Deckers Outdoor Corp. (NYSE:DECK)

The financial ratios over the analyzed periods exhibit notable fluctuations indicative of shifts in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio demonstrates variability, starting at 3.24 in 2018 and peaking at 4.21 in 2021 before declining to 3.38 in 2023. This suggests that the speed of inventory movement improved until 2021 but faced some deceleration afterward, reflecting potential changes in inventory management or sales demand.

Receivables Turnover

Receivables turnover shows a decreasing trend from 13.24 in 2018 to a low of 10.41 in 2022, followed by a modest rebound to 12.03 in 2023. This pattern indicates a general lengthening of the time taken to collect receivables over most years, with slight improvement in the latest period.

Payables Turnover

Payables turnover declines steadily from 10.34 in 2018 to 4.71 in 2022, before partially recovering to 6.78 in 2023. The downward trend implies extended payment periods to suppliers over the years, which might contribute to improved cash flow, albeit potentially straining supplier relations during the low turnover phase.

Working Capital Turnover

This ratio generally decreases from 2.64 in 2018 to 2.15 in 2021, then moderately increases to 2.57 by 2023. The movement suggests a temporary decline in the efficiency of using working capital to generate sales, with some recovery in the final year.

Average Inventory Processing Period

The average days to process inventory drops from 113 days in 2018 to a minimum of 87 days in 2021, before rising sharply to 120 days in 2022 and then slightly improving to 108 days in 2023. This mirrors the inventory turnover trend, indicating improvements in inventory handling initially, followed by slower turnover in recent years.

Average Receivable Collection Period

The collection period lengthens from 28 days in 2018 to 35 days in 2022, with a decrease to 30 days in 2023. This suggests that the company allowed more time for customers to pay over the bulk of the period but undertook efforts to speed up collections most recently.

Operating Cycle

The operating cycle decreases from 141 days in 2018 to 118 days in 2021, reflecting improved efficiency, then expands significantly to 155 days in 2022, before reducing to 138 days in 2023. This broadening in 2022 indicates challenges in inventory and receivables management during that year.

Average Payables Payment Period

The payment period extends substantially from 35 days in 2018 to 77 days in 2022, indicating a strategic lengthening of payables to conserve cash, followed by a decrease to 54 days in 2023, reflecting quicker payments last year.

Cash Conversion Cycle

The cash conversion cycle shows a significant reduction from 106 days in 2018 to 46 days in 2021, implying enhanced liquidity management, but it rises again to 78 days in 2022 and 84 days in 2023. This reversal suggests recent difficulties in converting investments in inventory and receivables back into cash efficiently.

Overall, the data reveals an initial phase of improvement in operational efficiency and cash flow management up to 2021, characterized by faster inventory turnover, shorter operating and cash conversion cycles, and controlled receivables collection periods. However, from 2022 onwards, these measures indicate a reversal with slower inventory processing, lengthened operating and cash conversion cycles, and extended receivable and payment periods, pointing toward potential challenges in managing working capital amid changing market or internal conditions.

The financial data reveals several noteworthy trends in the cost of sales, inventories, and inventory turnover ratios over the six-year period ending March 31, 2023.

Cost of Sales

The cost of sales demonstrated a consistent upward trajectory each year. From approximately $971.7 million in 2018, this figure increased steadily to reach about $1.80 billion by 2023. Notably, there was a more pronounced escalation between 2021 and 2023, where cost of sales grew by nearly 54% over two years, signaling either increased production costs, higher sales volume, or a combination of both factors.

Inventories

Inventory levels fluctuated over the years with some volatility. Starting at around $299.6 million in 2018, inventories decreased slightly to $278.8 million in 2019, then rose moderately in 2020 to $311.6 million before decreasing again in 2021 to $278.2 million. A significant increase was observed in 2022 and 2023 with inventory levels rising to over $506.8 million and $532.9 million respectively, nearly doubling the amounts recorded in 2021. This sharp increase may indicate stockpiling, a buildup in anticipation of increased demand, or potential challenges in inventory turnover during these years.

Inventory Turnover Ratio

The inventory turnover ratio, which measures the efficiency of inventory management, showed variability throughout the period. The ratio was relatively stable around the mid-3 range from 2018 to 2020, dipping slightly to 3.24 in 2018 and peaking at 3.52 in 2019. There was a marked improvement in 2021, with the ratio rising to 4.21, indicating faster inventory movement that year. However, this efficiency declined in 2022 to 3.04 and partially recovered in 2023 to 3.38. The dip following the 2021 peak corresponds to the sharp inventory increase, suggesting that despite more inventory on hand, the company faced challenges in maintaining efficient turnover during that timeframe.

The financial data reveals several key trends over the six-year period ending March 31, 2023. Net sales exhibit a consistent upward trajectory, increasing from approximately $1.9 billion in 2018 to $3.6 billion in 2023. This indicates sustained growth in revenue generation, with particularly notable acceleration between 2021 and 2023.

Trade accounts receivable, measured net of allowances, also increased significantly, rising from about $144 million in 2018 to over $301 million in 2023. This growth parallels the expansion in net sales, reflecting higher credit sales or extended payment terms possibly used to support revenue growth strategies.

The receivables turnover ratio, which measures how efficiently the company collects its receivables, shows some variability throughout the period. It started at 13.24 in 2018, declined to a low of 10.41 in 2022, and then improved to 12.03 in 2023. The decrease until 2022 suggests a weakening in collection efficiency or lengthening of payment periods. However, the recovery in 2023 indicates an improvement in receivables management.

Net Sales Trend

There is a steady and significant increase each year, demonstrating robust revenue growth.

Trade Accounts Receivable

Shows a growing level consistent with increasing sales, suggesting higher sales on credit or extended terms.

Receivables Turnover Ratio

Declined over the years until 2022, implying slower collections, but partially recovered in 2023, reflecting improved efficiency.

Overall, the data indicates strong sales performance accompanied by increased receivables, with a recent positive shift in collection efficiency after a period of relative decline. This pattern may warrant continued focus on receivables management to sustain liquidity amid expanding sales volumes.

Cost of Sales

The cost of sales demonstrates a consistent upward trend over the six-year period, increasing from approximately $972 million in 2018 to about $1.80 billion in 2023. This increase suggests growing operational activities or rising input costs. The most substantial annual increase occurred between 2021 and 2022, where cost of sales rose sharply by around $370 million, indicating intensified business scale or inflationary pressures during that period.

Trade Accounts Payable

Trade accounts payable show a general increase from roughly $94 million in 2018 to a peak of $327 million in 2022, followed by a decline to approximately $266 million in 2023. This pattern indicates an expansion in credit purchases or deferred payments up to 2022, then a subsequent reduction in payables, possibly reflecting improved payment policies or changes in supplier agreements.

Payables Turnover Ratio

The payables turnover ratio steadily declined from 10.34 in 2018 to a low of 4.71 in 2022, indicating that the company was taking longer to settle its payables over this period. However, there is a notable rebound to 6.78 in 2023, suggesting a partial restoration of quicker payment to suppliers. The declining trend through 2022 aligns with the rising trade payables, while the increase in 2023 corresponds with the reduction in payables, highlighting shifting payment management strategies.

The financial data exhibits several notable trends in working capital, net sales, and working capital turnover over the six-year period.

Working Capital

Working capital shows a steady and continuous increase from 721,524 thousand USD in 2018 to 1,412,873 thousand USD in 2023. This growth indicates an expanding level of current assets relative to current liabilities, suggesting improved liquidity and capacity to manage short-term obligations over time. The increase is particularly marked between 2020 and 2021, and continues upward in subsequent years.

Net Sales

Net sales demonstrate a consistent upward trajectory, rising from 1,903,339 thousand USD in 2018 to 3,627,286 thousand USD in 2023. This represents significant revenue growth, almost doubling over the five-year span. The pace of growth accelerates notably after 2020, highlighting a period of strong sales expansion and possibly enhanced market demand or company performance.

Working Capital Turnover

The working capital turnover ratio, which measures the sales generated per unit of working capital, experienced a declining trend from 2.64 in 2018 to 2.15 in 2021. This downward movement suggests that the increase in working capital outpaced sales growth during those years. However, from 2021 onward, the ratio recovers to 2.6 in 2022 and slightly decreases to 2.57 in 2023. This recovery implies a relative improvement in the efficiency with which working capital is used to generate sales, aligning more closely with or exceeding historical levels.

Overall, the data reflects robust growth in net sales accompanied by substantial enhancements in working capital. While efficiency in utilizing working capital showed some decline in the earlier part of the period, recent years indicate a return to stronger turnover ratios, suggesting improved operational management of current resources against sales expansion.

Inventory Turnover

The inventory turnover ratio exhibited moderate fluctuations over the analyzed years. Starting at 3.24 in 2018, it increased slightly to 3.52 in 2019, followed by a minor decline to 3.3 in 2020. A notable peak occurred in 2021 with a ratio of 4.21, indicating improved efficiency in selling inventory during that period. However, this was followed by a significant drop to 3.04 in 2022, suggesting a slowdown in inventory movement, before partially recovering to 3.38 in 2023.

Average Inventory Processing Period

The average inventory processing period, measured in days, displayed a generally increasing trend after 2020. It started at 113 days in 2018 and shortened to 104 days in 2019, reflecting improved inventory management. The period lengthened slightly to 111 days in 2020, then saw a significant reduction to 87 days in 2021, aligning with the peak in inventory turnover. However, in 2022 there was a considerable increase to 120 days, indicating slower inventory processing and potential accumulation of stock. In 2023, this period decreased again to 108 days, showing some recovery but not reaching the low levels observed in 2021.

Overall Insights

The inventory efficiency showed notable variability during the six-year span. The year 2021 represented the most efficient period with the highest turnover and lowest processing time, suggesting effective inventory control. The following year, 2022, was marked by a decline in turnover and an extended processing time, indicating challenges in inventory management, which may have led to excess stock or slower sales. Improvement was observed in 2023 but not to prior peak levels. These trends highlight fluctuating operational efficiency in managing inventory that may warrant further investigation into underlying causes, such as supply chain disruptions, market demand shifts, or strategic changes in inventory policies.

Receivables Turnover

The receivables turnover ratio shows a fluctuating pattern over the six-year period. Initially, there was a notable decline from 13.24 in 2018 to 11.31 in 2019, indicating a slowdown in the frequency of collection of receivables. The ratio remained relatively stable in 2020 and 2021 at around 11.49 and 11.8, respectively. A slight decrease occurred in 2022, reaching 10.41, before improving again to 12.03 in 2023. Overall, these fluctuations suggest variability in the efficiency of credit and collection policies, with a peak efficiency in 2018 and a recovery trend in the most recent year.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the receivables turnover, with periods lengthening as turnover decreases and shortening as turnover increases. Starting at 28 days in 2018, there is a steady increase to 32 days in both 2019 and 2020 and 31 days in 2021, indicating a slower collection process. The longest collection period is observed in 2022 at 35 days, reflecting potential challenges in receivables management during this year. In 2023, the collection period improves significantly to 30 days, suggesting enhanced effectiveness in receivables collection and possibly tighter credit control.

Overall Insights

The trends suggest that the company experienced some weakening in receivables turnover and collection efficiency between 2018 and 2022, with a peak delay in collections occurring in 2022. The most recent data indicates a reversal of this trend, with improved receivables turnover and a reduction in the average collection period in 2023. This improvement may be indicative of management actions to strengthen working capital management and improve cash flow cycles. Monitoring these metrics in subsequent periods will be important to confirm the sustainability of the positive trend.

The financial data reveals several notable trends in operational efficiency over the reported periods. These metrics relate primarily to inventory management, receivable collections, and the overall operating cycle.

Average Inventory Processing Period

This period fluctuates throughout the years, starting at 113 days in 2018 and decreasing to 104 days in 2019. It then rises slightly back to 111 days in 2020, followed by a significant decline to 87 days in 2021. However, the period extends again in subsequent years, reaching 120 days in 2022 before slightly reducing to 108 days in 2023. This pattern indicates periods of improved inventory turnover efficiency around 2021, with volatility in inventory management observed across the years.

Average Receivable Collection Period

The receivable collection period shows relatively minor variations. Starting at 28 days in 2018, it increases to 32 days in both 2019 and 2020 and slightly decreases to 31 days in 2021. It rises again to the highest level in the data set at 35 days in 2022, before decreasing to 30 days in 2023. This indicates a generally stable but slightly increasing period needed to collect receivables, peaking in 2022 before improving slightly in the most recent year.

Operating Cycle

The operating cycle, which combines the inventory processing and receivable collection periods, follows a somewhat volatile trajectory. It starts at 141 days in 2018, decreasing to 136 days in 2019, then increases to 143 days in 2020. A marked improvement is seen in 2021 with a reduction to 118 days. However, the operating cycle then expands significantly to 155 days in 2022 before contracting again to 138 days in 2023. This suggests fluctuating operational efficiency, affected by changes in both inventory management and receivables collection.

Overall, the data suggests that the company experiences periods of operational improvement, particularly in 2021, but also shows tendencies toward increased cycle times, notably in 2022. Improvements in inventory processing and receivables collection in 2023 indicate potential efforts to regain operational efficiency. Continued monitoring of these metrics is advisable to sustain and enhance working capital management.

Payables Turnover

The payables turnover ratio shows a declining trend from 10.34 in 2018 to a low of 4.71 in 2022, indicating a slower rate at which the company is paying off its suppliers over this period. However, in 2023, there is a noticeable improvement as the ratio increases to 6.78, suggesting a partial recovery in payment efficiency.

Average Payables Payment Period

The average payables payment period exhibits an increasing trend from 35 days in 2018 to a peak of 77 days in 2022, reflecting a lengthening time for the company to settle its payables. This corresponds inversely with the payables turnover ratio trend. In 2023, the payment period decreases to 54 days, indicating an improvement in the company's payment speed relative to the prior year.

Insights

The inverse relationship between payables turnover and the average payables payment period is evident. The significant increase in days payable outstanding from 2018 through 2022 suggests possible cash flow management strategies aimed at extending payment terms. The subsequent improvement in both metrics in 2023 could signal a shift toward quicker settlements, possibly in response to supplier terms or credit considerations.

The analysis of the financial data over the six-year period reveals several fluctuations in the company's operational efficiency, as measured by various inventory and receivables/payables periods.

Average Inventory Processing Period

The average inventory processing period exhibited variability throughout the years. Starting at 113 days in 2018, it decreased slightly to 104 days in 2019, increased to 111 days in 2020, then significantly declined to 87 days in 2021. However, it rose again to 120 days in 2022 before decreasing to 108 days in 2023. These fluctuations suggest occasional changes in inventory management or supply chain conditions, with the shortest processing period observed in 2021 and the longest in 2022.

Average Receivable Collection Period

The average receivable collection period showed a relatively stable but slightly increasing trend from 28 days in 2018 to 35 days in 2022. However, in 2023, this period decreased to 30 days. This pattern indicates that while the company generally maintained consistent collection efficiency, there was a peak in the time taken to collect receivables around 2022, followed by improved collections in the most recent period.

Average Payables Payment Period

The average payables payment period increased significantly from 35 days in 2018 to a peak of 77 days in 2022, before dropping to 54 days in 2023. This trend indicates that the company extended the time taken to settle its payables, potentially as a cash management strategy, but reversed this trend in the most recent year, possibly reflecting changes in supplier terms or financial policy.

Cash Conversion Cycle

The cash conversion cycle demonstrates a general downward trend from 106 days in 2018 to a low of 46 days in 2021, indicating improved efficiency in the management of working capital during this period. However, it increased again to 78 days in 2022 and further to 84 days in 2023. This reversal suggests some challenges in maintaining the earlier improvements in operational cash flow efficiency.

In summary, the company showed improvements in working capital efficiency through 2021, especially evident in a reduced cash conversion cycle and shorter inventory processing period. Nonetheless, subsequent years revealed a regression with longer inventory processing and receivables collection periods alongside fluctuating payables payment periods, leading to a higher cash conversion cycle. These trends may warrant further review to understand underlying operational or market factors impacting liquidity and efficiency.