Estée Lauder Cos. Inc. (NYSE:EL)

Inventory Turnover

The inventory turnover ratio shows a generally declining trend over the observed periods. Starting from 1.76 in September 2018, it increased slightly to a peak of 1.89 in March 2019 but mostly trended downward thereafter, reaching a low of 1.39 in December 2022 before a mild recovery to 1.53 by June 2023. This decline suggests slower inventory movement or increased inventory holding over time.

Receivables Turnover

Receivables turnover demonstrated fluctuations with no clear upward or downward trend. It initially stood at 9.2 in September 2018, dropped to as low as 6.29 in December 2017, then showed improvement reaching highs above 10 in the first quarters of 2020 and 2023. This variability indicates inconsistent efficiency in collecting receivables.

Payables Turnover

The payables turnover ratio fluctuated moderately, ranging roughly between 2.27 and 3.24. There was no sustained directional trend, but intermittent decreases and increases suggest variability in payment timing to suppliers throughout the periods.

Working Capital Turnover

Working capital turnover generally declined from a high of 6.26 in December 2018 to a low of 2.54 in December 2020, representing a loss in efficiency in generating revenue from working capital during this period. Afterward, the ratio showed gradual recovery, reaching 5.49 by March 2023, signaling improved working capital management in recent quarters.

Average Inventory Processing Period

The average inventory processing period shows an increasing trend, rising from around 194 days in March 2018 to peak at 263 days in December 2022. This increase in days suggests longer inventory holding times, potentially indicating slower sales or increased stock levels.

Average Receivable Collection Period

The receivable collection period fluctuated between approximately 30 and 58 days. It peaked at 58 days in December 2017, then mostly moved between mid-30s to mid-50s across later quarters, with some improvement in the most recent periods (around 33 days in June 2023), suggesting some enhancement in collections efficiency.

Operating Cycle

The operating cycle, which is the sum of inventory processing and receivables collection periods, varied between 242 to 306 days. A noticeable increase occurred from about 242 days in September 2019 to over 300 days in late 2022 and early 2023, illustrating an elongation of the total operating cycle mainly driven by longer inventory and sometimes receivables periods.

Average Payables Payment Period

The average payables payment period exhibited considerable variability, ranging roughly from 113 to 161 days. Peaks were observed intermittently, for example, 161 days in September 2018 and September 2021. These fluctuations indicate changing payment strategies or terms with suppliers.

Cash Conversion Cycle

The cash conversion cycle experienced marked fluctuations with values ranging approximately from 96 days to a high of 185 days in December 2022. There was a general tendency towards increases, indicating that the company took longer to convert investments in inventory and receivables back into cash, though the most recent quarter shows some reduction to 137 days by June 2023.

Cost of Sales

The cost of sales figures show an overall upward trend from the beginning of the period to the end. Starting at 711 million USD in September 2017, the cost generally increases across the years, with some fluctuations. There are notable peaks in December 2019 (1041 million USD) and December 2020 (1084 million USD), followed by a gradual rise, reaching the highest values in late 2021 and 2022, peaking at 1223 million USD in September 2021. In 2023, the cost of sales remains elevated with figures around 1159 to 1163 million USD. This pattern indicates a consistent increase in expenses associated with product costs, which could be attributed to factors such as inflation, increased production volume, or changes in sourcing and product mix.

Inventory and Promotional Merchandise

Inventory levels show a consistent increase throughout the reporting periods. Beginning at 1518 million USD in September 2017, inventory grows steadily, surpassing 2000 million USD in late 2018 and maintaining growth through 2019. Post-2020, inventory experiences a sharper rise, peaking at 3097 million USD in March 2023 before seeing a slight decline to 2979 million USD in June 2023. This upward trend suggests either an expansion in product lines, buildup in stock due to anticipated demand, or slower turnover. The parallel increase in promotional merchandise indicates a strategic emphasis on marketing initiatives or a buildup of inventory to support sales campaigns.

Inventory Turnover Ratio

The inventory turnover ratio data is incomplete for early periods but begins from March 2018 onwards. It initially fluctuates around 1.7 to 1.9, indicating moderate efficiency in inventory management. Over the subsequent years, this ratio shows a gradual declining trend, falling from approximately 1.75 in late 2018 to as low as 1.39 by late 2022. A slight recovery is observed in early 2023, with the ratio rising to about 1.53. The overall decline suggests a slower rate of inventory movement relative to sales, which could point to either increased inventory levels not matched by sales growth or challenges in inventory management leading to accumulation.

Summary Insights

The data collectively suggest a scenario where cost of sales and inventory levels are rising steadily, coupled with a decreasing inventory turnover ratio. This indicates that while the company is investing more in inventory and incurring higher costs of sale, the efficiency with which inventory is converted into revenue is diminishing. Such patterns might reflect strategic stockpiling in response to market conditions, supply chain adjustments, or demand uncertainties. Attention may be warranted to optimize inventory management and control cost escalation to maintain operational efficiency.

Net Sales

Net sales exhibit notable seasonality and fluctuation over the periods analyzed. The highest quarterly sales are predominantly recorded in the fourth quarter of most years, indicating a strong year-end sales performance. For example, December 2017, 2019, and 2021 show peaks at 3744, 4624, and 5539 million USD respectively. There is a clear increase in net sales over the long term, growing from 3274 million USD in September 2017 to 4620 million USD in December 2022, despite some volatility in individual quarters. The year 2020 shows a marked dip in sales during the second quarter (June 2020: 2430 million USD) attributed to external challenges, followed by a recovery in subsequent quarters.

Accounts Receivable, Net

Accounts receivable display considerable variability over the quarters. Values oscillate between approximately 1194 million USD and 2294 million USD, with some concentration of higher values in the third quarter of 2018 (2214 million USD) and the third quarter of 2019 (2294 million USD). There is a reduction in receivables during mid-2020, coinciding with lowered sales, followed by a rise in subsequent periods, reflecting adjustments in credit policies or collection effectiveness. Recent periods show a moderate decline, with values reducing from 2156 million USD in September 2022 to 1452 million USD in June 2023.

Receivables Turnover Ratio

The receivables turnover ratio, available intermittently, reflects how efficiently the company manages collections. Ratios vary significantly, ranging from a low of 6.29 to a high of 11.97. Higher turnover ratios in the mid-2020 period (11.97 in June 2020) suggest improved efficiency in collection during periods of reduced sales stress. However, the ratio shows fluctuations consistent with seasonality and changing sales volume, with relatively lower turnover in certain quarters (e.g., 6.29 in December 2017). Increasing turnover ratios in recent periods (e.g., 10.96 in June 2023) indicate ongoing improvements in receivables management.

Overall Analysis

The data suggests that the company experiences pronounced seasonal sales cycles with peaks generally in the fourth quarter. The impact of macroeconomic or extraordinary factors is evident in mid-2020, with a downturn in sales and receivables, followed by a strong recovery. Accounts receivable trends correspond with sales fluctuations, while variations in receivables turnover indicate episodes of enhanced or reduced collection efficiency. Recent trends point to sales growth accompanied by improved receivables management, which supports a stable liquidity profile.

The cost of sales exhibited a general upward trend over the observed quarters, starting from 711 million US dollars at the end of September 2017 and increasing to a peak of 1,223 million US dollars by the end of December 2021. Despite some fluctuations, notably a decrease in cost around March to June 2020 which may reflect an anomalous period, the overall movement is an increase. After the peak in late 2021, the cost of sales showed some volatility but remained above 1,000 million US dollars through mid-2023.

Accounts payable values also showed a rising trend with notable variability, beginning at 679 million US dollars in September 2017 and increasing substantially to 1,822 million by June 2022. The figures showed spikes, for instance reaching nearly 1,690 million in mid-2021 and again peaking around 1,820 million in mid-2022. After mid-2022, accounts payable figures stayed relatively high yet somewhat less volatile, ending at 1,670 million US dollars by June 2023. The overall trajectory aligns broadly with the increase in cost of sales but with sharper increases and occasional declines.

The payables turnover ratio, which measures how many times the company pays off its accounts payable during a period, fluctuated between approximately 2.27 and 3.24 over the time span. From the first recorded ratio of 2.41 in March 2018, the ratio experienced peaks around 3.24 in December 2017 and September 2019, indicating quicker payment cycles during these periods. Conversely, lower turnover ratios near 2.27 and 2.36 suggest slower payment periods, notably in mid-2019 and late 2022. The ratio remained somewhat stable but tended to slightly decrease over recent quarters, implying a trend towards longer payment durations or increased accounts payable balances relative to cost of sales.

Overall, these patterns indicate an escalation in both the scale of operations as reflected in rising cost of sales and accounts payable, alongside some variability in payment efficiency. The significant rise in accounts payable relative to cost of sales in recent periods suggests potential changes in payment policies or supplier terms, warranting further evaluation to understand the underlying factors impacting working capital management.

Cost of Sales

General upward trend from 711M to peak at 1,223M USD; minor declines during unusual periods; overall growth consistent with expanded business scale.

Accounts Payable

Marked increase from 679M to over 1,800M USD; exhibits volatility with sharp rises and some declines; trend aligns with increasing cost of sales but at a faster pace.

Payables Turnover Ratio

Fluctuates between 2.27 and 3.24; reflects varying payment speeds; recent slight downward trend suggests lengthening payment cycles or higher payables relative to cost.

The financial data displays varying trends in working capital, net sales, and working capital turnover over the analyzed quarterly periods.

Working Capital

The working capital figures show fluctuations with a general increasing trend from 2017 through 2020, reaching a peak of 5,800 million USD in March 2021. After the peak, there is a decline, stabilizing around 3,500-4,000 million USD through late 2022 and mid-2023. This indicates periods of both expansion and contraction in liquid resources available for day-to-day operations over the observed timeline.

Net Sales

Net sales convey a cyclical but mostly positive growth trend up to December 2019 when sales peaked at 4,624 million USD. Following this, a significant drop occurs in mid-2020, hitting a low around 2,430 million USD, likely reflecting external market disruptions. Sales subsequently recover gradually with fluctuating increases, culminating near 4,620 million USD by the end of 2022, before slightly retreating towards mid-2023. Overall, net sales demonstrate resilience with recovery from downturns along the period.

Working Capital Turnover

Working capital turnover ratios, indicating efficiency in using working capital to generate sales, demonstrate a general downward trend over the earlier quarters from values above 5.0 towards lows below 3.0 around late 2020 and early 2021. Post 2021, this ratio recovers steadily back to values exceeding 4.0 and approaching 5.5 in some quarters. The reduction in turnover coincides with peaks in working capital and dips in sales, followed by improvements indicating better utilization efficiency as market conditions stabilize.

In summary, the data reflects cycles of growth and contraction in both liquidity and sales performance, with efficiency metrics improving after mid-period fluctuations. The initial growth phases gave way to a contraction likely influenced by the market environment in 2020, while subsequent recovery shows adaptability and strengthening operational management.

Inventory Turnover

The inventory turnover ratio exhibits a generally declining trend over the observed periods. Starting from 1.76 in September 2017, the ratio fluctuates slightly but ends at 1.53 by June 2023. The ratio has consistently remained below 2.0, indicating a relatively slow turnover of inventory. Notable dips are observed towards the end of the dataset, particularly from the fiscal year 2021 onwards, where turnover ratios mostly fall below 1.60.

Average Inventory Processing Period

The average inventory processing period shows an increasing pattern over time. Beginning at 208 days in September 2017, this duration extends significantly, reaching a peak of 263 days in December 2022 before a slight improvement to 238 days by June 2023. The lengthening of the inventory cycle suggests slower movement of inventory through the system, aligning inversely with the decreasing inventory turnover ratio.

Interpretation of Trends

The opposing trends of declining inventory turnover and increasing processing period imply a decreased efficiency in inventory management. The extension in the average number of days inventory remains suggests either increased stock levels, slower sales, or potential supply chain issues. These changes may impact liquidity and operational efficiency, warranting further investigation into causes and potential strategic adjustments.

Receivables Turnover

The receivables turnover ratio exhibits variability over the analyzed periods, ranging from a low of 6.29 to a high of 11.97. Starting at 9.2 in September 2017, the ratio declines to 6.29 by December 2017, suggesting a reduction in the efficiency of converting receivables into cash. Subsequently, the ratio fluctuates moderately with values around 7 to 8 from early 2018 through 2019, before increasing sharply to reach 11.97 mid-2020. After this peak, the turnover ratio generally decreases again, with values in the 7 to 9 range by late 2021 and then showing an upward tendency towards 10.96 by mid-2023. Overall, the pattern indicates periods of both improved and reduced efficiency in receivable collection, with a notable spike around mid-2020 followed by a stabilization and slight increase by 2023.

Average Receivable Collection Period

The average receivable collection period, measured in days, moves inversely to the receivables turnover ratio as expected. It begins around 40 days in late 2017, then rises to a peak of 58 days by December 2017, indicating slower collections during this time. From that peak, the collection period fluctuates between approximately 30 and 55 days over the subsequent quarters. A marked improvement is observed mid-2020, when the collection period shortens sharply to around 30 days, aligning with the peak receivables turnover ratio at the same time. Thereafter, the period modestly increases but remains generally below earlier high levels, settling between 33 and 49 days by mid-2023. This reflects an overall enhancement in the speed of receivables collection post-2020, with some variability but no return to the higher values seen at the start of the period.

The analysis of the quarterly financial data reveals several notable patterns and trends in key operational efficiency indicators.

Average inventory processing period

This metric shows an overall increasing trend over the observed periods. Starting from a low 194 days in early 2018, it increased with some fluctuations, peaking at 263 days in late 2022 before slightly declining to 238 days by mid-2023. The gradual upward movement suggests a lengthening of the time inventory remains before sale, potentially indicating changes in inventory management, supply chain dynamics, or sales velocity.

Average receivable collection period

The receivable collection period exhibits some volatility but generally remains within a range of approximately 30 to 58 days. Initially, it peaked at 58 days at the end of 2017, then generally declined to the low 30s by mid-2020. Following that, there was a fluctuating recovery to around mid-40s towards 2022, with a notable decrease again in mid-2023 to 33 days. This pattern suggests variations in credit control or customer payment behavior over time, with some improvement in collection efficiency during specific periods.

Operating cycle

The operating cycle, which combines inventory and receivables periods, mirrors the trends observed in the individual components. It grew from approximately 245 days in early 2018 to a peak of 306 days near the end of 2022, signaling a lengthening overall cash conversion time. However, there is a modest reduction to 271 days by mid-2023. The extended operating cycle could imply slower inventory turnover or delayed receivable collection, impacting liquidity and working capital needs.

In summary, the data indicates a general trend toward longer inventory processing and operating cycles over the years, with some recent signs of improvement. Receivable collection periods have varied but mostly reflect moderate efficiency with recent declines suggestive of tightening credit management. These trends underscore evolving operating dynamics that may require ongoing attention to optimize working capital and operational performance.

Analysis of the presented financial data pertaining to payables turnover and the average payables payment period reveals certain trends and fluctuations over the observed quarterly intervals.

Payables Turnover

The payables turnover ratio, beginning from the quarter ended September 30, 2017, shows variation across periods without a consistent upward or downward trend. Initial values, starting around 2.41 and rising to a peak close to 3.24, indicate some improvement in the frequency of payable settlements early in the series.

Subsequently, the ratio oscillates within a range roughly between 2.27 and 3.24, suggesting alternating phases of accelerated and decelerated payment activity. Noteworthy is the absence of a sustained increase or decrease; the ratio appears to stabilize within this band in later quarters.

This fluctuation may reflect changing payment policies, supplier negotiation terms, or operational cash flow management nuances.

Average Payables Payment Period

The average days payable outstanding inversely echoes the payables turnover behavior, as expected due to their financial relationship. Starting at approximately 152 days, the payment period shortens to about 113 days in later quarters, before increasing again toward values exceeding 160 days in some periods.

This increase and subsequent variability in days payable indicate that the company at times extends payment cycles, possibly to optimize cash flow or respond to supplier terms. The periods of elevated averages correspond to quarters where the turnover ratio dips, confirming the inverse correlation.

Overall, the average payment period does not display a clear directional trend but remains within a fluctuating range, pointing to tactical adjustments in payment timing rather than structural changes.

In summary, the financial indicators related to payables exhibit cyclical variances without definitive linear trends over the reported timeframe. The company's management of accounts payable appears dynamic, adjusting payment speed and timing in response to operational needs or external conditions. These adjustments maintain the turnover ratio and payment period within moderate bounds, reflecting balanced short-term liabilities management.

Average Inventory Processing Period

The average inventory processing period exhibits fluctuations over the observed timeframe. Starting from 208 days in late 2017, the period decreased to 194 days by the first quarter of 2018, followed by an increase that peaked at 263 days in late 2022. The period then decreased to 238 days by mid-2023. Overall, this suggests varying efficiency in inventory management, with notable elongation in the processing period towards the end of 2022 before showing signs of improvement.

Average Receivable Collection Period

The average receivable collection period shows variability without a clear directional trend. It started at 40 days in late 2017, increased to peaks of 58 days at the year's end and 51 days in early 2018. Subsequently, there were periods of decline and rise, with a low of 30 days in mid-2020 and values fluctuating between 33 and 51 days thereafter. By mid-2023, the period stands at 33 days, indicating improved collections compared to some previous peaks.

Average Payables Payment Period

The average payables payment period demonstrates considerable variation, ranging from a low of 113 days in late 2017 and late 2018 to highs of 161 days in early 2019 and late 2021. There is no sustained upward or downward trend, but spikes followed by decreases can be observed. The period ended at 134 days in mid-2023, slightly above the earlier average values, suggesting somewhat extended payment terms in recent quarters.

Cash Conversion Cycle

The cash conversion cycle (CCC) reflects the combined impact of inventory, receivables, and payables periods, showcasing a high degree of variability. After starting at 96 days in late 2017, the CCC peaked multiple times, notably reaching 185 days in late 2022, signaling elongated capital tied up in operations. The cycle then declined to 137 days by mid-2023, indicating an improvement in operational cash flow management. The general pattern illustrates challenges in efficiently converting inventory and receivables into cash while managing payment schedules.