Hershey Co. (NYSE:HSY)

Inventory Turnover

The inventory turnover ratio exhibits fluctuations over the periods observed, generally ranging between approximately 4.4 and 5.5. Starting around 5.37 in early 2019, the ratio declined in late 2019 and early 2020, before recovering modestly toward late 2020 and through 2021. In 2022 and early 2023, the ratio remains relatively stable near 5.0, with some slight decreases at intervals, suggesting a somewhat consistent but slightly varying efficiency in inventory management.

Receivables Turnover

This ratio demonstrates pronounced variability, fluctuating between approximately 9.3 and 16.3. Periods of higher turnover, indicating quicker receivables collection, often alternate with intervals of notable declines. For example, there is a marked increase to around 16.32 in late 2021, followed by a decrease in 2022. The data reflects intermittent changes in credit policy or collection efficiency, with no clear long-term upward or downward trend, but rather cyclical movement in receivables management performance.

Payables Turnover

The payables turnover ratio shows a generally declining trend over the timeframe. It starts near 8.4 in early 2019 and gradually reduces to just over 6 by mid-2023. This decreasing turnover suggests the company is taking longer to pay its suppliers, as corroborated by the increasing average payables payment period, indicating extended payment terms or slower disbursement practices.

Working Capital Turnover

Working capital turnover exhibits considerable variability and some missing data points. Notably high ratios such as 73.74 and 70.12 appear in some periods, contrasted by much lower measures in others. Despite gaps, this pattern suggests inconsistency in how effectively working capital is utilized to generate sales, potentially reflecting fluctuations in operational efficiency or working capital base size across quarters.

Average Inventory Processing Period

The average inventory processing period generally oscillates between approximately 67 and 83 days. There is a slight upward drift from around 68 days in early 2019 to peaks near 83 days in multiple quarters. This indicates a tendency for the company to hold inventory longer over time, possibly reflecting slower inventory turnover or changes in inventory management strategy.

Average Receivable Collection Period

This metric varies between roughly 22 and 39 days, showing cyclical movement without a definitive trend. Periods of faster collection near 22-25 days alternate with intervals exceeding 35 days. This cyclical pattern aligns with the fluctuations seen in receivables turnover, signifying periodic changes in credit collection efficiency or customer payment behaviors.

Operating Cycle

The length of the operating cycle shows an overall moderate increase, with values moving from around 96 days in early 2019 to a range exceeding 100 days in subsequent periods. Spikes near 122 days and other elevated readings occur intermittently, indicating occasional elongations of the operating cycle, perhaps due to extended inventory holding or receivables collection periods.

Average Payables Payment Period

There is a clear upward trend in the average payables payment period, rising from around 41-43 days in early 2019 to approximately 60-61 days by mid-2023. This lengthening suggests the company is progressively delaying payments to suppliers, either to optimize cash flow or as a result of extended payment agreements.

Cash Conversion Cycle

The cash conversion cycle shows an initial upward movement from roughly 53 days to a peak around 74 days, followed by a general decline toward the low 40s by 2023. This pattern indicates that while cash tied up in the operating cycle increased initially, the company managed to reduce the duration over the more recent periods, improving liquidity and operational cash efficiency.

Cost of Sales

The cost of sales exhibited notable fluctuations over the observed quarterly periods. Initial figures in early 2018 showed values close to a million US dollars, with intermittent increases and decreases throughout the timeline. There is a visible upward trend starting in early 2020, peaking multiple times between 2020 and 2023, with the highest values recorded above 1.6 million US dollars in late 2022. While fluctuations are apparent, the general trajectory indicates increasing cost of sales, suggesting rising expenses associated with production or procurement activities over time.

Inventories

Inventory levels similarly displayed volatility across quarters but generally demonstrated a tendency to increase. Starting from approximately 780,000 US dollars in early 2018, inventories rose and fell in various quarters, with some peaks exceeding 1.3 million US dollars by mid-2023. Notably, there is a consistent accumulation of inventories from early 2021 onward, indicating either increased stockpiling or slower turnover compared to earlier periods.

Inventory Turnover Ratio

Inventory turnover ratio data, available only from late 2018, ranged mostly between 4.4 and 5.5 times, indicating the number of times inventories were sold and replaced within the year. The ratio peaked around 5.5 in early 2019, reflecting efficient inventory management during that period. Thereafter, the turnover ratio fluctuated without a clear upward or downward trend, mostly hovering around 4.4 to 5.2. This suggests relatively stable inventory efficiency over time, despite increasing absolute inventory levels.

Summary

The analysis indicates that while costs of sales have been generally rising, inventories have also increased, leading to a relatively stable inventory turnover ratio. The increase in both cost of sales and inventories may reflect growing business scale, inflationary impacts, or changes in supply chain strategies. The stable inventory turnover ratio indicates that despite higher inventory accumulation, the company's ability to move inventory remains consistent. Monitoring these trends is essential to ensure that inventory levels and production costs remain aligned with demand and sales performance.

Net Sales

The net sales figures demonstrate a generally upward trend over the reported periods, with some fluctuations. Starting from approximately 1.97 billion USD in April 2018, sales showed volatility with declines in mid-2018 and mid-2019, followed by recovery periods. There were notable increases toward the end of 2020, reaching over 2.35 billion USD, and continuing to climb to a peak near 2.99 billion USD in April 2023. Despite intermittent decreases, particularly in quarters following peaks, the overall trajectory indicates growth in revenue over the five-year span.

Accounts Receivable, Trade, Net

Accounts receivable values fluctuate considerably in line with net sales but with pronounced variations. Initial levels near 614 million USD in April 2018 decreased to roughly 501 million USD in July 2018 but then surged to over 814 million USD by September 2018. This pattern of volatility continues across the periods, with frequent spikes and declines, such as a sharp drop to approximately 538 million USD in June 2019 and an increase to the high 800 million range at different points. The most recent data from July 2023 shows accounts receivable at about 764 million USD, reflecting continued sizable receivables relative to sales.

Receivables Turnover Ratio

The receivables turnover ratio, calculated for selected periods, shows considerable variability but generally remains within a moderate range between approximately 9 and 16 times per year. Sharp declines to values near 9.3 and 9.7 indicate slower collection periods during certain quarters, whereas peaks above 14 and reaching over 16 times suggest more efficient receivables management or stronger cash collections in those periods. The data implies cyclical patterns in how quickly the company converts receivables into cash, without a clear directional trend but reflecting operational or market conditions affecting collection efficiency.

Summary of Trends and Insights

Sales growth over time, despite interim fluctuations, points to an expanding business scale or increasing market demand. The variability in accounts receivable hints at changing payment terms, customer behavior, or sales mix shifts. The fluctuation in receivables turnover ratios supports the observation of variable cash collection efficiency, potentially impacted by external factors such as economic cycles or internal credit policies. Monitoring and managing accounts receivable closely appears essential to maintain liquidity given the sizable amounts involved relative to sales.

The analyzed financial data reveals several notable trends in cost of sales, accounts payable, and payables turnover over the examined periods.

Cost of Sales

The cost of sales demonstrates a noticeable volatility with some significant fluctuations across quarters. Starting from approximately 998 million US dollars in early April 2018, there is a decline by mid-2018, followed by sharp increases and decreases in subsequent quarters. For instance, the cost rose significantly in the third quarter of 2018, dropped in the following quarter, and then experienced repeated peaks in late 2019 and 2020.

The general trajectory from 2018 through mid-2023 appears upward, with costs rising above 1.4 billion US dollars in several of the most recent quarters (2022-2023). However, a declining pattern toward mid-2023 is also observed, reflecting a possible tempering of costs or changes in operational intensity.

Accounts Payable

Accounts payable exhibits a consistent upward trend throughout the period. Starting at about 520 million US dollars in April 2018, the figures steadily increase each quarter, reaching beyond the 1 billion US dollars mark by mid-2023. This trajectory suggests that the company's outstanding obligations to suppliers and creditors have nearly doubled over the analyzed timeframe.

The steady increase in accounts payable could be indicative of expanded procurement or extended payment terms, both of which affect working capital management.

Payables Turnover Ratio

The payables turnover ratio, which measures how quickly a company pays off its suppliers, shows a clear declining trend. Starting at 8.39 in late 2018, it gradually decreases to around 6.01 by mid-2023. This decline suggests that the company is taking longer to pay its suppliers over time.

The reduction in payables turnover ratio aligns with the increasing accounts payable balance, implying that while the company’s purchases or expenses may be rising (as reflected in the higher cost of sales), it is extending its payment period.

Overall, the data indicates a pattern of growing costs and liabilities, paired with a more extended payment cycle. Such trends could reflect strategic changes in supplier negotiations or cash flow management, though they also necessitate close monitoring to ensure supplier relationships and credit terms remain sustainable.

Working Capital

The working capital values show significant fluctuations over the observed periods. Initially, there is a notable negative value of -1,435,011 thousand USD in April 2018, followed by a substantial improvement into positive territory by September 2018, reaching 35,220 thousand USD. This positive trend reverses in subsequent quarters, with negative values persisting through much of 2019 and early 2020. The period from mid-2020 onwards marks a recovery phase where working capital rises steadily, peaking at 1,085,392 thousand USD by the end of 2020. However, this improvement is not fully sustained, as the figures drop again into negative values by 2022 and early 2023, before showing a modest recovery to 154,848 thousand USD by mid-2023.

Net Sales

Net sales demonstrate a relatively consistent upward trajectory, with fluctuations reflective of typical seasonal and economic influences. Sales range from approximately 1.75 billion USD in mid-2018 to nearly 2.99 billion USD by April 2023. Notable dips occur around mid-2020, which may align with broader market disruptions, followed by a strong rebound and steady growth thereafter. This pattern indicates resilience in sales performance with a general positive long-term trend.

Working Capital Turnover

Working capital turnover ratios, reported intermittently, suggest variability in operational efficiency relative to working capital. The turnover was exceptionally high at 73.74 during an unspecified quarter, followed by a dip to values in the lower double digits and single digits (e.g., 11.55, 8.21, 7.5, 7.75). The ratio again climbs to 13.75 and 10.57 towards the end of 2020, indicating improved turnover. The latest available data point returns to a very high value of 70.12, implying a possible significant enhancement in how effectively working capital is being utilized relative to sales, although the inconsistency and gaps in data limit detailed trend analysis.

Overall Observations

The company’s working capital exhibits volatility, with periods of notable negative values impacting liquidity and operational flexibility. Conversely, net sales maintain a strong, positive growth trend, suggesting healthy market demand and sales execution. The working capital turnover ratio's sporadic high values may indicate episodes of efficient capital use but also raise questions about stability and consistency. The divergent trends between working capital and net sales could warrant further investigation into the underlying causes, such as changes in receivables, payables, inventory management, or financing strategies.

The analysis of the quarterly financial data reveals fluctuating trends in both inventory turnover and average inventory processing period over the observed periods.

Inventory Turnover Ratio

The inventory turnover ratio shows variability within a range approximately between 4.39 and 5.49. The values demonstrate a declining trend beginning around mid-2019, dropping from 5.49 to a low of around 4.39 by the end of 2019. The subsequent quarters show oscillations without a clear directional trend, with figures rising back near the 5.0 mark several times, most notably in the second quarter of 2023 at 5.17. However, the ratio recorded a decrease again towards the last quarter in 2023, ending at 4.4. This indicates moderate fluctuations in the frequency with which inventory is sold and replaced over time, without a consistent long-term increase or decrease.

Average Inventory Processing Period (Days)

The average number of days inventory remains before being processed mirrors the inverse nature of the turnover ratio. Starting around 67-68 days in early 2019, this period elongated to approximately 82-83 days by late 2019, signaling slower inventory processing. This extended processing period persists intermittently over the timeline, with spikes notably in Q4 2021 and Q4 2022 reaching above 80 days. Periods of reduction in processing days are also noted, such as in mid-2021 and mid-2023, when days decreased to the low 70s. The overall pattern suggests variability in inventory management efficiency, with intermittent slowdowns in moving inventory balanced by phases of relatively quicker turnover.

In summary, the data reflects cyclical patterns in inventory management metrics, consistent with operational adjustments or market conditions influencing inventory velocity. The absence of a sustained trend upward or downward implies the company may be managing inventory levels responsively, adjusting to external factors rather than following a linear improvement or deterioration in turnover or processing duration.

Receivables Turnover Ratio

The receivables turnover ratio displays noticeable fluctuations throughout the observed periods. Initially, the ratio starts at 13.11 and then shows a downward trend to 9.31 by December 2018, indicating a slower collection of receivables during that time. Following this decline, the ratio recovers and exhibits a cyclical pattern, with peaks reaching as high as 16.32 in October 2021 and troughs falling to around 10.5 in December 2021. Overall, the ratio tends to oscillate between approximately 10 and 16, reflecting inconsistent efficiency in collecting receivables over the quarters. Toward the most recent quarters, the ratio appears to stabilize somewhat at values around 14, suggesting an improvement in the collection process compared to earlier periods but still displaying variability.

Average Receivable Collection Period

The average receivable collection period inversely correlates with the turnover ratio, as expected, varying between approximately 22 to 39 days. Notably, the longest collection periods occurred during December 2018 and December 2020, with values of 39 and 38 days respectively, indicating slower cash collection in those quarters. Conversely, the shortest periods, around 22 days, appear in July 2021, implying quicker receipt of payments during that quarter. The data shows a repetitive pattern where higher turnover ratios correspond to lower collection periods and vice versa. Recent values settle near the high 20s to low 30s range, indicating a moderate level of efficiency in managing accounts receivable.

Trend Analysis and Insights

Both indicators demonstrate a cyclical pattern with alternating periods of improved and reduced receivables efficiency. The fluctuations could suggest seasonality or operational impacts that temporarily affect how quickly the company converts receivables into cash. Despite these variations, the general level of receivables turnover and collection periods oscillate within a relatively narrow range without a clear long-term upward or downward trend. This suggests that the company's receivables management has remained stable over the observed quarters, with periods of heightened efficiency followed by reversion to baseline levels. Maintaining or improving these metrics may offer opportunities to optimize working capital management.

The data reveals several patterns in the average inventory processing period, average receivable collection period, and operating cycle across multiple quarters from 2018 to 2023.

Average Inventory Processing Period

The average inventory processing period shows some variability across the observed quarters. Initially, it hovered between the high 60s and low 80s in 2018 and 2019, fluctuating around 67 to 83 days. In 2020, the period remained relatively stable mostly in the range of 69 to 82 days. Moving into 2021 and 2022, the values again oscillated between the low 70s and low 80s, reaching a peak of 83 days at certain points. The most recent quarters (2023) indicate a mild downward trend towards the lower 70s, suggesting a slight improvement in inventory processing efficiency over time.

Average Receivable Collection Period

The average receivable collection period displays more volatility compared to inventory processing. Throughout 2018 to 2019, values fluctuated notably between the mid-20s to high 30s days. From 2020 onward, there was no clear definitive trend; the collection period alternated between approximately 22 to 35 days, indicating variability in the company's ability to collect receivables in a timely manner. The data reflects repeated rises and falls without sustained improvement or deterioration across multiple quarters.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, follows a pattern consistent with the other two metrics. From 2018 through 2019, the operating cycle increased from the mid-90s days to a peak exceeding 120 days, indicating longer cash conversion cycles at certain points. In 2020, the cycle decreased somewhat but remained elevated between 100 and 118 days. The subsequent years witnessed fluctuations generally between about 97 and 113 days, with no consistent trending up or down. The operating cycle thus suggests a maintained, yet somewhat variable, investment in working capital over the period.

Overall, the data suggests that while average inventory processing has shown minor improvements in efficiency recently, the average receivable collection period remains inconsistent with frequent fluctuations. The operating cycle reflects these trends, emphasizing variability in working capital management without distinct long-term improvements or declines.

The payables turnover ratio exhibits a generally declining trend over the assessed periods, commencing from a high point near 8.91 in late 2018 and descending to approximately 6.01 by mid-2023. This gradual decrease suggests that the frequency with which the company settles its accounts payable has slowed down over time, indicating that the company may be taking longer to pay its suppliers.

Correspondingly, the average payables payment period, which measures the number of days taken to pay creditors, demonstrates an increasing trend. Initially around 41 days in late 2018, this figure rises steadily to about 61 days by mid-2023. This extension in payment duration aligns with the observed decline in payables turnover, confirming the lengthening of the company's payment cycle.

Notable observations include moderate fluctuations within specific intervals, such as a temporary increase in turnover and a decrease in payment days around mid-2019, followed by a more sustained and pronounced deterioration starting from late 2021 through mid-2023. The increase of approximately 20 days in the payment period over the analyzed timeframe may have implications for supplier relationships and working capital management.

In summary, the data indicates a trend toward slower payment to suppliers, as evidenced by a weakening payables turnover ratio and an extension in average payment days. This pattern could reflect strategic changes in cash flow management or potential liquidity considerations during the period.

Payables Turnover Ratio

Declined from about 8.9 in late 2018 to approximately 6.0 by mid-2023, indicating slower payment frequency to creditors.

Average Payables Payment Period

Increased from around 41 days to roughly 61 days over the same period, signaling longer payment cycles.

Trends Over Time

Moderate fluctuations occurred within 2019 and 2020; a more marked decline in turnover and increase in payment days took place from late 2021 onward.

Implications

The extended payment period and reduced turnover ratio may affect supplier relations and reflect strategic or liquidity considerations.

The financial data reveals several key trends in the working capital management over multiple quarters spanning from 2018 to 2023, focusing on inventory, receivables, payables, and the cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period generally fluctuates between approximately 67 and 83 days. It displays a cyclical pattern with peaks around 82 to 83 days and troughs near 67 to 69 days. Notably, the period remained relatively stable from late 2019 to early 2020, increased slightly towards the end of 2020 and 2021, and then exhibited a mild downward trend in the first half of 2023, ending around 71 to 83 days. This indicates some variability in how long inventory is held before processing, with occasional lengthening periods that could affect liquidity.

Average Receivable Collection Period

The average receivable collection period shows variability but generally stays within a range of 22 to 39 days. The data indicates occasional spikes, such as near 39 days in late 2018 and 38 days at the end of 2020, contrasting with lower points around 22 to 25 days in mid-2021 and early 2023. This suggests fluctuations in the efficiency of collecting receivables, with some quarters experiencing slower collection, potentially impacting cash flow.

Average Payables Payment Period

The payables payment period has shown a clear upward trend over the analyzed period. Starting around the low 40s in early 2018, it progressively increased to consistently above 50 days by late 2021 and continued rising slightly to the 58 to 61 day range through 2022 and into mid-2023. This trend may reflect the company's strategy to extend payment terms with suppliers, which can improve short-term liquidity but may impact supplier relationships.

Cash Conversion Cycle

The cash conversion cycle (CCC) demonstrates variability that largely corresponds to changes in the inventory processing and receivable collection periods, moderated by payables payment trends. Early in the dataset, CCC fluctuated from the 53 to 74 day range, with notable peaks near the end of 2018. Following that, it showed a decreasing trend, reaching a low of approximately 37 days in early 2023. After this dip, the CCC slightly increased again towards the mid-2023 quarter, settling near 48 days. This overall reduction in CCC suggests improvements in the efficiency of converting inventory and receivables into cash, supported by extended payment periods that effectively reduce the length of cash tied up in operations.