Nomura Securities on Retail: Days Payable Is Saying Something (AMZN, AZO, PETM, RUE & LULU)
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Rating Summary:
68 Buy, 7 Hold, 2 Sell
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
68 Buy, 7 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Nomura Securities on Retail: Days Payable Is Saying Something
Analyst, Aram Rubinson and Paul Lejuez, said, "Days payable is an important but often-overlooked measure of a retailers cash flow. The equation (Accounts Payable divided by Daily Cost of Sales) tells us how many days retailers take to pay their suppliers. While standards typically call for 30 or 45 days, the observed range is quite wide."
Hardline Takeaways:
Amazon.com (Nasdaq: AMZN) has the most virtuous inventory cycle at negative 54 days of inventory (net of payables). AMZN fares well despite weakening inventory turns. That is because it has enjoyed widening AP days.
AutoZone (NYSE: AZO) is best in class when it comes to DSP. Despite slow inventory
turns, AZO takes 254 days (8+ months) to pay its suppliers. The ‘secret sauce’ is a complicated arrangement with AZO’s financial partners.
PetSmart (Nasdaq: PETM) sees lower AP coverage, as it buys from the most concentrated (and powerful) vendor base. Nonetheless, we were encouraged to see it make progress for the first time in 6 years.
Softline Takeaways:
rue21 (NYSE: RUE): Highest days payable and high inventory coverage relates to domestic vendor base and increasing leverage w/vendors due to growth.
Lululemon (Nasdaq: LULU): Lowest days payable not related to lack of leverage with vendors but may be explained by the company constantly being in chase mode.
Analyst, Aram Rubinson and Paul Lejuez, said, "Days payable is an important but often-overlooked measure of a retailers cash flow. The equation (Accounts Payable divided by Daily Cost of Sales) tells us how many days retailers take to pay their suppliers. While standards typically call for 30 or 45 days, the observed range is quite wide."
Hardline Takeaways:
Amazon.com (Nasdaq: AMZN) has the most virtuous inventory cycle at negative 54 days of inventory (net of payables). AMZN fares well despite weakening inventory turns. That is because it has enjoyed widening AP days.
AutoZone (NYSE: AZO) is best in class when it comes to DSP. Despite slow inventory
turns, AZO takes 254 days (8+ months) to pay its suppliers. The ‘secret sauce’ is a complicated arrangement with AZO’s financial partners.
PetSmart (Nasdaq: PETM) sees lower AP coverage, as it buys from the most concentrated (and powerful) vendor base. Nonetheless, we were encouraged to see it make progress for the first time in 6 years.
Softline Takeaways:
rue21 (NYSE: RUE): Highest days payable and high inventory coverage relates to domestic vendor base and increasing leverage w/vendors due to growth.
Lululemon (Nasdaq: LULU): Lowest days payable not related to lack of leverage with vendors but may be explained by the company constantly being in chase mode.
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