Lamb Weston Holdings Inc (LW)

Lamb Weston Holdings Inc.’s liquidity ratios over the analyzed periods reveal a trend of fluctuating liquidity positions. The current ratio demonstrates some volatility, starting at 2.09 as of August 2022 and gradually declining to 1.19 by February 2025, with intermittent recoveries. This ratio indicates that the company's current assets have historically exceeded current liabilities, but the margin has narrowed over time, approaching an increasingly lower buffer. The decline suggests a potential reduction in short-term liquidity cushion, necessitating closer monitoring for effective working capital management.

The quick ratio, which excludes inventory from current assets, also reflects a declining trend. It began at 1.20 in August 2022, decreased to a low of approximately 0.44 in February 2024, and then modestly recovered to around 0.58 by May 2025. The pattern indicates that the company’s ability to meet short-term obligations with the most liquid assets has weakened over this period. The ratios remained above 1 in the earlier periods, signifying adequate liquidity, but fell below 1 in recent quarters, highlighting potential liquidity constraints.

The cash ratio, representing the most conservative measure of liquidity, shows a significant decline from 0.62 in August 2022 to near negligible levels of 0.03 in early 2024, with slight fluctuations thereafter. This decline indicates a diminishing proportion of cash and cash equivalents relative to current liabilities, which could pose challenges in meeting immediate obligations without liquidating other assets.

Overall, the data suggests that Lamb Weston Holdings Inc.’s liquidity position has been deteriorating over time. While the company maintained comfortable liquidity margins in the earlier periods, recent trends point toward tightening liquidity buffers, which may impact operational flexibility and short-term financial stability if the current trajectory persists.

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Additional liquidity measure

The cash conversion cycle (CCC) of Lamb Weston Holdings Inc. has exhibited fluctuations over the observed periods, reflecting variability in the company's operational efficiencies related to inventory management, receivables collection, and payables deferral.

In late August 2022, the CCC was approximately 54.84 days, indicating a relatively efficient cycle where the company collected cash from sales and converted inventories into receivables and receivables into cash within just over 54 days. This period was associated with a slight increase by late November 2022, reaching approximately 63.33 days, suggesting a modest elongation in the cycle, potentially due to increases in inventory holdings or extended receivables.

Throughout fiscal 2023, the CCC demonstrated variability but generally remained within the mid-50s to low 70s days range. Notably, by late February 2023, the CCC had expanded to approximately 74.52 days, indicating a period where the company's cycle was somewhat lengthened, likely due to slower collection times or increased inventory levels.

The cycle experienced a slight reduction by late May 2023 to around 66-73 days but then shortened again by late August 2023 to approximately 52.76 days, suggesting an improvement in liquidity management during that period. However, the following quarter, there was an increase once more, with the CCC reaching around 63.54 days in November 2023.

Entering fiscal 2024, the CCC showed a notable increase, reaching approximately 78.48 days in February 2024, and further lengthened to approximately 80.64 days by late February. This upward trend indicates a delay in cash collection or inventory turnover, or potentially extended payables period, affecting the overall cycle duration.

The subsequent periods indicate a partial recovery, with the CCC decreasing to approximately 65.92 days in May 2024 and slightly increasing again thereafter, stabilizing around 66-74 days through late August 2024. In late 2024 and early 2025, the CCC increased further, reaching approximately 84.12 days in February 2025 and around 80.66 days in late May 2025. This extension suggests a lengthening of the company's cash flow cycle, which could reflect slower receivable collection, longer inventory cycles, or delayed payables.

Overall, the trend suggests that Lamb Weston Holdings Inc.'s cash conversion cycle has experienced periods of expansion and contraction, with notable lengthening in early 2024 and early 2025, pointing to potential challenges in managing working capital, particularly in receivables and inventory turnover. The fluctuations across periods underpin the importance of ongoing operational and supply chain efficiencies to optimize cash flow realization.