Lululemon Athletica Inc. (LULU)

Cash conversion cycle

		Jan 28, 2024	Jan 29, 2023	Jan 30, 2022	Jan 31, 2021	Feb 2, 2020
Days of inventory on hand (DOH)	days	65.18	77.78	71.61	65.76	61.24
Days of sales outstanding (DSO)	days	4.75	5.95	4.50	5.18	3.69
Number of days of payables	days	17.16	9.28	21.47	17.50	9.45
Cash conversion cycle	days	52.77	74.45	54.65	53.44	55.48

January 28, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 65.18 + 4.75 – 17.16
= 52.77

The cash conversion cycle of Lululemon Athletica Inc. has fluctuated over the past five years. In the fiscal year ending on January 28, 2024, the company's cash conversion cycle improved significantly to 52.77 days compared to 74.45 days in the prior year. This indicates that Lululemon has been able to manage its cash, inventory, and receivables more efficiently in converting its resources into cash.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle suggests that the company is able to generate cash more quickly, which is favorable for its liquidity and working capital management.

In comparison to previous years, Lululemon's cash conversion cycle was relatively stable in FY 2022 and FY 2021, indicating consistent efficiency in managing its cash flows and working capital. However, there was a slight improvement in FY 2024, which suggests that the company may have optimized its operations further to streamline its working capital processes.

Overall, the improvement in Lululemon's cash conversion cycle is a positive sign of its effectiveness in managing its working capital and optimizing cash flows, contributing to its financial health and operational efficiency.