Estee Lauder Companies Inc (EL)

Short-term

Turnover ratios

The activity ratios of Estee Lauder Companies Inc. over the analysis period indicate fluctuating operational efficiency with notable trends and variations across key performance indicators.

Inventory Turnover:
This ratio measures the company’s ability to effectively manage and sell its inventory. Starting from approximately 1.57 times in September 2020, the ratio experienced incremental improvements, reaching a low of 1.39 in December 2022 before an upward trend resumed, culminating at 2.03 by June 2024. The consistent increase in inventory turnover post-December 2022 suggests enhanced inventory management and accelerated sales cycles, indicating the company’s efforts to optimize stock levels and reduce holding periods.

Receivables Turnover:
This ratio reflects the efficiency with which the company collects its accounts receivable. The data shows some volatility, with a high of 10.89 in June 2022 and fluctuations thereafter. Overall, the receivables turnover increased significantly from approximately 7.70 in September 2020 to over 9.00 in subsequent periods, indicating improved receivables collection efficiency. Notably, the ratios peaked again in June 2023 at 10.96, suggesting periods of more effective credit management, although variability persists.

Payables Turnover:
This indicator assesses how quickly the company settles its trade payables. The turnover declined from 2.94 in September 2020 to a nadir of 2.27 in June 2021, then generally increased, reaching a high of 3.77 in September 2023. The upward trend from early 2022 indicates that the company has been taking longer to pay its suppliers, possibly optimizing cash flow management while balancing supplier relations. Subsequently, a decline to 2.49 by June 2025 suggests a possible shortening of payment cycles.

Working Capital Turnover:
This ratio measures how efficiently the company utilizes its working capital to generate sales. The data reveals periods of substantial variation, beginning at 3.45 in September 2020, dipping to 2.54 in March 2021, and then generally trending upward, reaching as high as 8.94 in September 2024. The increased ratios in more recent periods imply a more efficient deployment of working capital to support sales activities, possibly reflecting better operational leverage and cash management strategies.

Summary of Trends:
- The inventory turnover ratio shows a steady improvement from late 2022 onwards, reflecting better inventory control and faster stock movement.
- The receivables turnover indicates consistent collection efficiency, with peaks suggesting periods of tighter credit policies or improved customer payment behavior.
- The payables turnover trend suggests a deliberate extension of payment periods over time, enhancing cash management but requiring careful supplier relationship management.
- The working capital turnover has increased substantially in recent periods, indicating improved operational efficiency and more effective use of internal resources to generate revenue.

Overall, market dynamics, strategic operational adjustments, and financial management practices are reflected in these ratios, illustrating the company's ongoing efforts to optimize its working capital and operational efficiency.

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Average number of days

The activity ratios for Estee Lauder Companies Inc., specifically days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables, indicate significant variations over the analyzed period from September 2020 to June 2025.

Inventory Turnover (Days of Inventory on Hand):
Initially, the number of days inventory on hand decreased from approximately 231.90 days in September 2020 to around 219.91 days at year-end 2020, signaling a slight improvement in inventory management. Throughout 2021, the DOH fluctuated within a narrow range, ending the year at approximately 226.73 days, but increased notably during 2022, reaching a peak of about 262.52 days in December 2022. The upward trend persisted into early 2023, peaking at 255.06 days in March, indicating a slowdown in inventory turnover during this period. Subsequently, the inventory days decreased substantially to 179.45 days by June 2024, reaching a more favorable level consistent with inventory optimization efforts. From the second half of 2024 through mid-2025, there was some fluctuation but generally maintained lower levels, ending June 2025 at approximately 203 days, reflecting improved inventory efficiency.

Receivables Collection (Days of Sales Outstanding):
DSO figures exhibit relative stability over the period. Starting from 47.37 days in September 2020, DSO oscillated generally between 33.31 days and 50.72 days. Notably, the DSO declined from 50.72 days at year-end 2020 to a low of about 33.31 days in June 2022, implying an improvement in collection efficiency. After that, the DSO maintained a range roughly from 38 to 46 days, with the latest figure of approximately 44.24 days in March 2025, indicating consistent accounts receivable collection cycles.

Payables Period (Number of Days of Payables):
The period outstanding for payables has experienced fluctuations. It increased from approximately 123.95 days in September 2020 to a peak of about 161.08 days in June 2021. Following that, the payables period generally declined, reaching around 99.50 days in September 2023, before rising again towards 146.53 days in June 2025. The current levels suggest a trend toward shorter payment cycles in late 2023 but a potential extension in payables in mid-2025, perhaps indicative of changes in payment policies or supplier relationships.

Summary:
Overall, the company's inventory management experienced periods of deterioration, notably during 2022, with significant inventory accumulation, although improvements emerged from mid-2024 onward. Receivables collection has remained relatively stable, with minor fluctuations, indicating consistent credit policies and collection practices. The payables cycle has fluctuated more intensely, possibly reflecting strategic adjustments in vendor payments or working capital management. These ratios collectively imply that Estee Lauder managed to optimize inventory turnover and maintain stable receivables collection, but fluctuations in payables suggest ongoing adjustments in working capital strategies.

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See also:

Estee Lauder Companies Inc Short-term (Operating) Activity Ratios (Quarterly Data)

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Long-term

The long-term activity ratios for Estee Lauder Companies Inc., specifically the Fixed Asset Turnover and Total Asset Turnover ratios, exhibit distinct trends over the analyzed period.

The Fixed Asset Turnover ratio demonstrates significant fluctuations. From September 2020 to December 2021, the ratio remained relatively stable, fluctuating between approximately 6.62 and 6.72, indicating efficient utilization of fixed assets during this period. However, a notable decline is observed starting in March 2021, with the ratio dropping to 3.41, and further fluctuations occurring thereafter, peaking again at around 7.27 in March 2022 before decreasing to approximately 2.97 in September 2024. This pattern suggests periods of both increased and decreased efficiency in generating sales from fixed assets, potentially reflecting shifts in asset utilization strategies or changes in capital expenditure.

Conversely, the Total Asset Turnover ratio has maintained a relatively stable, upward trend from approximately 0.72 in December 2020 to a peak of 0.86 in September 2022. After reaching this peak, the ratio experienced a gradual decline, reaching about 0.65 in December 2023, with a subsequent slight recovery to approximately 0.74 by March 2025. These movements indicate a moderate, yet fluctuating, efficiency in using total assets to generate sales, with periods of improved activity and subsequent moderation.

Overall, the data reveal that Estee Lauder’s fixed asset utilization has been notably variable over time, with periods of high efficiency interrupted by sharp declines, while the total asset turnover has remained relatively more stable, albeit with some periods of decline. These trends could reflect strategic shifts in asset management, changes in operational scale, or market conditions impacting asset efficiency over the observed periods.

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See also:

Estee Lauder Companies Inc Long-term (Investment) Activity Ratios (Quarterly Data)