Kontoor Brands Inc (KTB)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate revenues.

1. Inventory Turnover: Kontoor Brands Inc's inventory turnover has shown fluctuations over the years. The ratio increased from 5.86 in 2020 to 6.05 in 2021, indicating an improvement in inventory management efficiency. However, in 2022, the ratio decreased to 3.84, suggesting a potential buildup of excess inventory. This was followed by a slight recovery in 2023 and a further increase to 5.84 in 2024. Overall, there seems to be some volatility in inventory turnover, and the company may need to focus on optimizing its inventory levels to improve efficiency.

2. Receivables Turnover: The receivables turnover ratio demonstrates how quickly Kontoor Brands Inc collects payments from its customers. The ratio declined from 9.07 in 2020 to 8.40 in 2021, indicating a slowdown in receivables turnover. However, there was a significant improvement in 2022 and 2023 with ratios of 11.53 and 11.85, respectively, showing efficient collection of receivables. In 2024, the ratio decreased slightly to 10.75, but still remained at a relatively healthy level. This suggests that the company has been effective in managing its accounts receivable turnover.

3. Payables Turnover: The payables turnover ratio reflects how quickly Kontoor Brands Inc pays its suppliers. The ratio decreased from 11.95 in 2020 to 10.25 in 2021, indicating a slower turnover of payables. However, there was a steady increase in the ratio over the next three years, reaching 12.68 in 2024. This suggests that the company has been able to manage its payables more efficiently over time, potentially improving its relationship with suppliers.

4. Working Capital Turnover: The working capital turnover ratio measures how effectively Kontoor Brands Inc utilizes its working capital to generate revenue. The ratio has fluctuated over the years, with a peak of 5.35 in 2021. However, in the following years, the ratio declined to 4.81 in 2022, 3.96 in 2023, and 3.91 in 2024. This downward trend indicates a decrease in the company's efficiency in utilizing its working capital to generate sales. Kontoor Brands Inc may need to focus on optimizing its working capital management to improve this ratio.

In conclusion, while Kontoor Brands Inc has shown variations in its activity ratios over the years, there are opportunities for the company to enhance its efficiency in managing inventory, receivables, payables, and working capital to drive improved financial performance.

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Average number of days

Based on the provided data for Kontoor Brands Inc, we can analyze the activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- In December 2020, the company had 62.25 days of inventory on hand, which decreased to 60.36 days by December 2021. This implies that the company managed its inventory slightly more efficiently year over year.
- However, there was a notable increase in DOH to 95.15 days by December 2022, indicating a potential buildup of excess inventory during that period. The DOH then decreased to 79.38 days by December 2023 and slightly rose to 62.49 days by December 2024.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding measure how long it takes for the company to collect revenue after a sale. In December 2020, the DSO was 40.26 days, which increased to 43.45 days by December 2021. This suggests a slowdown in collecting revenue from customers.
- Subsequently, there was a significant improvement in DSO to 31.65 days by December 2022, indicating a more efficient collection process. The DSO further decreased to 30.80 days by December 2023 and increased slightly to 33.94 days by December 2024.

3. Number of Days of Payables:
- The Number of Days of Payables refers to how long the company takes to pay its suppliers. In December 2020, the company had 30.55 days of payables, which increased to 35.62 days by December 2021. This suggests a lengthening of the payment period to suppliers.
- However, the number of days of payables improved to 32.88 days by December 2022, indicating the company may have negotiated better payment terms or managed its payables more efficiently. By December 2023, the days decreased further to 28.59 days and remained relatively stable at 28.78 days by December 2024.

In summary, the company's efficiency in managing inventory, collecting revenue, and paying suppliers fluctuated over the analyzed periods. Efficient management of these activity ratios is crucial for optimizing working capital and overall operational performance.

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Long-term

Long-term activity ratios provide insight into how efficiently a company is utilizing its assets to generate sales.

Fixed Asset Turnover: This ratio measures how effectively a company is using its fixed assets to generate revenue. An increasing trend in fixed asset turnover over the years for Kontoor Brands Inc, from 17.64 in 2020 to 25.37 in 2024, indicates that the company is becoming more efficient in generating sales relative to its investment in fixed assets. This suggests that Kontoor Brands Inc is effectively utilizing its property, plant, and equipment to drive revenue growth.

Total Asset Turnover: The total asset turnover ratio indicates the company's ability to generate sales from its total assets. Kontoor Brands Inc's total asset turnover ratio has shown a relatively stable trend, increasing from 1.36 in 2020 to 1.59 in 2024. This suggests that the company has been consistent in efficiently utilizing its total assets to generate revenue over the years.

In conclusion, the improving trend in fixed asset turnover and the stable total asset turnover ratio indicate that Kontoor Brands Inc has been effectively managing its assets to drive sales growth and maintain operational efficiency over the years.