PriceSmart Inc (PSMT)

Inventory turnover

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Cost of revenue	US$ in thousands	565,367	512,959	487,041	3,207,140	3,107,350
Inventory	US$ in thousands	471,407	464,411	389,711	309,509	331,273
Inventory turnover		1.20	1.10	1.25	10.36	9.38

August 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $565,367K ÷ $471,407K
= 1.20

The inventory turnover ratio measures how efficiently a company is managing its inventory. It is calculated by dividing the cost of goods sold by the average inventory for a specific period. In the case of Pricesmart Inc., the inventory turnover ratios for the past five years are as follows:

- Aug 31, 2023: 7.75
- Aug 31, 2022: 7.29
- Aug 31, 2021: 7.63
- Aug 31, 2020: 8.97
- Aug 31, 2019: 8.14

A higher inventory turnover ratio generally indicates that the company is selling its inventory more frequently, which can be a sign of strong sales and efficient inventory management. Conversely, a lower ratio may indicate overstocking or slower sales.

By analyzing the trend of Pricesmart Inc.'s inventory turnover ratios, it's apparent that there has been a slight decline in the inventory turnover ratio from 8.14 in 2019 to 7.75 in 2023. This could imply that the company's inventory management may have become slightly less efficient over the past five years.

It's essential to consider the industry in which Pricesmart Inc. operates when interpreting these ratios, as certain industries naturally have different inventory management requirements. Additionally, a thorough understanding of the company's specific business model and operations is crucial for a comprehensive analysis of its inventory turnover performance.