Balance Sheet adjustments

Cut your inventories and receivables numbers by 30%.

If you are analysing publicly listed balance sheets of companies selling ‘non-critical’ products, it may be advisable to lower the ‘current assets’ as seen in the past quarterly reports.

Many companies won’t receive their full quota of monies owed (receivables) nor the full price of their inventory on offer.

This also puts pressure on the cycle of honouring your payables.

Nike reports high inventories and coming discounting in their latest quarterly financial report.

Nike held 19% of its revenues as inventory.

Its total inventory last quarter was touching $9 billion.

This shouldn’t be a surprise but the market is acting as if it is.

Nike’s share price is trading 10% lower in today’s pre-opening market.

In May 2022, I painted a scenario of how falling demand results in higher inventories.

Through July 2022, I wrote, cited and warned of rising inventories and coming ‘discounting wars’. 

The markets were critical of Target and Wal-Mart’s inventory levels with the latter’s inventory ‘only’ touching 8% of its revenue.

September 30, 2022

by Rob Zdravevski

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