Lamb Weston Holdings Inc (LW)

Short-term

Turnover ratios

The activity ratios of Lamb Weston Holdings Inc., as reflected in the provided data, exhibit notable trends and fluctuations over the periods analyzed.

Inventory Turnover:
The inventory turnover ratio demonstrates a pattern of decline from August 2022 to approximately February 2024, with ratios decreasing from around 5.89 to a low of 4.12. This decline indicates that the company was turning over its inventory less frequently during this period, possibly reflecting increased inventory levels, slower sales, or supply chain adjustments. Subsequently, from around May 2024 onwards, the ratio trends upward, reaching approximately 4.88 by May 2025. The increase suggests an improvement in inventory management efficiency or a turnaround in demand conditions.

Receivables Turnover:
Receivables turnover ratios show relative stability with minor fluctuations around the 8.00 to 10.00 range throughout the observed periods. The ratio peaks at 10.11 in February 2023 and again at 9.32 in November 2024, indicating the company's ability to collect receivables efficiently during these times. Slight decreases, such as to 7.56 in May 2023 or 8.25 in May 2024, may reflect variations in credit policies or collection periods but do not indicate drastic changes in receivables management.

Payables Turnover:
The payables turnover ratio presents variability, with an apparent decrease from levels above 8 in August 2022 and early 2023 (8.08 and 8.27) to a low of roughly 5.89 in May 2024. The ratio then increases notably to 9.52 by May 2025. Lower ratios suggest extended periods for payments to suppliers, impacting the company's working capital management and potentially indicating a strategy to optimize cash flow. The subsequent rise to higher ratios may reflect tighter payment schedules or supplier agreements.

Working Capital Turnover:
The working capital turnover ratio exhibits a broad range, beginning at around 5.16 in August 2022, and experiencing substantial increases, peaking above 19.20 in February 2024, then fluctuating downward to approximately 11.13 by February 2025. Elevated ratios in certain periods, such as over 19, imply that the company is generating significant sales relative to its working capital, pointing to operational efficiency or reduced working capital investment. The dips suggest periods where working capital investments were relatively high or sales growth slowed.

Summary:
Overall, Lamb Weston Holdings Inc.'s activity ratios reflect periods of operational efficiencies and challenges. The inventory turnover decline followed by recovery indicates inventory management and sales cycle adjustments. Stable receivables turnover ratios suggest consistent collection efforts, while fluctuations in payables and working capital turnover ratios signal strategic shifts in supplier payment policies and working capital utilization. These shifts may be driven by market conditions, operational strategies, or supply chain strategies, necessitating ongoing monitoring to understand their implications fully.

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Average number of days

The activity ratios for Lamb Weston Holdings Inc., specifically focusing on inventory management (Days of Inventory on Hand - DOH), receivables collection (Days of Sales Outstanding - DSO), and payables management (Number of Days of Payables), reveal insights into its operational efficiency over the period analyzed.

Inventory Management (DOH):
The DOH fluctuated notably throughout the period, with an initial increase from approximately 64 days in August 2022 to a peak near 81 days by February 2023. A subsequent reduction is observed in mid-2023, with DOH reaching around 73 days by the end of May 2023, before declining further to approximately 60 days in late August 2023. Notwithstanding this decline, the ratio increased again, surpassing 92 days by late 2024, indicating a significant buildup in inventory. As of the most recent data, DOH decreased to approximately 75 days, but remains elevated compared to earlier periods. This pattern suggests cyclical inventory management, with periods of buildup potentially driven by strategic stockpiling or supply chain constraints, followed by efforts to reduce inventory levels.

Receivables Collections (DSO):
The DSO has remained relatively stable throughout the period, generally ranging between 36 and 44 days. A notable increase between May and August 2023, reaching around 44 days, indicates a slight elongation in the collection cycle. The most recent data maintains DSO at about 40 to 44 days, implying consistent receivables management with no substantial deterioration. This stability suggests effective credit policies and collection processes.

Payables Management (Number of Days):
The number of days of payables has exhibited variability, with the ratio oscillating between approximately 45 and 62 days. A significant rise is observed around late 2023, where payables extend beyond 58 days. More recently, a downward adjustment occurs, particularly in May 2025, with payables decreasing to approximately 38 days. The fluctuations indicate periodic delays in paying suppliers, which could reflect cash flow management strategies or supplier negotiations. The recent decrease points towards normalized payables practices.

Overall Interpretation:
The activity ratios demonstrate that Lamb Weston has experienced periods of inventory buildup, notably in late 2024, which could be associated with strategic stockpiling or supply chain disruptions. The stability in DSO indicates consistent receivables collection efficiency. The variability in payables suggests active management of supplier payments, with recent trends indicating efforts to shorten payables, potentially to optimize cash flows. These patterns collectively highlight a dynamic operational environment with periods of inventory accumulation, steady receivables performance, and adaptive payables management strategies.

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Long-term

The analysis of Lamb Weston Holdings Inc.'s long-term activity ratios, specifically the Fixed Asset Turnover and Total Asset Turnover ratios, reveals insights into the company's efficiency in utilizing its fixed assets and total assets over time.

Fixed Asset Turnover Ratio:
This ratio measures how effectively the company generates sales from its fixed assets. The data indicates variability over the specified periods, with ratios ranging from a low of 1.66 in August 2024 to a high of 2.66 in November 2022. Earlier periods, such as August 2022 through February 2023, exhibited relatively higher ratios (approximately 2.51 to 2.66), suggesting efficient use of fixed assets during that timeframe. Post-February 2023, there is a noticeable declining trend, with ratios decreasing to around 1.66 by August 2024 and further down to 1.73 in February 2025. This decline may reflect increased investment in fixed assets, reduced sales relative to fixed assets, or operational adjustments affecting asset utilization.

Total Asset Turnover Ratio:
This ratio indicates overall efficiency in using total assets to generate sales. The values fluctuate within a narrower band, generally between 0.83 and 1.05 over the period analyzed. The highest ratio of approximately 1.05 was observed at the end of November 2022, with subsequent periods showing a gradual decrease, reaching around 0.83 by May 2024. The ratios stabilize somewhat in later periods, remaining close to 0.86, with minor variations. The overall trend suggests a slight decline in the efficiency of total assets in generating sales over time, possibly due to increased assets not proportionally contributing to revenue or strategic investments requiring longer-term asset deployment.

Summary:
The observed decline in both fixed asset and total asset turnover ratios over the analyzed periods indicates a potential decrease in asset utilization efficiency. Several factors could contribute to this trend, including strategic investments in assets, operational shifts, or changes in sales volume relative to asset base. While the company maintained reasonably stable total asset turnover ratios in recent periods, the persistent downward trend warrants consideration for further analysis of asset management and operational strategies.