Victoria's Secret & Co (VSCO)

Short-term

Turnover ratios

Victoria's Secret & Co's inventory turnover ratio has shown a slight improvement over the past three years, increasing from 5.58 in January 2022 to 6.05 in February 2024. This indicates that the company is selling its inventory at a slightly faster pace, which is generally a positive sign.

The receivables turnover ratio, on the other hand, has declined from 44.57 in January 2023 to 40.02 in February 2024. This suggests that the company is collecting its accounts receivable at a slightly slower rate, which may be a cause for concern as it could indicate potential issues with customer credit or collection procedures.

The payables turnover ratio has fluctuated slightly over the three years, with a decrease from 12.20 in January 2023 to 11.62 in February 2024. This ratio indicates how efficiently the company is managing its accounts payable. A higher ratio typically signifies quicker payment of suppliers, which could potentially strain cash flow if not managed properly.

The absence of data for the working capital turnover ratio in February 2024 limits a comprehensive analysis of the company's efficiency in utilizing working capital during that period. However, the significant decrease in this ratio from 39.77 in January 2023 to an undisclosed figure in February 2024 may raise questions about how effectively Victoria's Secret & Co is utilizing its working capital to generate sales.

Overall, while the inventory turnover ratio has shown improvement, the declining receivables turnover ratio and fluctuating payables turnover ratio could warrant further investigation into Victoria's Secret & Co's management of its operational processes.

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Average number of days

Based on the provided data, we can analyze Victoria's Secret & Co's activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- In February 3, 2024, the company held inventory for an average of 60.31 days, which decreased compared to the previous year (65.46 days) but slightly higher than two years ago (58.56 days). This indicates that the company has been managing its inventory more efficiently in the current year.
- A lower DOH is generally preferable as it suggests that the company is selling its inventory faster, minimizing holding costs, and reducing the risk of obsolete stock.

2. Days of Sales Outstanding (DSO):
- The DSO for February 3, 2024, was 9.12 days, which increased compared to the prior year (8.19 days) but remained relatively consistent compared to two years ago (8.75 days). This implies that the company is taking slightly more time to collect its receivables in the current year.
- A lower DSO indicates that the company is collecting payments more quickly, improving cash flow and reducing the risk of bad debts.

3. Number of Days of Payables:
- The number of days of payables for February 3, 2024, was 31.41 days, showing an increase compared to the previous year (29.93 days) but a decrease compared to two years ago (33.20 days). This suggests that the company is taking slightly longer to pay its bills in the current period.
- A higher number of days of payables may indicate that the company is effectively managing its working capital by leveraging trade credit without jeopardizing supplier relationships.

In conclusion, Victoria's Secret & Co has shown improvements in managing its inventory efficiently, slightly slower collection of receivables, and a slightly longer payment period to creditors in the current financial year compared to the previous periods. Further analysis and trend monitoring over time would provide more insights into the company's operational efficiency and liquidity management.

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Long-term

The fixed asset turnover ratio for Victoria's Secret & Co has been relatively stable over the last three years, with values of 7.22 in 2024, 7.43 in 2023, and 7.06 in 2022. This indicates that the company is generating around 7 times its fixed assets in sales revenue each year.

In contrast, the total asset turnover ratio has shown a declining trend, decreasing from 1.56 in 2022 to 1.33 in 2023, and further down to 1.32 in 2024. This suggests that the company's efficiency in utilizing its total assets to generate sales has decreased over the years.

Overall, while Victoria's Secret & Co has been effectively utilizing its fixed assets to generate sales revenue consistently, there seems to be some inefficiencies in utilizing its total assets for revenue generation, as indicated by the declining trend in total asset turnover ratio. Further analysis would be required to understand the underlying reasons for this trend and to address any potential operational or financial issues.