Unilever Nigeria Plc is not selling goods quickly as inventory continues to pile on the back of weak demand in a country where rising inflation has eroded the purchasing power of consumers.
Interestingly, the consumer goods giant has an inventory turnover of 3.81, which translates to 95 days (3 months), according to MoneyCentral calculations.
This indicates that the company sold its entire inventory within a 95-day period, which is unimpressive for such a large-scale retailer.
Inventory turnover is the rate at which a company replaces inventory in a given period due to sales.
The higher the inventory turnover, the better, since high inventory turnover typically means a company is selling goods quickly, and there is considerable demand for their products.
Low inventory turnover, on the other hand, would likely indicate weaker sales and declining demand for a company’s products.
A very high inventory is detrimental to a company because it bloats the cost of goods sold, resulting in deteriorating gross margins.
Unilever had a total inventory of N13.23 billion as at December 2020, which is 11.55 percent higher than 2019’s N11.86 billion.
The company posted a loss after tax of N1.59 billion as at December 2020, while sales dipped by 1.34 percent to N61.57 billion.
Manufacturers have bemoaned rising inventory in the warehouse, blaming it on the difficult business environment.
The Manufacturers Association (MAN) of Nigeria has said the inventory of unsold finished and manufactured goods increased to N303.22bn in the second half of last year, compared to N202.16bn in the corresponding period of 2019.
“The increase in inventory in the period was attributed to the general low consumption and renewed imports in the economy as global economies generally open after months of lockdown,” said Omotayo Okewunmi, Public Relations Officer, MAN.
Notably, the consumer goods firms felt the pang of the economic downturn than any other sector as consumer wallets have been squeezed.