Estee Lauder Companies Inc (EL)

Activity ratios

Short-term

Turnover ratios

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Inventory turnover	7.10	5.09	5.23	5.73	7.04
Receivables turnover	8.86	10.81	10.77	9.40	11.86
Payables turnover	10.72	9.08	8.38	8.49	12.33
Working capital turnover	6.89	5.42	5.04	3.58	3.81

Estee Lauder Companies Inc's activity ratios indicate the efficiency of its operations in managing inventory, receivables, payables, and working capital over the past five years.

1. Inventory turnover: The company's inventory turnover ratio has fluctuated over the years but generally remained healthy, indicating that the company is effectively managing its inventory levels. A higher ratio suggests that Estee Lauder is efficiently selling its inventory.

2. Receivables turnover: Estee Lauder's receivables turnover has also fluctuated, but it remains at a level that indicates the company is collecting its receivables in a timely manner. A higher ratio suggests that the company is efficient in collecting payments from customers.

3. Payables turnover: The payables turnover ratio shows how quickly the company pays its suppliers. Estee Lauder's payables turnover has varied over time but has generally remained at a level indicating efficient management of payables.

4. Working capital turnover: The working capital turnover ratio measures how effectively the company is using its working capital to generate sales. Estee Lauder's ratio has shown improvement over the years, indicating an increasing efficiency in utilizing its working capital to drive revenues.

Overall, the analysis of Estee Lauder's activity ratios suggests that the company has been managing its operational activities efficiently over the years, with improvements in some areas like working capital turnover. This indicates effective management of inventory, receivables, payables, and working capital, which are crucial for the company's overall financial health and success in the cosmetics industry.

Average number of days

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Days of inventory on hand (DOH)	days	51.40	71.74	69.84	63.68	51.85
Days of sales outstanding (DSO)	days	41.21	33.76	33.88	38.81	30.77
Number of days of payables	days	34.03	40.22	43.58	43.01	29.60

The analysis of Estee Lauder Companies Inc activity ratios based on the provided data shows fluctuations in its inventory management, accounts receivable collection efficiency, and accounts payable management over the past five years.

1. Days of Inventory on Hand (DOH): The DOH measures how many days, on average, a company holds onto its inventory before selling it. Estee Lauder's DOH has varied over the years, with a significant increase from 51.85 days in 2020 to 71.74 days in 2023 before decreasing to 51.40 days in 2024. This suggests that in recent years, the company has been able to manage its inventory more efficiently and streamline its operations.

2. Days of Sales Outstanding (DSO): The DSO ratio indicates the average number of days it takes for a company to collect its accounts receivable. Estee Lauder's DSO has shown some fluctuations but generally remained within a reasonable range, with a peak of 41.21 days in 2024. This indicates that the company has been effective in managing its accounts receivable and collecting payments in a timely manner.

3. Number of Days of Payables: This ratio reflects how long a company takes to pay its suppliers. Estee Lauder's days of payables have varied over the years, showing an increase from 29.60 days in 2020 to 43.58 days in 2022 before decreasing to 34.03 days in 2024. A higher number of days of payables can indicate a more favorable payment term negotiation with suppliers, but it may also potentially strain relationships with suppliers if extended too far.

Overall, Estee Lauder's activity ratios indicate that the company has been managing its inventory, accounts receivable, and accounts payable efficiently, adapting to changing market conditions and optimizing its working capital management strategies. Movement in these ratios year over year provides insights into the company's operational performance and financial health.

Long-term

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Fixed asset turnover	4.88	4.94	6.62	7.02	6.89
Total asset turnover	0.71	0.67	0.84	0.73	0.80

The fixed asset turnover ratio for Estee Lauder Companies Inc has shown a declining trend over the past five years, decreasing from 7.02 in 2021 to 4.88 in 2024. This suggests that the company is generating less revenue for each dollar invested in fixed assets.

On the other hand, the total asset turnover ratio has been relatively stable, with fluctuations between 0.67 and 0.80 during the same period. This ratio indicates that the company is generating revenue more efficiently with its total assets compared to fixed assets alone.

Overall, the declining trend in fixed asset turnover may indicate potential inefficiencies in the utilization of fixed assets by Estee Lauder Companies Inc. It would be beneficial for the company to investigate the reasons behind this trend and implement strategies to improve the utilization of its fixed assets to enhance profitability and operational efficiency.