Kroger Company (KR)

Short-term

Turnover ratios

Inventory turnover for Kroger Company has been gradually increasing over the past five years, indicating that the company is managing its inventory more efficiently. This suggests that Kroger is selling its inventory more frequently within a specific period, which is a positive sign of operational effectiveness.

Receivables turnover has also shown an improving trend, demonstrating that Kroger is collecting its accounts receivable at a faster rate, which is beneficial for cash flow management. This metric indicates the efficiency of the company in converting its credit sales into cash.

On the other hand, payables turnover has declined over the years, suggesting that Kroger is taking longer to pay its suppliers. While a lower payables turnover ratio could indicate potential liquidity issues or strained supplier relationships, it could also be a strategic move to optimize cash flow management. Further analysis is needed to understand the reasons behind this trend.

Unfortunately, data for working capital turnover is not provided for Kroger Company, making it challenging to assess how effectively the company is generating revenue relative to its working capital. This ratio would have provided insights into how efficiently Kroger is utilizing its working capital to support its sales growth.

In conclusion, Kroger Company's inventory turnover and receivables turnover ratios indicate improving operational efficiency, while the payables turnover ratio warrants further investigation to understand its implications for the company's financial health and supplier relationships.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities. In the case of Kroger Company:

1. Days of Inventory on Hand (DOH):
- The trend shows an improvement in inventory management efficiency over the past five years, with the number of days of inventory on hand decreasing from 26.79 days in 2020 to 21.99 days in 2024.
- This indicates that Kroger has been optimizing its inventory levels, potentially leading to lower carrying costs and a faster turnover of inventory.

2. Days of Sales Outstanding (DSO):
- The trend in DSO shows relatively consistent performance, hovering around 5 days over the five-year period.
- A stable DSO suggests that Kroger efficiently collects payments from its customers, leading to better cash flow management and potentially indicating effective credit policies.

3. Number of Days of Payables:
- The number of days of payables shows a fluctuating trend, with a notable increase in 2024 compared to the prior year.
- This indicates that Kroger has been taking longer to pay its suppliers, potentially benefiting from extended payment terms. However, a significant increase in days of payables could also signal liquidity issues or strained relationships with suppliers.

Overall, the activity ratios for Kroger Company suggest a positive trend in inventory management efficiency, stable collection of receivables, and some variability in payment practices. Monitoring these ratios over time can provide valuable insights into the company's operational effectiveness and financial health.

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Long-term

The long-term activity ratios of Kroger Company, specifically the Fixed Asset Turnover and Total Asset Turnover, demonstrate the efficiency with which the company utilizes its assets to generate sales.

1. Fixed Asset Turnover: This ratio indicates the company's ability to generate sales revenue from its investment in fixed assets. The increasing trend in the Fixed Asset Turnover ratio from 5.56 in 2020 to 6.43 in 2024 suggests that Kroger has been improving its efficiency in utilizing its fixed assets to generate sales over the years. This indicates that the company is effectively managing its fixed assets to generate higher revenue.

2. Total Asset Turnover: Total Asset Turnover measures how effectively the company generates sales from all its assets. The Total Asset Turnover ratio has been relatively stable over the past five years, ranging from 2.69 in 2020 to 2.96 in 2024. This indicates that Kroger has been consistently efficient in generating sales relative to its total assets during this period.

Overall, both Fixed Asset Turnover and Total Asset Turnover ratios reflect Kroger's ability to efficiently utilize its assets to drive sales and generate revenue. An increasing Fixed Asset Turnover ratio indicates improved efficiency in using fixed assets, while a stable Total Asset Turnover ratio signifies consistent efficiency in generating sales from all assets.