Sally Beauty Holdings Inc (SBH)

Short-term

Turnover ratios

Sally Beauty Holdings Inc's inventory turnover ratio has shown a decreasing trend over the past five years, indicating that the company is taking longer to sell its inventory. This could potentially lead to excess inventory holding costs and obsolescence risks.

The receivables turnover ratio has been relatively stable over the years, indicating that the company is efficient at collecting payments from its customers. A high turnover ratio implies that Sally Beauty is converting its accounts receivable into cash quickly, which is a positive sign of liquidity.

On the other hand, the payables turnover ratio has also shown a decreasing trend, indicating that the company is taking longer to pay its suppliers. While a low payables turnover ratio may signify a good relationship with suppliers, it could also indicate cash flow issues or inefficiencies in managing payables.

The working capital turnover ratio has fluctuated over the years, with a notable increase in 2022. This ratio measures how efficiently the company is utilizing its working capital to generate sales. A higher ratio indicates a more efficient use of working capital, which can be beneficial for the company's overall financial health.

In summary, Sally Beauty Holdings Inc should focus on improving its inventory management to increase inventory turnover, maintain its strong receivables turnover performance, and optimize its payables turnover to enhance cash flow management. Additionally, the company should aim to sustain the improvements seen in the working capital turnover ratio to drive operational efficiency and profitability.

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Average number of days

Sally Beauty Holdings Inc's activity ratios provide insights into the company's efficiency in managing inventory, collecting receivables, and paying suppliers.

1. Days of Inventory on Hand (DOH): Sally Beauty's average days of inventory on hand have increased over the past five years, indicating that the company is holding inventory for a longer period before selling it. This can tie up capital and potentially lead to higher carrying costs. The upward trend suggests a need for closer monitoring of inventory levels and adjustments to procurement and sales strategies.

2. Days of Sales Outstanding (DSO): The average days of sales outstanding have fluctuated slightly over the years but have remained relatively low. This indicates that Sally Beauty has been efficient in collecting payments from customers, which is a positive sign for cash flow management. However, the slight variability in DSO signals a need for consistent monitoring to ensure timely receivables collection.

3. Number of Days of Payables: Sally Beauty's number of days of payables has shown fluctuations but has generally been within a reasonable range. The company appears to be managing its payables effectively by maintaining consistent payment terms with suppliers. The increase in payables days in 2021 and 2022 suggests a possible strategy to extend payment terms to manage cash flow.

Overall, Sally Beauty Holdings Inc's activity ratios reflect a mixed performance in inventory management, receivables collection, and payables management. The company should continue to monitor these ratios closely and make adjustments as needed to improve efficiency and optimize working capital management.

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Long-term

Sally Beauty Holdings Inc's fixed asset turnover ratio has shown an increasing trend over the past five years, reaching a peak of 13.76 in September 2024. This indicates that the company generated $13.76 in sales for every $1 invested in fixed assets during that period, reflecting efficient utilization of its property, plant, and equipment to generate revenue.

In contrast, the total asset turnover ratio has fluctuated slightly over the same period, with a slight decrease from 1.34 in September 2023 to 1.33 in September 2024. This ratio measures how effectively the company utilizes all its assets to generate revenue, and a higher ratio generally signifies better asset utilization efficiency.

Overall, Sally Beauty Holdings Inc's long-term activity ratios suggest that the company has been effectively utilizing both its fixed assets and total assets to generate sales revenue in recent years. The increasing trend in fixed asset turnover indicates improving efficiency in utilizing property and equipment, while the relatively stable total asset turnover ratio suggests consistent overall asset utilization efficiency.