market conditions impacting the company's short-term financial dynamics.

The analysis of the quarterly financial ratios reveals several noteworthy trends and shifts over the observed period.

Inventory Turnover Ratio

The inventory turnover ratio displays an overall increasing trend from the initial recorded values onward. Starting at approximately 1.94 in early periods, the ratio gradually rises, reaching a peak exceeding 3.2 in early 2021. This increase suggests enhanced efficiency in inventory management, implying that the company was able to sell and replenish its stock more frequently during this time frame. However, post the peak period, a decline is observable, with the ratio falling to values around 2.56 toward the latest period. This reduction may indicate a slowdown in inventory movement or changes in sales dynamics.

Average Inventory Processing Period

Inversely related to the inventory turnover, the average inventory processing period initially remains relatively stable, hovering around 188 to 214 days. Starting from early 2019, there is a significant decrease in the processing period down to approximately 114 days by 2021, reflecting quicker inventory cycles and potentially improved operational efficiencies. Nonetheless, in the most recent periods, the processing period extends again, reaching about 140 days, which aligns with the observed dip in the inventory turnover ratio.

In conclusion, the data reflect a phase of improved inventory management efficiency marked by faster turnover and shorter processing periods up to early 2021, followed by a period of some reversal where inventory turnover slows and processing periods lengthen. These patterns could be indicative of changing market conditions, supply chain challenges, or shifts in demand affecting inventory handling towards the end of the period analyzed.

Receivables Turnover

The receivables turnover ratio exhibits fluctuations across the periods presented, generally oscillating between approximately 8.3 and 11.7. Early in the series, values range around 8.7 to 9.9, followed by intermittent increases and decreases without a clearly defined upward or downward long-term trend. Notably, the period ending February 29, 2020, shows a peak at 11.72, indicating a relatively higher efficiency in collecting receivables during that quarter. Subsequent quarters experience some declines and recoveries, maintaining a range mostly above 9.0, with minor variations. Overall, the ratio suggests moderately consistent receivables management, with periodic improvements in turnover evident.

Average Receivable Collection Period

The average receivable collection period displays inverse fluctuations relative to the receivables turnover, as expected from their intrinsic relationship. Values range between roughly 31 and 44 days, with occasional spikes such as 44 days near November 2016 and a trough of 31 days in August 2020. The data indicates variability in collection efficiency, with some quarters showing faster collections (lower days) and others slower (higher days). The quarter ending February 29, 2020, corresponds to one of the lower collection days periods at 31 days, aligning with the peak in receivables turnover, highlighting a period of improved cash flow efficiency. In the later quarters, the collection period steadies near the high 30s, suggesting relatively stable receivables management despite periodic fluctuations.

Overall Observations

The patterns between receivables turnover and average collection period corroborate one another, with collection periods shortening when turnover ratios increase, indicating improved credit management and cash conversion efficiency. Some volatility is observed, but these metrics generally reflect stable receivables performance over the span, without extreme deviations or radical shifts in trends. The peak observed around February 2020 may warrant further investigation to understand the factors contributing to improved collection efficiency during that timeframe.

Average Inventory Processing Period

Over the observed periods, the average inventory processing period exhibits notable fluctuations. Starting from 188 days in the initial recorded quarter, it remains relatively stable around 188-189 days for several quarters before rising sharply to 214 days by February 2018. Subsequently, it declines consistently to a low of 114 days by August 2021. After this trough, there is a moderate increase, finishing around 134-142 days toward the latter quarters of 2022. The data reveals a peak in early 2018, followed by a generally downward trend indicating improved inventory turnover, with a slight resurgence in processing time near the end of the period.

Average Receivable Collection Period

The average receivable collection period shows moderate variability within a relatively narrow range. Initial periods record collection times between 37 and 44 days. There is a slight downward trend in mid-2019 and throughout 2020, reaching as low as 31 days in August 2020, indicative of faster receivables turnover. However, this is followed by some oscillation, with values generally fluctuating between 35 and 42 days in recent quarters. Overall, the receivable collection period maintains near-consistency, with periodic mild improvements and reversals suggesting controlled but slightly variable credit collection performance.

Operating Cycle

The operating cycle, reflecting the total time encompassing both inventory processing and receivable collection, mirrors the trends observed in its components. It rises from approximately 225 days to a peak around 252 days by February 2018, consistent with the inventory processing peak. From this point, the cycle shows a significant decline to roughly 147 days by August 2021, suggesting enhanced operational efficiency. In the final quarters, the cycle lengthens again, stabilizing near 170-177 days. This pattern indicates periods of both operational slowdown and improved efficiency, with the general trend toward a shorter operating cycle over the medium term before a minor reversal at the end.

The analysis of the payables turnover ratio and the average payables payment period reveals notable trends over the observed periods. The payables turnover ratio shows variability, with initial values around 6.79 declining gradually to lows near 4.34 and 4.57 before rising again toward values around 4.93 and 4.69. This fluctuation indicates changing efficiency in the management of accounts payable over time, with periods of more rapid turnover interspersed with slower turnover phases.

Corresponding to the payables turnover, the average payables payment period, measured in days, exhibits an inverse relationship as expected. Early periods reflect payment periods generally under 60 days, but these extend significantly in later periods, reaching highs above 80 days. There are several spikes in the payment period, notably around Feb 28, 2019, and subsequent quarters through early 2022, indicating longer durations taken by the company to settle payables.

Overall, the data suggests a trend toward lengthening payment periods paired with a lower payables turnover ratio in recent years compared to earlier periods. Such a trend may imply a strategic extension of payment terms or potential liquidity management considerations. The variation throughout the timeframe highlights periods of adjustment or changing operational dynamics in supplier payments.

Payables Turnover Ratio

Ranges between approximately 4.3 and 9.0, with higher values earlier and in some mid periods, then declining and stabilizing at lower ratios.

Average Payables Payment Period

Varies inversely with turnover ratio, spanning from about 40 to over 80 days, trending upward over the long term and reaching peaks in the later periods.

Overall Observations

The efficiency of payables management shows variability, with a tendency toward longer payment periods and reduced turnover in more recent periods, possibly reflecting changing payment policies or liquidity strategies.

Inventory Processing Period

The average inventory processing period demonstrates a moderate fluctuation over the analyzed timeframe. Initially, the values rose from approximately 188 days in mid-2016 to a peak around 214 days by early 2017. Subsequently, there was a general downward trend with some volatility, reaching a notable decrease to near 114 days by late 2021. Towards the end of the period, a slight increase is observed with values around 134 to 142 days. This suggests improved inventory turnover efficiency in the later years compared to earlier periods, despite intermittent reversals.

Receivable Collection Period

The average receivable collection period remained relatively stable across the quarters, mostly oscillating between the mid-30s to low-40s days range. Minor variations are noted, with occasional peaks such as 44 days in late 2016 and troughs around 31 days in mid-2020. Overall, the consistency indicates steady management of receivables with no significant elongated collection delays over time.

Payables Payment Period

The payables payment period displayed considerable variability throughout the period. It increased from around 54-59 days in the initial years to highs exceeding 80 days in late 2018 and again in late 2021 to early 2022. There were periods of reduction as well, such as mid-2020 when the period dropped to 40-45 days. The trend suggests fluctuating supplier payment practices, potentially reflecting shifting working capital strategies or varying supplier terms.

Cash Conversion Cycle

The cash conversion cycle followed a general downward trajectory over the analyzed quarters. Starting around 171-182 days in 2016-2017, it gradually declined to below 100 days by mid-2019, with some minor increases thereafter. By late 2021 and into 2022, the cycle settled around the mid-90s to low 100s range, indicating an overall improvement in cash flow efficiency. The reduction in cash conversion cycle aligns with trends in inventory processing and receivables, suggesting enhanced operational liquidity management.