Costco Wholesale Corp. (NASDAQ:COST)

Inventory Turnover

The inventory turnover ratio exhibited fluctuations over the analyzed periods, beginning at 11.84 and generally maintaining values around the 11 to 13 range. Notably, it reached the lowest point of 11.13 before rising to a peak of 13.24. This suggests relatively effective inventory management, with a slight improvement in efficiency toward the latest period.

Receivables Turnover

The receivables turnover ratio showed a declining trend, decreasing from 105.3 to 84.27 over the periods. The gradual decline points to a longer collection period for receivables, implying that customers are taking more time to settle their accounts, which may impact cash inflows.

Payables Turnover

The payables turnover ratio increased steadily from 10.23 to 12.13, indicating a faster payment rate to suppliers. This trend suggests the company is paying its suppliers more quickly over time, which can affect cash outflows and supplier relationships.

Working Capital Turnover

There was extreme volatility in the working capital turnover ratio, with an exceptionally high peak in the second period followed by a sharp decline and fluctuations thereafter. The irregularity and missing value in the penultimate period limit the conclusiveness of this measure, indicating possible data anomalies or significant operational changes affecting working capital management.

Average Inventory Processing Period

The average inventory processing period remained relatively stable, fluctuating between 28 and 33 days. There was a slight decrease toward the most recent periods, which aligns with the increased inventory turnover, suggesting improved efficiency in inventory handling.

Average Receivable Collection Period

The collection period for receivables increased modestly from 3 to 4 days and then stabilized. This minor extension aligns with the declining receivables turnover, confirming a trend toward longer customer payment durations.

Operating Cycle

The operating cycle varied slightly between 32 and 37 days, illustrating moderate consistency. The shortest and longest periods correspond roughly to movements in inventory and receivables periods, indicating stability in operational efficiency with slight fluctuations.

Average Payables Payment Period

The average payment period to suppliers showed a decreasing trend from 36 to 30 days, with a small increase noted in one period. This faster payment pattern is consistent with the increasing payables turnover ratio, indicating the company is shortening its payment terms to suppliers.

Cash Conversion Cycle

The cash conversion cycle hovered around zero, with minor positive and negative values between -2 and 4 days. The cycle remained very short, reflecting efficient management of the time between cash outflows and inflows, signifying a strong liquidity position throughout the periods.

Merchandise Costs

The merchandise costs have demonstrated a consistent upward trend over the analyzed periods. Starting from $144,939 million, the costs increased each year, reaching $239,886 million by the end of the last period. This indicates a considerable growth in the volume of goods purchased or cost per unit, reflecting expanded operations or inflationary pressures.

Merchandise Inventories

Inventory levels have generally increased, with fluctuations observed between years. From $12,242 million initially, inventory rose to a peak of $18,907 million, followed by a slight decline to $16,651 million in the subsequent year. The inventory then grew again to $18,647 million before a small reduction to $18,116 million by the final period. This pattern suggests active inventory management, potentially responding to demand changes or supply chain adjustments.

Inventory Turnover Ratio

The inventory turnover ratio has experienced variability but overall displays a positive trend. Starting at 11.84, it slightly improved to 12.01, dipped to 11.13, then rose significantly to 12.77. After a minor decline to 11.92, it increased to the highest value of 13.24 in the last period. This increase indicates improved efficiency in inventory management, with faster conversion of inventory into sales over time.

Net Sales

The net sales demonstrate a consistent upward trend over the analyzed periods. Starting at 163,220 million US dollars in the earliest period, sales steadily increased each year, reaching 269,912 million US dollars by the latest period. This reflects strong revenue growth and suggests ongoing market expansion or increased sales volume.

Receivables, Net

The net receivables balance shows a rising pattern parallel to sales growth. Beginning at 1,550 million US dollars in the earliest period, the amount of receivables increased each year, culminating at 3,203 million US dollars in the most recent period. This increase indicates that amounts owed by customers have grown, potentially due to higher sales on credit or extended payment terms.

Receivables Turnover

The receivables turnover ratio exhibits a declining trend throughout the time span. Initially high at 105.3 in the first period, the ratio remained relatively stable around 100 for the next two years before steadily decreasing to 84.27 in the final period. This decline suggests that the company's efficiency in collecting receivables has weakened over time, implying that customers may be taking longer to settle their accounts.

Overall Analysis

The company’s expanding net sales alongside growing receivables indicates business growth but also a potential increase in credit risk or relaxed collection policies. The declining receivables turnover ratio further supports the notion of slower collections, which could impact cash flow if not managed carefully.

Merchandise Costs

The merchandise costs have shown a consistent upward trend over the observed periods, rising from 144,939 million US dollars in 2020 to 239,886 million US dollars in 2025. This represents a substantial increase, indicating either growth in inventory purchases or rising costs of goods sold. The steady year-over-year increases suggest ongoing expansion or increased procurement activities.

Accounts Payable

Accounts payable also increased over the years, moving from 14,172 million US dollars in 2020 to 19,783 million US dollars in 2025. While this also reflects growth, the rate of increase is relatively moderate compared to merchandise costs, suggesting a somewhat controlled or steady payment cycle with suppliers.

Payables Turnover Ratio

The payables turnover ratio exhibits an overall upward trend, increasing from 10.23 times in 2020 to 12.13 times in 2025. This indicates that the company is paying off its suppliers more frequently or efficiently over time. Notably, the ratio peaked at 12.16 in 2023, with a slight dip to 11.45 in 2024 before rising again in 2025, which may reflect temporary changes in payment policies or supplier negotiations.

Insights

The rising merchandise costs combined with relatively increasing accounts payable and payables turnover ratio suggest the company is managing its supplier obligations effectively despite growing procurement volumes. The improved payables turnover ratio implies enhanced liquidity or operational efficiency related to payables management. However, the elongation in the dollar amount of accounts payable signals increased reliance on supplier credit as the company expands its merchandise purchasing.

Working Capital

The working capital demonstrates considerable fluctuations across the periods analyzed. Starting at 3,276 million USD in 2020, it sharply decreased to 64 million USD in 2021. It then increased moderately to 698 million USD in 2022 and further climbed to 2,296 million USD in 2023. However, a notable decline occurred again in 2024, where working capital turned negative to -1,218 million USD, before recovering to 1,272 million USD in 2025. This volatility suggests significant changes in the current assets and liabilities management over the years, with potential impacts on liquidity.

Net Sales

Net sales exhibit a consistent and robust upward trend throughout the periods. Starting from 163.22 billion USD in 2020, sales increased each year, reaching 192.05 billion USD in 2021, then 222.73 billion USD in 2022, followed by 237.71 billion USD in 2023, 249.63 billion USD in 2024, and finally 269.91 billion USD in 2025. This steady growth reflects sustained expansion in revenue-generating activities.

Working Capital Turnover

The working capital turnover ratio shows extreme variability and some missing data. The ratio was 49.82 in 2020 but surged dramatically to 3,000.81 in 2021, indicating an abnormal spike likely influenced by the drastically reduced working capital that year. It declined significantly to 319.1 in 2022 and further to 103.53 in 2023, suggesting a normalization trend. Data for 2024 is missing, but the ratio increased again to 212.19 in 2025. The large fluctuations imply instability in the relationship between net sales and working capital, possibly due to irregularities or strategic changes in working capital management.

Inventory Turnover

The inventory turnover ratio demonstrates some fluctuations but generally exhibits an increasing trend over the examined periods. Starting at 11.84 in 2020, it slightly increased to 12.01 in 2021, then declined to 11.13 in 2022. Subsequently, it rose again to 12.77 in 2023, dipped to 11.92 in 2024, and finally reached its highest point of 13.24 in 2025. This volatility suggests periodic adjustments in inventory management or sales efficiency, with the overall outcome indicating enhanced turnover efficiency by the end of the period.

Average Inventory Processing Period

The average inventory processing period shows an inverse pattern relative to inventory turnover, reflecting the expected relationship between these two metrics. Starting at 31 days in 2020, it slightly decreased to 30 days in 2021, then increased to 33 days in 2022. Following this, a decreasing trend is observed: 29 days in 2023, 31 days in 2024, and then a reduction to the shortest period of 28 days in 2025. The reduction in days during the latter years indicates improved inventory handling efficiency, supporting changes seen in the inventory turnover ratio.

Summary

Overall, the data suggests that inventory management has undergone periodic variability but improved towards the end of the timeframe. The rise in inventory turnover ratio coupled with the reduction in average inventory processing period during recent years points to enhanced operational efficiency in inventory control, likely contributing positively to working capital management and profitability.

The analysis of the receivables turnover ratio over the reported periods indicates a general downward trend. Beginning at 105.3 in the year ending August 30, 2020, the ratio slightly increased to 106.52 in 2021 before experiencing a decline to 99.39 in 2022. Subsequent periods reveal continued decreases, reaching 84.27 by the year ending August 31, 2025.

This decreasing receivables turnover ratio suggests that the company has been collecting its receivables less frequently over time, which could indicate a longer time frame for converting credit sales into cash.

Correspondingly, the average receivable collection period has shown a slight increase. Initially stable at 3 days for the fiscal years ending in 2020 and 2021, the period extended to 4 days from 2022 onward and maintained at 4 days through 2025. This aligns with the trend observed in the receivables turnover ratio, as a longer collection period typically accompanies a lower turnover ratio.

Receivables Turnover Ratio

Started high at 105.3, peaked slightly to 106.52, then steadily decreased to 84.27 by the most recent period.

Average Receivable Collection Period

Remained stable at 3 days during the first two years, then increased to 4 days from 2022 onward.

Overall, these indicators imply a marginal decline in the efficiency of accounts receivable management, with the company collecting outstanding receivables more slowly in recent years. While the absolute values still suggest relatively rapid collection periods, the trend may warrant attention to assess potential impacts on liquidity and operational cash flow.

The analysis of the provided financial periods reveals the following trends in operational efficiency metrics over a six-year span:

Average inventory processing period

This metric exhibits moderate fluctuations over the years. Starting at 31 days, it slightly decreased to 30 days the following year, then increased to a peak of 33 days in the third year. Subsequently, it declined to 29 days in the fourth year, rose again to 31 days in the fifth year, and finally decreased to 28 days in the last year. Overall, the trend indicates improved inventory management efficiency in the most recent period, reflected by the reduction to the lowest recorded days.

Average receivable collection period

This period remains relatively stable throughout the timeframe. It starts consistently at 3 days in the first two years and then sees a minor increase to 4 days that persists through the final four years. The slight increase suggests a marginal extension in the time taken to collect receivables, but the overall period remains low, reflecting strong receivables management.

Operating cycle

The operating cycle follows a pattern influenced by changes in both inventory processing and receivable collection periods. Beginning at 34 days, it decreases to 33 days in the second year, peaks at 37 days in the third year, then returns to 33 days in the fourth year. It experiences a slight increase to 35 days the following year before falling to 32 days in the final year. The overall trend indicates a short-term variation but a general improvement in the operating cycle duration towards the end of the period analyzed, highlighting enhanced operational efficiency.

Payables Turnover

The payables turnover ratio exhibits an overall upward trend from 10.23 in 2020 to 12.13 in 2025. This indicates an increasing frequency with which the company is paying off its suppliers over the observed period. The ratio increased steadily each year until 2023, reaching a peak of 12.16, followed by a slight decrease to 11.45 in 2024, before rising again to 12.13 in 2025. The increase suggests improved efficiency in managing accounts payable or potentially taking shorter credit terms from suppliers.

Average Payables Payment Period

The average payables payment period shows a general decline from 36 days in 2020 to 30 days in 2025, indicating that the company is reducing the time taken to pay its suppliers. The period decreased consistently from 36 days in 2020 to 30 days by 2023, rose slightly to 32 days in 2024, then returned to 30 days in 2025. This reduction aligns with the increase in payables turnover, reflecting a quicker settlement cycle for obligations to suppliers, possibly improving supplier relationships or leveraging prompt payment discounts.

Overall Insights

The inverse relationship between payables turnover and the average payment period suggests effective working capital management. The company appears to be accelerating payments to suppliers while maintaining or slightly improving the velocity of payables turnover. Such trends may improve supplier confidence and could imply better negotiation terms. However, consistently low payment periods might affect cash flow flexibility, which requires balanced attention.

Average Inventory Processing Period

The average inventory processing period exhibits some fluctuations over the analyzed periods. Starting at 31 days, it slightly decreased to 30 days in the following year, then increased to 33 days before trending downward to 28 days in the last recorded period. This indicates a general improvement in inventory turnover efficiency toward the most recent period.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the periods, holding steady at 3 days initially before increasing marginally to 4 days from the third period onward. This consistency suggests sustained efficiency in receivables management.

Average Payables Payment Period

There is a clear downward trend in the average payables payment period, declining from 36 days to 30 days over the analyzed timeline. This reduction suggests that the company is paying its suppliers more quickly in recent years compared to prior periods.

Cash Conversion Cycle

The cash conversion cycle (CCC) started with a slightly negative value (-2 days), indicating efficient cash flow management. Over time, the CCC increased to positive values around 3 to 4 days but then decreased again to 2 days in the final period. The relatively low values of the CCC throughout indicate strong overall working capital efficiency.