Dollar Tree Inc (DLTR)

Cash conversion cycle

		Jan 31, 2025	Feb 3, 2024	Jan 31, 2024	Jan 31, 2023	Jan 28, 2023
Days of inventory on hand (DOH)	days	86.43	92.78	87.73	102.55	108.09
Days of sales outstanding (DSO)	days	—	—	—	—	—
Number of days of payables	days	—	35.38	—	—	35.73
Cash conversion cycle	days	86.43	57.40	87.73	102.55	72.36

January 31, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 86.43 + — – —
= 86.43

To analyze Dollar Tree Inc's cash conversion cycle over time, we will calculate the average cash conversion cycle based on the given data. The cash conversion cycle is a critical measure of how efficiently a company manages its working capital.

1. Convert the given data into numeric values:
- January 28, 2023: 72.36 days
- January 31, 2023: 102.55 days
- January 31, 2024: 87.73 days
- February 3, 2024: 57.40 days
- January 31, 2025: 86.43 days

2. Calculate the average cash conversion cycle:
(CCC for 2023 + CCC for 2024 + CCC for 2025) / 3

- (72.36 + 102.55 + 87.73 + 57.40 + 86.43) / 5 = 81.29 days

3. Analysis:
The cash conversion cycle for Dollar Tree Inc has shown variability over the years. In 2023, the company's cash conversion cycle was 72.36 days, which increased significantly to 102.55 days in January 2023. However, in January 2024, the cycle decreased to 87.73 days and further dropped to 57.40 days in February 3, 2024. By January 31, 2025, the cash conversion cycle increased slightly to 86.43 days.

The average cash conversion cycle for the period is approximately 81.29 days. A longer cash conversion cycle may indicate that Dollar Tree Inc takes more time to convert its inventory into cash, which can tie up working capital. Conversely, a shorter cycle suggests more efficient management of working capital.

Overall, Dollar Tree Inc should focus on monitoring and optimizing its cash conversion cycle to ensure efficient working capital management and improve its overall financial performance.