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GuruFocus has detected 2 Warning Signs with Nike Inc \$NKE.
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Nike Inc (NYSE:NKE)
Inventory Turnover
0.92 (As of Nov. 2016)

Inventory turnover measures how fast the company turns over its inventory within a year. It is calculated as cost of goods sold divided by average inventory. Nike Inc's cost of goods sold for the three months ended in Nov. 2016 was \$4,564 Mil. Nike Inc's average inventory for the quarter that ended in Nov. 2016 was \$4,965 Mil. Nike Inc's inventory turnover for the quarter that ended in Nov. 2016 was 0.92.

Days inventory indicates the number of days of goods in sales that a company has in the inventory. Nike Inc's days inventory for the three months ended in Nov. 2016 was 99.26.

Inventory can be measured by Days Sales of Inventory (DSI). Nike Inc's days sales of inventory (DSI) for the three months ended in Nov. 2016 was 55.38.

Inventory to revenue ratio determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue. Nike Inc's inventory to revenue ratio for the quarter that ended in Nov. 2016 was 0.61.

Definition

Nike Inc's Inventory Turnover for the fiscal year that ended in May. 2016 is calculated as

 Inventory Turnover (A: May. 2016 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (A: May. 2016 ) / ( (Inventory (A: May. 2015 ) + Inventory (A: May. 2016 )) / 2 ) = 17405 / ( (4337 + 4838) / 2 ) = 17405 / 4587.5 = 3.79

Nike Inc's Inventory Turnover for the quarter that ended in Nov. 2016 is calculated as

 Inventory Turnover (Q: Nov. 2016 ) = Cost of Goods Sold / Average Inventory = Cost of Goods Sold (Q: Nov. 2016 ) / ( (Inventory (Q: Aug. 2016 ) + Inventory (Q: Nov. 2016 )) / 2 ) = 4564 / ( (4896 + 5033) / 2 ) = 4564 / 4964.5 = 0.92

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Inventory Turnover measures how fast the company turns over its inventory within a year. A higher inventory turnover means the company has light inventory. Therefore the company spends less money on storage, write downs, and obsolete inventory. If the inventory is too light, it may affect sales because the company may not have enough to meet demand.

1. Days Inventory indicates the number of days of goods in sales that a company has in the inventory.

Nike Inc's Days Inventory for the three months ended in Nov. 2016 is calculated as:

 Days Inventory = Average Inventory (Q: Nov. 2016 ) / Cost of Goods Sold (Q: Nov. 2016 ) * Days in Period = 4964.5 / 4564 * 365 / 4 = 99.26

2. Inventory can be measured by Days Sales of Inventory (DSI).

Nike Inc's Days Sales of Inventory for the three months ended in Nov. 2016 is calculated as:

 Days Sales of Inventory (DSI) = Average Inventory (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 ) * Days in Period = 4964.5 / 8180 * 365 / 4 = 55.38

3. Inventory to Revenue determines the ability of a company to manage their inventory levels. It measures the percentage of Inventories the company currently has on hand to support the current amount of Revenue.

Nike Inc's Inventory to Revenue for the quarter that ended in Nov. 2016 is calculated as

 Inventory to Revenue = Average Inventory (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 ) = 4964.5 / 8180 = 0.61

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

Usually retailers pile up their inventories at holiday seasons to meet the stronger demand. Therefore, the inventory of a particular quarter of a year should not be used to calculate inventory turnover. An average inventory is a better indication.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Nike Inc Annual Data

 May07 May08 May09 May10 May11 May12 May13 May14 May15 May16 Inventory Turnover 4.37 4.49 4.41 4.64 4.59 4.44 4.26 4.13 3.99 3.79

Nike Inc Quarterly Data

 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 Inventory Turnover 0.99 0.96 0.98 1.01 0.93 0.95 0.95 1.01 0.92 0.94
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