Sprouts Farmers Market LLC (SFM)

Short-term

Turnover ratios

Sprouts Farmers Market Inc's activity ratios reflect the efficiency of its operations in managing inventory, receivables, payables, and working capital.

1. Inventory turnover:
- The inventory turnover ratio has been relatively stable over the past five years, ranging from 13.06 to 16.09. This suggests that the company is effectively managing its inventory levels and converting them into sales.
- A higher inventory turnover indicates that the company is selling its products quickly, which is generally a positive sign of operational efficiency.

2. Receivables turnover:
- The receivables turnover ratio has shown a decreasing trend over the years, dropping from 358.61 in 2019 to 126.92 in 2023. This indicates that it takes longer for Sprouts Farmers Market Inc to collect on its receivables.
- A lower receivables turnover may suggest potential issues with credit policies or collection practices, which could impact the company's cash flow.

3. Payables turnover:
- The payables turnover ratio has been fairly consistent, with values between 23.46 and 26.67, indicating that the company is effectively managing its payables.
- A stable payables turnover implies that Sprouts Farmers Market Inc is efficiently utilizing trade credit and managing its payment obligations to suppliers.

4. Working capital turnover:
- The working capital turnover ratio has fluctuated significantly, with a high of 120.16 in 2023 and a low of 42.29 in 2022. This metric measures how efficiently the company utilizes its working capital to generate sales revenue.
- The increasing trend in working capital turnover indicates that Sprouts Farmers Market Inc is effectively using its working capital to support its business operations and drive sales growth.

Overall, while the company demonstrates strong inventory and payables management, there may be room for improvement in receivables turnover to enhance cash flow efficiency. Monitoring these activity ratios can provide valuable insights into Sprouts Farmers Market Inc's operational performance and financial health.

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Average number of days

Activity ratios provide insight into how efficiently a company manages its assets and operations. Let's analyze Sprouts Farmers Market Inc's activity ratios based on the provided data:

1. Days of Inventory on Hand (DOH):
- The trend for DOH shows fluctuation over the years, ranging from 22.69 days in 2021 to 27.95 days in 2023.
- In 2023, the DOH of 27.34 days indicates that, on average, Sprouts holds inventory for approximately 27 days before selling it.
- A higher DOH may suggest slow-moving inventory or potential issues with inventory management.

2. Days of Sales Outstanding (DSO):
- The DSO has fluctuated but generally remained low compared to DOH, indicating efficient collection practices.
- In 2023, the DSO of 2.88 days suggests that Sprouts collects receivables within approximately 3 days of making a sale.
- A low DSO reflects efficient credit and collection policies, ensuring timely cash inflows.

3. Number of Days of Payables:
- The data for payables is missing for 2021 and 2022, but in 2023, the company took approximately 15 days to pay its obligations.
- A longer payable period allows Sprouts to hold onto cash longer, potentially improving liquidity.
- However, excessively extending payables could strain supplier relationships if not managed carefully.

Overall, analyzing these activity ratios provides valuable insights into Sprouts Farmers Market Inc's inventory management, sales efficiency, and payment practices, which are crucial factors in assessing the company's operational efficiency and financial health.

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Long-term

Sprouts Farmers Market Inc's fixed asset turnover ratio has shown some fluctuation over the past five years, ranging from a low of 7.60 in 2019 to a high of 8.90 in 2021. The company's fixed asset turnover indicates its ability to generate sales from its investment in fixed assets. A higher fixed asset turnover ratio suggests that the company is more effective in utilizing its fixed assets to generate revenue.

On the other hand, the total asset turnover ratio has been relatively stable over the same period, with a range of 2.05 to 2.31. This ratio measures the company's efficiency in generating sales from its total assets, including both fixed and current assets. A higher total asset turnover ratio indicates that the company is efficient in generating sales relative to its total asset base.

Overall, Sprouts Farmers Market Inc has demonstrated strong efficiency in generating sales from both fixed assets and total assets, as indicated by the consistently high turnover ratios. This suggests that the company is effectively utilizing its assets to drive revenue growth and maximize shareholder value.