Kontoor Brands Inc (KTB)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its assets and liabilities to generate sales or revenue. Let's analyze the activity ratios of Kontoor Brands Inc:

1. Inventory Turnover: Kontoor Brands Inc's inventory turnover has shown variability over the past five years, ranging from 3.84 to 6.05. A higher inventory turnover indicates that the company is selling its inventory more frequently, which could be a sign of efficient inventory management. However, a significant decrease from 2021 to 2022 should be further investigated to understand the reasons behind this decline.

2. Receivables Turnover: Kontoor Brands Inc's receivables turnover has been relatively stable over the past five years, ranging from 8.40 to 11.85. A higher receivables turnover suggests that the company is collecting its accounts receivable more quickly, which could indicate effective credit management and timely collection practices.

3. Payables Turnover: Kontoor Brands Inc's payables turnover has also shown consistency over the years, ranging from 10.25 to 16.27. A higher payables turnover implies that the company is paying its suppliers more frequently, which could be a strategy to manage working capital efficiently. However, a decrease from 2021 to 2022 should be further analyzed to understand the impact on the company's payment terms and relationships with suppliers.

4. Working Capital Turnover: Kontoor Brands Inc's working capital turnover has fluctuated over the years, with a range of 3.96 to 5.35. A higher working capital turnover ratio suggests that the company is effectively utilizing its working capital to generate sales revenue. It indicates how efficiently the company is using its current assets to support sales activities. A decrease from 2021 to 2022 should be investigated to understand the impact on the company's liquidity and operational efficiency.

In conclusion, Kontoor Brands Inc's activity ratios provide insights into its operational efficiency in managing inventory, receivables, payables, and working capital. Further analysis and comparison with industry benchmarks can help evaluate the company's performance and identify areas for improvement.

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Average number of days

Days of inventory on hand (DOH) indicates how efficiently Kontoor Brands manages its inventory. A lower DOH value is generally better as it implies faster turnover of inventory. In 2023, the DOH decreased to 79.38 days from 95.15 days in 2022, indicating an improvement in inventory management. However, compared to 2021 and 2020, the company's inventory turnover was lower.

Days of sales outstanding (DSO) measures how quickly Kontoor Brands collects its accounts receivable. A lower DSO is preferable as it signifies faster collection of payments. In 2023, the DSO decreased to 30.80 days from 31.65 days in 2022, suggesting more efficient collection practices. This is a positive trend compared to 2021 when the DSO was higher.

Number of days of payables shows how long it takes for Kontoor Brands to pay its suppliers. A longer payables period can be advantageous for cash flow management. In 2023, the number of days of payables decreased to 28.59 days from 32.88 days in 2022, indicating that the company paid its suppliers more quickly. This is a shift from the trend observed in 2021 and 2020 when the payables period was longer.

Overall, in 2023, Kontoor Brands showed improvements in inventory management and accounts receivable collection while also adjusting its payables period. These changes suggest a focus on optimizing working capital efficiency, which is crucial for sustainable business operations.

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Long-term

The fixed asset turnover ratio measures how efficiently a company generates sales from its investments in fixed assets, such as property, plant, and equipment. Kontoor Brands Inc's fixed asset turnover ratios have been relatively high and increasing over the past five years, indicating that the company is effectively utilizing its fixed assets to generate sales revenue.

On the other hand, the total asset turnover ratio reflects how well a company generates sales from its total assets, both fixed and current. Kontoor Brands Inc's total asset turnover ratios have shown some fluctuations but generally remained at moderate levels. A declining trend in total asset turnover may indicate that the company is facing challenges in generating sales relative to its total asset base.

Overall, Kontoor Brands Inc's performance in terms of long-term activity ratios suggests efficient utilization of fixed assets to drive revenue growth, although there may be room for improvement in optimizing the utilization of its total asset base.