MSC Industrial Direct Company Inc (MSM)
Inventory turnover
| Sep 2, 2023 | Sep 3, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 2,615,350 | 2,389,680 | 2,179,360 | 2,074,380 | 1,931,770 |
| Inventory | US$ in thousands | 726,521 | 715,625 | 624,169 | 543,106 | 559,136 |
| Inventory turnover | 3.60 | 3.34 | 3.49 | 3.82 | 3.45 |
September 2, 2023 calculation
Inventory turnover = Cost of revenue ÷ Inventory
= $2,615,350K ÷ $726,521K
= 3.60
The inventory turnover ratio measures how efficiently a company manages its inventory by indicating the number of times inventory is sold and replaced over a specific period. A higher inventory turnover ratio generally signifies effective inventory management.
Based on the data provided, MSC Industrial Direct Co., Inc.'s inventory turnover has fluctuated over the past five years, ranging from 2.98 to 3.45. In the most recent period, the inventory turnover ratio was 3.26, indicating an increase from the previous year.
The increase in inventory turnover from the prior year suggests that MSC Industrial Direct Co., Inc. has improved its efficiency in managing inventory, as the company is selling and replacing its inventory more frequently. This can be positive, as it may result in reduced holding costs and less risk of obsolete inventory.
However, despite the year-over-year improvement, the company's inventory turnover ratio remains below the 5-6 range typically considered optimal for industrial and distribution companies. This suggests that there may still be room for MSC Industrial Direct Co., Inc. to further enhance its inventory management practices to reach industry benchmarks.
It's also important to consider the industry and market dynamics when assessing the inventory turnover ratio. A thorough understanding of MSC Industrial Direct Co., Inc.'s specific industry and operational strategies is crucial to evaluating the significance of the inventory turnover ratio in the context of the company's overall performance and competitive position.
Peer comparison
Sep 2, 2023