An Analysis Of Inventory Turnover And Its Impact On Financial Performance In Indian Organized Retail Industry | Himanshu Choudhary & Gaurav Tripathil

The purpose of this research paper is to assess the operational efficiency of the companies in the Indian organized retail industry, expressed in terms of inventory days, and to investigate the impact of the inventory days on the key financial indicators. Panel data was collected from CMIE?s Prowess database for the period 2000-2010 for three retailers viz., Pantaloon Retail (India) Ltd., Shopper?s Stop Ltd. and Trent Ltd. These are considered as the representatives of the industry due to high market share. Fixed effect model has been used to analyze the panel data. For the data analysis, ANOVA is used to check the significance of differences in the inventory holding period of the case companies. Further, for analyzing financial impact of inventory holding period, regression analysis is used. The results suggest large differences in the inventory positions of companies under study. An inverse relationship is observed between inventory days and the financial performance ratios under consideration which is partially supported by the regression function. Interestingly, significant results could not be obtained for all the companies under study. The findings have policy implications as the measures could be implemented for improving the inventory position and thereby the financial performance by the retailers.