JM Smucker Company (SJM)

Short-term

Turnover ratios

The analysis of JM Smucker Company's activity ratios over the specified periods reveals several notable trends and patterns.

Inventory Turnover:
The inventory turnover ratio exhibits variability throughout the period, generally fluctuating between approximately 4.10 and 5.67. Notably, there is a significant increase in the ratio in April 2023 to 5.67, indicating a more efficient inventory management cycle during that quarter, followed by a decline to 4.86 in October 2023 and further to 4.42 by April 2025. This fluctuation suggests periods of improved inventory utilization interspersed with phases of slower turnover, reflecting potential shifts in product demand, inventory holding policies, or supply chain efficiencies.

Receivables Turnover:
Receivables turnover ratios show a broad range, from a low of 10.39 in January 2024 up to a high of 16.06 in July 2020. After an initial decline from 16.06 to approximately 11.99 in October 2021, the ratio generally stabilizes and then increases again, reaching above 13 in subsequent periods, with a peak at 15.60 in January 2023. The period around the beginning of 2024 demonstrates a decline to 10.39, possibly indicating longer collection cycles. Subsequent figures suggest a recovery in receivables collection efficiency, maintaining ratios mostly above 13, reflective of generally effective receivables management.

Payables Turnover:
The payables turnover ratio fluctuates modestly, ranging from approximately 3.79 to 6.30 across the periods. The highest ratio, observed in July 2020 at 6.30, indicates shorter payment cycles early in the period, whereas some decline is observed around April 2024 to 3.79, potentially indicating extended payment terms or delayed payments. Over time, a trend toward stabilization around 4.1 to 4.7 is evident, suggesting relatively consistent accounts payable practices.

Working Capital Turnover:
Data in this category is limited to specific periods, with values notably high during certain quarters: 66.82 in October 2021 and 139.60 in April 2022, indicating periods of highly efficient usage of working capital relative to sales. The ratios decrease sharply afterward, reaching as low as 2.03 in October 2023, which may indicate periods of tighter working capital management, increased investments in inventory or receivables, or decreased sales activity. The absence of recent data beyond October 2023 limits further trend appraisal.

Overall Summary:
The activity ratios for JM Smucker Company over this span demonstrate periods of operational efficiency swings, with inventory and receivables turnover ratios reflecting responsiveness to market conditions and internal management policies. Fluctuations in receivables and inventory turnover point to strategic adjustments in inventory control and credit policies. The payables ratio stability indicates consistent supplier relationships and payment practices. Periodic spikes in working capital turnover suggest varying operational focus or sales performance. These ratios collectively provide a nuanced view of operational activity efficiency, with some periods indicating enhanced management effectiveness, whereas others highlight potential areas for operational improvement.

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Average number of days

The activity ratios of JM Smucker Company, as reflected in the provided data, offer insights into its operational efficiency over the recent periods. The analysis focuses on the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, highlighting their trends and implications.

Days of Inventory on Hand (DOH):
Over the analyzed period, DOH has exhibited fluctuations indicative of inventory management strategies and market conditions. Starting at approximately 73.87 days in July 2020, the DOH decreased to around 65.77 days by January 2021, suggesting improved inventory turnover. However, there was a subsequent increase, peaking at about 88.73 days in July 2022, which may reflect higher stock levels, potential supply chain delays, or strategic inventory build-up. The DOH then showed a downward trend, reaching a low of approximately 64.35 days in April 2023, indicating more efficient inventory management. Recent data points reveal a modest increase to around 75.17 days in October 2023, with projections showing further variability, reaching approximately 82.64 days in April 2025. The overall trend suggests periods of inventory accumulation followed by efforts to optimize inventory levels.

Days of Sales Outstanding (DSO):
The DSO figures imply the company's receivables collection period. Initially low at about 22.72 days in July 2020, the DSO experienced an increase, reaching approximately 27.01 days in January 2021, with fluctuations thereafter. Notably, there was a significant jump in January 2024 to approximately 35.11 days, possibly reflecting changes in credit policies or customer payment behavior. Subsequently, DSO decreased to around 25.89 days by April 2025, indicating an improvement in receivables collections. These fluctuations suggest periods of varying efficiency in receivable management but generally hover within a moderate range, aligning with typical industry standards.

Number of Days of Payables (Payables Period):
The payables period has shown variability across the analyzed timeline. Starting at roughly 57.96 days in July 2020, it generally increased, peaking at approximately 96.32 days in April 2024, which may indicate extended credit terms negotiated with suppliers or strategic delaying of payments. Subsequent data points show a reduction to approximately 77.85 days in January 2025, suggesting a normalization or tightening of payment practices. This pattern reflects strategic cash management, with periods of extended payables potentially used to optimize working capital.

Summary of Trends and Implications:
- The inventory turnover period has experienced cyclical increases and decreases, pointing to fluctuations in inventory management efficiency or shifts in supply chain dynamics. Shorter inventory periods typically enhance liquidity and reduce holding costs, while longer periods may signify stockpiling or supply chain disruptions.
- The receivables collection period (DSO) has generally remained within a manageable range, with anomalies possibly attributable to changes in credit policies or customer payment behavior.
- The payables period suggests strategic management of supplier payments, balancing the need for supplier relations and cash flow optimization. The fluctuations in days payable indicate periods of extended credit terms and subsequent normalization.

Overall, JM Smucker's activity ratios demonstrate a company actively managing its working capital components with variability reflecting operational and strategic adjustments over time. The patterns suggest ongoing efforts to optimize inventory levels, collection processes, and payables, aligning with broader financial management objectives.

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Long-term

The analysis of JM Smucker Company's long-term activity ratios over the specified periods reveals insights into the company's efficiency in utilizing its fixed assets and total assets to generate sales.

Fixed Asset Turnover Ratio

The Fixed Asset Turnover ratio indicates how effectively the company deploys its fixed assets to generate revenue. The ratio peaked at 4.22 times on January 31, 2021, after which it experienced a decline, reaching 3.22 times by October 31, 2023. This downward trend suggests a possible decrease in the efficiency of fixed asset utilization over this period. The fluctuations, with minor increases such as 3.81 on April 30, 2023, indicate some variability but an overall weakening in fixed asset productivity. The consistent decline within the 2022-2023 period may reflect strategic shifts like asset accumulation, increased capital expenditure not yet resulting in proportional sales, or operational changes impacting asset utilization.

Total Asset Turnover Ratio

The Total Asset Turnover ratio measures the overall efficiency in using all assets to generate sales. From July 31, 2020, to April 30, 2021, the ratio remained relatively stable around 0.47-0.50, indicating consistent asset utilization. A modest upward trend is observed from the second quarter of 2021, with the ratio reaching 0.52 on January 31, 2023, and peaking at 0.58 on July 31, 2023. This suggests an improvement in overall asset efficiency during this period. However, a decline is evident in late 2023, with the ratio dropping back to 0.45 in October 2023, reflecting a potential reduction in asset utilization or sales growth lagging behind asset accumulation. The subsequent periods show some stabilization around 0.48-0.50, indicating a plateau in efficiency levels.

Overall Observation

Between the two ratios, the Fixed Asset Turnover shows a declining trend, signaling decreasing effectiveness in utilizing fixed assets specifically. Conversely, the Total Asset Turnover exhibits relative stability with slight fluctuations, implying that the overall asset base continues to generate sales at a relatively steady rate despite the decline in fixed asset efficiency. The divergence suggests that changes in intangible assets, current assets, or operational adjustments might be influencing the overall asset utilization differently from fixed assets alone. The analysis underscores a period where asset efficiency, especially regarding fixed assets, has faced some challenges, which could warrant strategic review to optimize asset utilization in alignment with sales growth objectives.