Nordstrom's Inventory Turnover Ratio Analysis

Over the past five fiscal years, while Nordstrom has reflected a decline in their Inventory Turnover ratio, which reflects a company’s ability on average to sell and replace their inventory during the year, their ratio has remained well about the industry average of 3.91, with their inventory turnover ratio for the 2015 fiscal year being approximately 4.71. Thus, Nordstrom has been able to sell and replenish their goods frequently, which is a good thing because in the fashion industry, some styles can become obsolete very quickly, so if a company is able to have a high rate of inventory turnover, they can ensure that at the end of the fiscal year, they are not left with a high amount of inventory that they are unable to get rid of to make a profit. On the other hand, over the past five fiscal years, Macy’s has recorded inventory turnover ratios that are well below the industry average with their ratio for the 2015 fiscal year being the lowest at 2.99. This indicates that during the year, Macy’s is able …show more content…
In 2014 and 2015, this ratio would decline going from 1.87 to 1.03. Indicating that for every dollar of liabilities they had approximately one dollar of assets. This shows that over the past five years, Nordstrom has become less liquid. On the other hand, while Macy’s has been historically less liquid, and had a lower ratio of current liabilities to current assets, as of 2015, their current ratio was 1.34, which is lower than 2014’s but higher than Nordstrom’s 2015 current ratio, indicating that while their company is more liquid than Nordstrom this past fiscal year, they are less liquid and less capable of paying off short term bills than they were in