Nike Inc. (NYSE:NKE)

Inventory Turnover

The inventory turnover ratio experienced a decline from 3.85 in 2019 to 2.87 in 2020, indicating slower inventory movement. This was followed by a recovery and gradual increase, reaching 3.79 by 2024, suggesting improved inventory management and faster sales in recent years.

Receivables Turnover

The receivables turnover ratio increased sharply to 13.61 in 2020 from 9.16 in 2019, likely reflecting faster collection of accounts receivable during that year. After a dip to around 10 in 2021 and 2022, it rose again to 12.4 in 2023 before slightly decreasing to 11.6 in 2024. Overall, the company has maintained relatively efficient receivables collection.

Payables Turnover

The payables turnover ratio improved from 8.29 in 2019 to 9.41 in 2020, then fluctuated downward to 7.51 in 2022, before rising to above 10 in 2023 and nearly 10 in 2024. This indicates varying payment speeds to suppliers, with faster payments in the most recent years after a slowdown in 2022.

Working Capital Turnover

Working capital turnover ratio showed a marked decline from 4.52 in 2019 to 2.68 in 2021, holding steady near that level in 2022, followed by a gradual rebound to 3.47 in 2024. This trend points to less efficient use of working capital during the middle years, with improvement more recently.

Average Inventory Processing Period

The average inventory processing period increased significantly from 95 days in 2019 to a peak of 127 days in 2020, then varied between 102 and 122 days up to 2023 before returning close to its initial level at 96 days in 2024. This reflects initial inventory holding challenges that were subsequently addressed.

Average Receivable Collection Period

The average collection period shortened substantially from 40 days in 2019 to 27 days in 2020, then lengthened again to around 36-37 days in 2021 and 2022, before declining to 29 and 31 days in 2023 and 2024 respectively. The pattern aligns with the receivables turnover changes, showing periods of faster and slower collections.

Operating Cycle

The operating cycle extended from 135 days in 2019 to 154 days in 2020, followed by fluctuations with a minor decrease to 127 days by 2024. This suggests a lengthening of the total time from inventory acquisition to cash collection in 2020, with gradual efficiency gains thereafter.

Average Payables Payment Period

The average payment period to suppliers shortened from 44 days in 2019 to 39 days in 2020, increased to 49 days in 2022, then dropped noticeably to 36-37 days in 2023 and 2024. This indicates variability in the company’s payment practices, with a tendency toward quicker payments in the latest years.

Cash Conversion Cycle

The cash conversion cycle lengthened sharply to 115 days in 2020 from 91 days in 2019, reflecting slower conversion of working capital to cash during that year. It then fluctuated between 90 and 109 days through 2024, showing a trend toward improved liquidity management and faster cash recovery in recent periods.

Cost of Sales

The cost of sales exhibited a fluctuating trend over the observed periods. Initially, there was a slight decrease from 21,643 million US dollars in 2019 to 21,162 million in 2020. Subsequently, it increased steadily reaching a peak of 28,925 million by 2023, before experiencing a minor decline to 28,475 million in 2024. This suggests a pattern of rising production or procurement expenses after 2020, with a modest reduction in the most recent year.

Inventories

Inventories showed notable variability during the timeframe. There was a significant increase from 5,622 million in 2019 to 7,367 million in 2020, followed by a moderate decrease in 2021 to 6,854 million. The inventory levels then rose again to 8,454 million in 2023, before declining appreciably to 7,519 million in 2024. This indicates adjustments in inventory management or stock levels possibly in response to demand fluctuations or supply chain factors.

Inventory Turnover Ratio

The inventory turnover ratio fluctuated considerably. It decreased from 3.85 in 2019 to 2.87 in 2020, which may reflect slower inventory movement. There was a recovery to 3.59 in 2021, followed by a slight decline to 3 in 2022. In 2023, the ratio improved to 3.42 and further increased to 3.79 in 2024, surpassing the initial 2019 level. This trend suggests improving efficiency in inventory management and sales velocity in the more recent periods after an initial slowdown.

Revenues

The revenue figures show an overall upward trend from 2019 to 2024. Starting at $39,117 million in 2019, revenues experienced a slight decline in 2020 to $37,403 million, likely reflecting macroeconomic or industry-specific challenges during that period. However, from 2021 onwards, revenues consistently increased, peaking at $51,362 million in 2024. This growth trend suggests a successful recovery and expanding market presence over the latter years.

Accounts Receivable, Net

The net accounts receivable amounts exhibit variability across the years with no clear linear trend. The value fell notably from $4,272 million in 2019 to $2,749 million in 2020, which may indicate tighter credit policies or improved cash collections during that year. Subsequently, receivables increased sharply to $4,463 million in 2021, followed by a relatively stable pattern around $4,100 to $4,667 million through 2024. This fluctuation could be associated with changes in sales volume or credit terms.

Receivables Turnover

The receivables turnover ratio has fluctuated over the analysis period but generally remained high, indicating effective collections relative to credit sales. The ratio surged from 9.16 in 2019 to 13.61 in 2020, corresponding with the decrease in accounts receivable, suggesting improved collection efficiency amid lower sales. The ratio then decreased to around 10 in 2021 and 2022, before rising again to 12.4 in 2023 and slightly decreasing to 11.6 in 2024. These variations imply efforts to balance credit policy with revenue growth.

The analysis of the annual financial data reveals several important trends related to Nike Inc.'s cost of sales, accounts payable, and payables turnover over the period from May 31, 2019 to May 31, 2024.

Cost of Sales

The cost of sales shows a generally upward trend over the six-year period. Starting at $21,643 million in 2019, it experienced a slight decrease to $21,162 million in 2020, likely influenced by external factors that year. From 2020 onwards, the cost of sales increased consistently, peaking at $28,925 million in 2023 before a marginal decline to $28,475 million in 2024. This overall increase indicates a rise in the company's production or acquisition costs, possibly reflecting growth in sales volume or inflationary pressures on material and labor expenses.

Accounts Payable

Accounts payable displays fluctuations without a clear steady trend. It declined from $2,612 million in 2019 to $2,248 million in 2020, then rose to $3,358 million in 2022 before decreasing again to approximately $2,851 million in 2024. These variations might suggest changes in the company's payment policies, supplier agreements, or operational strategies impacting vendor credit terms.

Payables Turnover Ratio

The payables turnover ratio, which reflects how frequently the company pays off its suppliers during the year, decreased from 8.29 in 2019 to 7.51 in 2022, indicating a slower rate of payment over that segment. However, this trend reversed sharply in 2023 and 2024 with ratios of 10.11 and 9.99, respectively, suggesting quicker payment cycles in the most recent periods. This improvement may be due to a strategic decision to accelerate creditor payments or changes in supplier contracts encouraging faster settlements.

In summary, the cost of sales has generally increased over the reviewed period, while accounts payable levels have fluctuated, reflecting dynamic supplier relationships and payment practices. The shift in payables turnover ratio points towards changing creditor payment behavior, with a recent trend toward faster payments. These patterns collectively indicate evolving operational and financial management approaches related to procurement and cash flow cycles.

The financial data reveals several notable trends over the six-year period ending May 31, 2024.

Working Capital

Working capital exhibited a generally increasing trend from 2019 through 2022, rising from 8,659 million US dollars to a peak of 17,483 million US dollars. However, it subsequently declined in the following years to 14,789 million US dollars by 2024. This suggests an initial strengthening of short-term financial health followed by a moderate contraction.

Revenues

Revenues fluctuated during the period, initially declining from 39,117 million in 2019 to 37,403 million in 2020. However, a consistent upward trajectory followed, reaching 51,362 million by 2024. This indicates resilience and growth in sales after a dip, particularly marked post-2020.

Working Capital Turnover

The working capital turnover ratio decreased from 4.52 in 2019 to around 2.67 in 2022, indicating a reduction in efficiency with which working capital was utilized to generate revenues. Starting from 2022, the ratio improved to 3.47 by 2024, signaling enhanced effectiveness in converting working capital into sales.

Overall, the data highlights an initial period of expanding liquidity and increasing operational capital, followed by a strategic optimization phase where working capital was better leveraged to support growing revenues. The improvement in turnover ratios in the most recent years suggests efforts towards improved asset management and operational efficiency.

Inventory Turnover Analysis

The inventory turnover ratio experienced a decline from 3.85 in May 2019 to a low of 2.87 in May 2020, indicating a slower rate at which inventory was sold or used during that period. This decline could reflect challenges such as decreased sales demand or overstocking. Following this trough, the ratio showed a recovery trend, increasing to 3.59 in May 2021, slightly decreasing to 3 in May 2022, then rising again steadily to 3.42 in May 2023 and 3.79 in May 2024. This suggests an overall improvement in inventory management or demand conditions after 2020, approaching and nearly matching the turnover levels observed in 2019 by 2024.

Average Inventory Processing Period Analysis

The average inventory processing period, measured in days, moved inversely to the inventory turnover ratio as expected. It increased sharply from 95 days in May 2019 to 127 days in May 2020, reflecting a longer holding period for inventory possibly due to slower sales or supply chain delays. This was followed by a reduction to 102 days in May 2021, then an increase to 122 days in May 2022, suggesting some volatility in inventory processing efficiency. Subsequently, the processing period declined to 107 days in May 2023 and further to 96 days in May 2024, approaching the more efficient inventory turnover levels seen in 2019.

Overall Insights

The data reveals a period of disruption or reduced efficiency around 2020, with inventory turnover declining and the average processing period increasing significantly. However, the subsequent periods show a recovery and improvement toward pre-2020 levels. The fluctuations in these metrics between 2021 and 2023 may indicate ongoing adjustments in inventory management strategies or external factors affecting inventory movement. By 2024, the metrics suggest the company has largely restored its inventory efficiency to levels comparable to those before the downturn.

The analysis of the receivables turnover ratio and the average receivable collection period over the six-year span reveals notable fluctuations and suggests changes in the company's efficiency in collecting receivables.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates variability between 2019 and 2024. The ratio starts at 9.16 in 2019, peaks at 13.61 in 2020, then declines to just below 10 in 2021 and 2022, before rising again to 12.4 in 2023 and slightly decreasing to 11.6 in 2024. This pattern indicates periods during which the company was able to accelerate the collection of receivables significantly, particularly in 2020 and 2023, suggesting temporary improvements in collection processes or credit policies.

Average Receivable Collection Period

This metric inversely mirrors the trend seen in the receivables turnover ratio. The average collection period was longest in 2019 at 40 days, shortened sharply to 27 days in 2020, then increased to 37 and 36 days in 2021 and 2022 respectively. This cycle reversed with a reduction to 29 days in 2023 and a mild increase to 31 days in 2024. These changes confirm adjustments in the efficiency of cash collection, with the shortest collection times occurring in 2020 and 2023.

Interpretation and Insights

The alternating pattern in both ratios suggests that the company experienced varied success in managing its receivables across the years. The improvements in turnover and reductions in collection period in 2020 and 2023 could be attributable to changes in credit terms, tighter credit control, or improved collection efforts. Conversely, the lower turnover ratios and longer collection periods during the intervening years may indicate challenges in receivables management or more lenient credit policies during those times.

Overall, while the company has demonstrated the capability to enhance receivable collections efficiently at times, there remains variability that could impact cash flow stability. Continuously focusing on maintaining higher turnover and lower collection periods would strengthen financial liquidity and operational cash management.

The analysis of the annual financial metrics reveals notable fluctuations in the company's operational efficiency over the examined periods.

Average Inventory Processing Period

This metric exhibits variability, increasing significantly from 95 days in 2019 to a peak of 127 days in 2020. It then declined to 102 days in 2021, followed by a rebound to 122 days in 2022. The subsequent two years show a decreasing trend, reaching 96 days by 2024, nearly returning to the initial 2019 value. This suggests initial challenges with inventory turnover that improved towards the end of the period.

Average Receivable Collection Period

The collection period generally improved over the years. Beginning at 40 days in 2019, it dropped sharply to 27 days in 2020, indicating faster receivables turnover. Although there was a slight increase to 37 days in 2021 and 36 days in 2022, the period decreased again to 29 days in 2023 and remained relatively stable at 31 days in 2024. Overall, this suggests enhanced credit management and cash collection efficiency.

Operating Cycle

The operating cycle, which sums inventory processing and receivable collection periods, has shown fluctuations mirroring those of the components. It increased from 135 days in 2019 to a high of 158 days in 2022, reflecting extended working capital tied up in operations during that year. However, the operating cycle improved thereafter, decreasing to 127 days by 2024, indicating better management of both inventory and receivables leading to improved operational liquidity.

In summary, despite some volatility in inventory processing times, the company has generally improved its receivables collection period and operating cycle toward the end of the observed timeline. These trends point towards enhanced operational efficiency and potentially improved liquidity management.

Payables Turnover

The payables turnover ratio exhibited fluctuations over the six-year period. Starting at 8.29 in 2019, it increased to 9.41 in 2020, indicating a faster rate of paying off suppliers. This ratio then declined to 8.67 in 2021 and further to 7.51 in 2022, suggesting a slower payment pace during these years. However, a notable increase occurred in 2023, reaching 10.11, the highest in the period, followed by a slight decline to 9.99 in 2024. Overall, the trend shows variability with a peak in 2023, reflecting changes in payment practices or supplier terms.

Average Payables Payment Period (Number of Days)

The average payment period also displayed variability that inversely correlates with the payables turnover ratio. It started at 44 days in 2019 and decreased to 39 days in 2020, indicating quicker payments to suppliers. The period then lengthened to 42 days in 2021 and further to 49 days in 2022, consistent with the decreasing payables turnover ratio observed in those years. A significant reduction occurred in 2023, with the payment period shortening sharply to 36 days, alongside the highest payables turnover ratio. The period remained relatively stable at 37 days in 2024. These fluctuations suggest shifting management strategies towards either accelerating or extending payment cycles across the years analyzed.

The financial data reveals notable fluctuations in key operational efficiency metrics over the observed periods.

Average inventory processing period

There is a discernible variability in inventory processing times. The period started at 95 days in 2019 and increased significantly to 127 days in 2020, potentially indicating slower inventory turnover. Following this peak, the period decreased to 102 days in 2021, rose again to 122 days in 2022, then gradually declined to 96 days by 2024. This pattern suggests ongoing adjustments in inventory management efficiency, with a recent movement towards faster processing comparable to the earliest period assessed.

Average receivable collection period

The collection period demonstrates a generally improving trend, dropping sharply from 40 days in 2019 to 27 days in 2020, which signifies quicker conversion of receivables to cash. There was a slight increase to 37 days in 2021, followed by a relatively stable range around the mid-30s in 2022 and then a decline to 29 and 31 days in the subsequent two years. Overall, this indicates increased effectiveness in receivables management and improved liquidity.

Average payables payment period

The payment period to suppliers fluctuated moderately. It decreased from 44 days in 2019 to 39 days in 2020, increased to 42 days in 2021, and reached a high of 49 days in 2022. Thereafter, it shortened substantially to 36 days in 2023 and remained close at 37 days in 2024. This volatility may reflect strategic shifts in supplier payment policies or cash flow management.

Cash conversion cycle

The cash conversion cycle displays a pattern largely mirroring the inventory processing period, increasing from 91 days in 2019 to a peak of 115 days in 2020. It then decreased to 97 days in 2021 before rising again to 109 days in 2022. Subsequent years show a decline to 100 days in 2023 and further to 90 days in 2024. The downward trend in recent years suggests an overall improvement in working capital management efficiency, reducing the time between outlay and recovery of cash.

In summary, operational efficiency as represented by these metrics has experienced some volatility but shows a general trend towards improvement, particularly in inventory turnover, receivables collection, and the overall cash conversion cycle in the latest reporting period.