Costco Wholesale Corp. (NASDAQ:COST)

The financial ratios over the reported periods indicate several notable trends in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio demonstrated a generally positive trend, increasing from 10.08 to 13.24 over the analyzed periods. Minor fluctuations occurred, but the overall pattern suggests improving inventory management with faster inventory movement.

Receivables Turnover

Receivables turnover exhibited greater volatility, initially declining from 102.87 to 84.27 with intermittent rises and falls. This points to some inconsistency in collection efficiency, with a tendency towards slower receivables turnover in later periods.

Payables Turnover

The payables turnover ratio showed an increasing trend from 8.83 up to approximately 12.13, implying that the company is paying its suppliers more rapidly over time. There were periods of plateau and slight decline but the general direction indicates quicker payables payment.

Working Capital Turnover

Data on working capital turnover is sparse and irregular, with very high spikes early on (above 3000) followed by much lower and varied values. This irregularity hampers clear interpretation but suggests volatile utilization of working capital across periods.

Average Inventory Processing Period

The average days inventory is held decreased from 36 to 28 days at its lowest, with slight increases in some periods but maintaining near this lower level. This aligns with the increasing inventory turnover, indicating more efficient inventory management.

Average Receivable Collection Period

This metric remained relatively stable, consistently around 3 to 4 days, suggesting steady management of accounts receivable collection timelines without significant changes.

Operating Cycle

The operating cycle showed some variation but generally ranged between 32 and 40 days, trending slightly lower in recent periods, reflecting modest improvements in the time it takes to convert inventory and receivables into cash.

Average Payables Payment Period

The number of days to pay suppliers decreased overall, from 41 down to near 29-30 days, though some fluctuations occurred. This reduction corroborates the payables turnover increase, suggesting more prompt payment practices.

Cash Conversion Cycle

Cash conversion cycle values hovered near zero, mostly between -2 and 5 days, indicating that the company operates with a tight or even negative cash conversion cycle. This implies efficient working capital management where cash inflows closely match cash outflows or occur sooner.

In summary, the data reveal that inventory management and payables payment have become more efficient over the analyzed periods, with inventory turnover increasing and payables being settled faster. Receivables turnover fluctuated with a slight declining trend, suggesting some challenges in collections. The overall operating and cash conversion cycles indicate effective liquidity management, with the company maintaining a short period between cash outflows and inflows. However, sporadic data on working capital turnover limits definitive conclusions in that area.

Merchandise Costs

Merchandise costs exhibited a generally increasing trend over the observed periods with notable fluctuations. The costs rose significantly from November 2020 through August 2021, peaking in August 2021. Afterwards, there was a period of decline followed by repeated increases, particularly strong peaks around August 2022, September 2023, and August 2025. This pattern suggests variability possibly influenced by seasonal factors or supply chain conditions, with costs trending upward overall, reaching the highest values in the final period.

Merchandise Inventories

The level of merchandise inventories showed variability with a moderate overall upward trend. Starting from approximately 14.9 billion US dollars, inventories initially decreased then fluctuated moderately through 2021 and 2022, with some increases peaking near 18.6 billion. From late 2023 onwards, inventories trended higher reaching over 20.9 billion at one point before declining somewhat but remaining elevated compared to early periods. The inventory levels demonstrate active stock management, likely adapting to changing market demand and supply considerations.

Inventory Turnover

Inventory turnover ratios have demonstrated an oscillatory yet generally stable pattern, mostly ranging between approximately 10 and 13 times over the periods. Early figures were around 10-11, then increased to a peak near 12 in early 2023. The ratio remained relatively high and stable thereafter, with slight fluctuations but showing improvement to as high as 13.24 in the final quarter. This indicates slightly more efficient inventory management or faster sales cycles in recent terms, reflecting improved operational effectiveness despite inventory growth.

Combined Insights

The merchandise cost increases alongside rising inventory values and stable or improving inventory turnover imply robust sales activity combined with effective inventory control. While costs peaked sharply at certain intervals, the company appears to maintain or improve the speed at which inventory is turned over. This balance might indicate strategic stocking to meet anticipated demand without excessive overstock. The consistent inventory turnover ratio improvement suggests efficient sales execution despite some volatility in merchandise costs and inventory holdings.

Net Sales

Over the observed quarters, net sales display a generally upward trend with notable seasonal peaks. The data shows substantial increases around late summer and fall periods, suggesting a possible seasonal impact on revenue. For example, net sales peak significantly in August 2021, August 2022, and again in August 2024 and August 2025. After these peaks, there is a decline but the subsequent periods tend to stabilize at levels higher than previous corresponding quarters, signaling underlying growth despite variability. This pattern indicates both cyclicality and solid expansion in sales volume.

Receivables, Net

Net receivables values increase steadily over time, moving from approximately 1.6 billion USD to around 3.2 billion USD by the end of the latest quarter. This steady increase suggests growing credit extended to customers or overall sales growth that may have an impact on accounts receivable. Notably, receivables also rise following the peak sales periods, which could imply that higher sales volumes are accompanied by an increase in credit sales or a longer collection period.

Receivables Turnover Ratio

The receivables turnover ratio exhibits volatility with a general downward tendency over the analyzed quarters. Initially, turnover was quite high, exceeding 100 times per year, which indicates very rapid collections relative to credit sales; however, it declines gradually to levels in the mid-80s by the latest quarters. The decline in turnover ratio suggests that the company is taking longer to collect receivables over time or that credit terms have been relaxed. This trend might raise concerns about collection efficiency or changes in customer credit policies.

Overall Insights

The analysis reveals overall expansion in sales accompanied by increasing receivables, reflecting growth in business and possibly extended credit terms. Seasonal fluctuations in sales are pronounced, with consistent peaks roughly in late summer to early fall, which drive increases in receivables after these peaks. Meanwhile, the downward trend in receivables turnover ratio warrants attention as it may indicate slower collections or greater credit risk exposure. Monitoring this ratio alongside sales growth is important to ensure that receivable management remains efficient amid expanding sales volumes.

Merchandise Costs

Merchandise costs exhibit a fluctuating trend over the observed periods, with a notable pattern of sharp increases followed by moderate decreases. Initially, costs rose steadily from $37,458 million to $39,415 million between late 2020 and mid-2021. Thereafter, a significant surge occurred in the August 2021 quarter to $54,733 million, followed by a decline in the subsequent quarters. This cycle repeats with costs peaking again in August 2022, August 2024, and August 2025, reflecting a seasonal or operational pattern of elevated expense in these quarters. Overall, the highest values tend to occur during late summer quarters, indicating potential inventory build-up or increased purchasing related to seasonal demand.

Accounts Payable

Accounts payable amounts also show cyclical fluctuations that roughly align with movements in merchandise costs. The payable balance increases during quarters with elevated merchandise costs, such as November 2021, November 2023, and November 2024. Between these peak periods, accounts payable generally declines or stabilizes, reflecting payment cycles and possibly enhanced management of payables. Despite some volatility, the growth trajectory of accounts payable appears consistent with expansion in merchandise activity, suggesting proportional supplier credit utilization relative to purchasing.

Payables Turnover Ratio

The payables turnover ratio, which measures how many times accounts payable are paid during the period, varies over time between approximately 8.8 and 12.5. Higher turnover ratios are observed in early and mid-2023 quarters, indicating faster payments to suppliers during those periods. Conversely, lower turnover ratios occur in late 2020 and late 2021 periods, implying extended payment terms or delayed settlements. The ratio tends to spike after quarters of heightened merchandise costs, potentially reflecting efforts to manage liquidity or negotiate payment terms. The general pattern suggests dynamic payables management tailored to seasonal purchasing cycles.

The financial data reveals several notable trends in the company’s quarterly performance over the observed periods. The analysis focuses on working capital, net sales, and working capital turnover, highlighting fluctuations and patterns that may have implications for operational efficiency and sales growth.

Working Capital

There is a marked shift in working capital from negative values in the early quarters to positive values starting around November 2021. Initially, working capital was deeply negative (-571 million USD in November 2020), indicating potential liquidity challenges or heavy reliance on short-term liabilities. Over subsequent quarters, working capital improved substantially, peaking at 3312 million USD in November 2023.

However, after this peak, there is a sharp decline in working capital, turning negative again in February 2024 (-2542 million USD) and remaining negative through August 2025, albeit with gradual improvement towards positive territory by the final quarter (1272 million USD in August 2025). This volatility suggests significant changes in current assets or liabilities impacting liquidity management.

Net Sales

Net sales exhibit a generally upward trajectory with some quarterly fluctuations. From 42,347 million USD in November 2020, sales rose steadily, with occasional spikes correlating to seasonal or business cycle factors—for example, substantial increases in August quarters (e.g., 61,441 million USD in August 2021 and 70,764 million USD in August 2022).

The highest recorded net sales occur in August 2025, with 84,432 million USD, representing an overall growth trend in revenue over the five-year span. Despite minor decreases in some quarters, the sales figures reflect robust demand and revenue generation capability.

Working Capital Turnover

The working capital turnover ratio shows extreme variability and some missing data. Early on, an extraordinarily high ratio (3000.81) in August 2021 is visible but then significantly declines in the following quarters, down to around 72.76 by February 2024. This steep decline could indicate either an increase in working capital or a slowdown in sales in proportion to working capital.

There are gaps in the data for several quarters, but observed values after February 2024 show ratios oscillating between approximately 89 and 460, revealing inconsistent asset utilization efficiency. The spike to 460.95 in May 2025 suggests a short-term improvement in how effectively working capital supports sales, but the overall trend points to volatility and potential challenges in managing short-term assets relative to sales.

In summary, the financial data reflects a dynamic operational environment with significant improvements and setbacks in working capital management, steady growth in net sales, and fluctuating efficiency in working capital utilization. Attention to liquidity management and the causes of the sharp working capital shifts will be key to maintaining sustainable growth and operational stability.

Inventory Turnover

The inventory turnover ratio demonstrates a generally upward trend over the period analyzed, indicating an improvement in the efficiency with which the company manages and sells its inventory. Starting at 10.08 in late 2020, the ratio sees several fluctuations, including a decline to 10.46 in late 2021 and mid-2024, but overall the ratio increases, peaking at 13.24 by mid-2025. Notable is the sharp rise from 10.94 in late 2022 to 12.82 in early 2023. This trend suggests enhanced inventory management, potentially reflecting better sales performance or improved stock control mechanisms.

Average Inventory Processing Period

The average inventory processing period, measured in days, inversely correlates with the inventory turnover ratio, as expected. The processing period decreases from 36 days in late 2020 to a low of 28 days by early 2023, highlighting quicker inventory cycles during this timeframe. After this low point, the period fluctuates modestly around 29 to 31 days, with a minor increase to 34 days in early 2025 before decreasing again to 28 days by mid-2025. These variations suggest intermittent changes in inventory holding strategies or supply chain responsiveness, but the overall reduction compared to the starting point indicates greater operational efficiency in managing inventory over the examined periods.

Summary of Trends and Insights

The combined analysis of the inventory turnover ratio and average inventory processing period points to an overall enhancement in inventory management efficiency. The increase in turnover ratio aligned with the decrease in processing period reflects faster sales cycles and possibly improved stock replenishment processes. Periodic fluctuations in both metrics suggest responsiveness to market conditions or internal adjustments, but without a sustained negative trend. The data evidences consistent efforts to optimize inventory, yielding shorter holding periods and higher turnover, which could contribute positively to cash flow and profitability.

The receivables turnover ratio exhibits noticeable fluctuations over the observed periods. Initially, the ratio was relatively high, reaching values above 100, indicating efficient collection of receivables during the early quarters. However, a declining trend is observed starting around early 2023, with the ratio decreasing from about 104 to values in the mid-80s towards the last recorded periods. This decline signifies a reduction in the frequency with which receivables are collected over the course of a year, potentially reflecting slower collections or changes in credit policy.

Despite the variability in the turnover ratio, the average receivable collection period remains consistently stable around 4 days throughout all periods. This stability suggests that while the turnover ratio fluctuates, the actual average time required to collect receivables has not significantly changed, maintaining a relatively short collection cycle.

Receivables Turnover Ratio

Started high with values above 100 in late 2020 and experienced intermittent fluctuations through 2021 and 2022.

From early 2023 onwards, a general downward trend emerged, with the turnover ratio declining to the mid-to-low 80s by mid-2025.

The decline in turnover ratio hints at a slight easing in the pace of collections or potentially increased accounts receivable balances relative to sales.

Average Receivable Collection Period

Maintained a consistent average collection period of approximately 4 days across all quarters.

This consistency indicates stable short-term credit management despite the fluctuation in the turnover ratio.

In summary, while the efficiency metric represented by the receivables turnover ratio shows some volatility and a slow decline over time, the relatively unchanged average collection period suggests that overall collections remain timely. Continued monitoring of these indicators would be prudent to detect any emerging issues affecting the company's working capital and liquidity management.

Average inventory processing period

The average inventory processing period shows a general downward trend from 36 days in late 2020 to a low of 28 days in early 2023. Following this, the period fluctuates slightly between 28 and 34 days, indicating some variability but overall maintaining a relatively efficient inventory turnover timeframe. The lowest values occur in February 2023 and August 2025 at 28 days, while the highest value in the most recent periods reaches 34 days in late 2024.

Average receivable collection period

The average receivable collection period remains remarkably stable throughout the entire timeline, consistently around 3 to 4 days. This suggests a strong and consistent ability to collect receivables promptly with minimal deviation, indicating effective credit and collection policies.

Operating cycle

The operating cycle follows a pattern that largely mirrors changes in the inventory processing period, starting at 40 days in late 2020, then gradually decreasing to around 32 days by early 2023. Post-2023, the cycle exhibits minor fluctuations, ranging between 32 and 38 days. These fluctuations suggest moderate variation in the combined inventory and receivables management efficiency over time, with the cycle maintaining an efficient duration overall.

Payables Turnover Ratio Trends

The payables turnover ratio exhibits a generally increasing trend over the analyzed periods. Starting from a ratio of 8.83 in November 2020, it experiences fluctuations but shows notable rises, peaking at values above 12 in multiple recent quarters. This indicates a progressively faster rate at which payables are being settled relative to purchases.

There are periods of minor decline or stabilization, such as around November 2021 and late 2023, but the overall trajectory is upward. The persistence of ratios above 10 in most quarters from early 2021 onward reflects consistent efficiency in managing payables.

Average Payables Payment Period Analysis

The average payables payment period in days demonstrates an inverse relationship to the turnover ratio, which is characteristic in financial analysis. The period decreases from 41 days in November 2020 to as low as 29 days in several quarters, primarily from late 2022 through mid-2025, suggesting faster payment cycles.

Intermittent increases up to 35 days occur, notably around November 2021, late 2023, and late 2024, indicating temporary extensions in payment periods. However, the overall trend supports improved liquidity management with shorter durations to pay suppliers compared to the initial periods.

Insights and Implications

The observed trends suggest enhanced operational efficiency in trade credit management, as the company is able to convert its payables more rapidly over time. This may contribute positively to supplier relationships and potentially leverage better credit terms.

Fluctuations in both ratios and payment periods indicate strategic adjustments or external economic factors influencing the timing of payments. The consistency in maintaining higher turnover and lower payment days in recent periods points to stable financial control in accounts payable functions.

Average inventory processing period

The average inventory processing period exhibits fluctuations ranging generally between 28 and 36 days throughout the observed periods. Initially, the period decreases from 36 days to a low of 30 days, indicating improved inventory turnover. Subsequently, the period stabilizes around low 30-day values with occasional minor increases, suggesting consistent but moderate inventory management efficiency. The most recent values maintain close to 29 to 31 days, reflecting a stabilized inventory processing timeframe.

Average receivable collection period

The average receivable collection period remains remarkably stable, consistently around 3 to 4 days across all periods. This indicates a steady and efficient policy in collecting receivables without significant variation or deterioration in credit terms or collection efficiency. The consistency suggests effective management in accounts receivable practices.

Average payables payment period

The average payables payment period shows some variation, moving from an initial value of 41 days down to around 29-35 days in later periods. There is a notable reduction in the payment period during mid-reporting periods, dropping as low as 29 days, which may indicate a faster payment cycle or changes in supplier terms. Later periods demonstrate slight fluctuations but generally maintain near these improved shorter payment periods, suggesting potentially stronger supplier relations or efforts to manage cash outflows efficiently.

Cash conversion cycle

The cash conversion cycle fluctuates near zero, with values oscillating between -2 and 5 days. Negative values or close to zero indicate an efficient cycle where the company quickly converts resources into cash. Over time, the cash conversion cycle shifts slightly from negative or zero values to small positive values around 3 to 5 days, reflecting a slight elongation but still maintaining a highly efficient working capital cycle. The consistency of low values confirms effective coordination of inventory, receivables, and payables processes.