Charles River Laboratories (CRL)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	962,393	827,224	759,312	662,852	627,506
Inventory	US$ in thousands	380,259	255,809	199,146	185,695	160,660
Inventory turnover		2.53	3.23	3.81	3.57	3.91

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $962,393K ÷ $380,259K
= 2.53

The inventory turnover ratio of Charles River Laboratories has been fluctuating over the past five years, ranging from 2.53 to 3.91. A lower inventory turnover ratio indicates that the company is holding inventory for a longer period before selling it, which may tie up working capital and increase storage costs. Conversely, a higher inventory turnover ratio suggests that the company is efficiently managing its inventory by quickly selling and replenishing stock.

Comparing the latest ratio of 2.53 in 2023 to previous years, we observe a decline in inventory turnover. This could imply potential issues such as overstocking, slowing sales, or inefficient inventory management practices. It may be beneficial for the company to investigate the root causes behind this decrease and take corrective actions to improve inventory turnover efficiency.

On the positive side, the company had relatively higher turnover ratios in 2021, 2020, and 2019, indicating efficient inventory management during those years. A consistently high inventory turnover ratio reflects strong sales performance and effective inventory control, which could improve cash flow and profitability.

Overall, analyzing the trend in Charles River Laboratories' inventory turnover ratios can provide insights into the company's inventory management practices and operational efficiency, highlighting areas for further investigation and potential strategies for improvement.