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I hope it is worth the effort.
Last week, we had our annual analysis of 2012 inventory performance by sector, based as always data REL has been kind enough to send me. The just released 2013 data is based on year-end 2012 financials from 1000 US public companies. (See Inventory Performance 2013.)
Gilmore Says: |
 So, the best sector, personal care products (Revlon, Estee Lauder, etc.) was able to decrease inventory levels as measured by DIO more than 16% versus 2006 levels.
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That includes data on Days Inventory Outstanding, or DIO, which calculates how many days of sales a company is holding in inventory, and which REL defines as:
End of Year Inventory Level/[total revenue/365]
As such, DIO is sort of the reverse of inventory turns, in that a higher DIO, all things being equal, means poorer inventory management performance, while a lower number signals improvement. You are being more efficient with inventory versus a given level of sales.
The main value-add I perform is to re-organize the companies in the list into more granular categories such that the DIO data can be more accurately be compared. It is quite an effort, actually. And for this week, my goal was to show changes in DIO over time, using 2004, 2006, 2011 and 2012 for my data set. But to keep the data perfectly comparable, I wanted to cull the list of 2012 companies down so that the exact same companies were in each of the sample years.
In other words, I didn't want companies coming in and out of a sector perhaps causing the changes in the sector's performance - hope that makes sense.
It was quadruple the effort I expected, for a number of reasons. One, the early data sets were smaller (the early data came from REL's then partnership with CFO magazine and what was available was not as extensive as what I receive now.) Second, the number of mergers, acquisitions, private equity deals, etc. make this list quite dynamic and hard to pin down for many sectors. It was quite an eye-opener to see the number of companies in the 2004 list that are no longer independent firms.
In the end, I could not get 2004 to work. I was able to have the exact same firms (number varies of course by sector) for 2006, 2011, and 2012. Some but not all of our sectors are shown in the table below, sorted by biggest drop in DIO (a good thing) to the largest rise from 2006 to 2012. (Note: this chat is slightly different than the one originally published after a couple of minor errors were corrected).
US Inventory Performance by Sector 2006 to 2012
| Sector |
DIO 2006 |
DIO 2011 |
DIO 2012 |
Change 2006-2012 |
| Personal Care Products |
37.8 |
31.4 |
31.6 |
-16.4% |
| Retail - Drug Stores |
51.7 |
47.0 |
45.7 |
-11.6% |
| Retail - Office Products |
43.3 |
38.0 |
38.3 |
-11.5% |
| Pharmaceuticals |
52.6 |
44.6 |
46.9 |
-10.9% |
| Retail - Dollar Stores |
57.3 |
50 |
52 |
-9.3% |
| Retail - Specialty Apparel |
55.4 |
49.4 |
50.4 |
-9.0% |
| Consumer Packaged Goods |
39 |
36 |
36.2 |
-7.3% |
| Network and Communications Equipment |
26.3 |
27.0 |
24.7 |
-6.3% |
| Wholesale - Pharma/Medical |
35.2 |
32.4 |
33.8 |
-4.0% |
| Wholesalers - Electronics |
39.2 |
39.4 |
37.8 |
-3.6% |
| Semiconductors |
42.5 |
39.3 |
41.4 |
-2.4% |
| Mass Merchants, Dept. Stores, Clubs |
59.4 |
58.9 |
58.9 |
-0.9% |
| Semiconductors Equipment |
80.0 |
83.3 |
80.6 |
0.7% |
| Retail - Grocery |
19.5 |
20.2 |
19.8 |
1.7% |
| Biotechnology |
50 |
47.7 |
51.3 |
2.7% |
| Containers and Packaging |
42.25 |
48.75 |
43.5 |
3.0% |
| Household Durables |
51 |
52.4 |
52.6 |
3.1% |
| Computers and Peripherals |
26.6 |
27.7 |
27.4 |
3.2% |
| Soft Drinks |
20 |
21 |
20.7 |
3.3% |
| Industrial Conglomerates |
40.3 |
42 |
42 |
4.1% |
| Auo-Truck Related OEMs |
28.6 |
29.2 |
29.8 |
4.2% |
| Food Manufacturing |
36.4 |
39.9 |
38.1 |
4.7% |
| Medical Devices |
53.7 |
56.1 |
56.7 |
5.6% |
| Machinery |
58.6 |
63.9 |
62.7 |
7.1% |
| Apparel and Shoe Manufacturers |
52.25 |
52.25 |
56 |
7.2% |
| Retail - Auto/Truck Parts |
107 |
109.8 |
115.4 |
7.9% |
| Toy Manufacturing |
24.5 |
28 |
27 |
10.2% |
| Retail - Home Improvement |
49 |
57.7 |
54.7 |
11.6% |
| Retail - Electronics |
48 |
51 |
54 |
12.5% |
| Auto Parts/Components |
30.6 |
36.75 |
34.5 |
12.7% |
| Restaurants |
4.6 |
5.2 |
5.2 |
13.0% |
| Wholesale - Food |
26.3 |
30 |
31 |
17.7% |
| Metals Manufacturing and Distribution |
47.8 |
55.4 |
57.1 |
19.5% |
| Chemicals and Gases |
38.8 |
48.5 |
49.3 |
27.2% |
| Aerospace and Defense Components |
57.5 |
69.2 |
74.8 |
30.1% |
| Building Products |
33 |
46.6 |
47.8 |
44.8% |
| Construction Equipment |
57.7 |
96.7 |
91.3 |
58.4% |
Source: SCDigest, based on Data from REL
So, the best sector, personal care products (Revlon, Estee Lauder, etc.) was able to decrease inventory levels as measured by DIO more than 16% versus 2006 levels. Aerospace and Defense component vendors (Moog, Precision Castparts Corp.) are seeing their inventory levels rise, up 30.1% over that time.
So this chart is my work for this week's column. In our On-Target newsletter next week, we'll have this with a few more sectors added, also compare 2006 to an average of 2011 and 2012, and point out the specific companies with impressive gains in DIO - and those that have gone strongly in the other direction.
Any reaction to this year's inventory numbers? What other analysis would
you like to see? Let us know your thoughts at the Feedback section
below.
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