Costco Wholesale Corp. (NASDAQ:COST)

The operating activity ratios demonstrate generally stable performance with some notable fluctuations over the observed period. Inventory turnover exhibits a cyclical pattern, generally ranging between 10 and 13, with a peak in early 2023 and a dip in late 2024. Receivables turnover shows a declining trend overall, starting above 100 and decreasing to the 70s by the end of the period, though with intermittent increases. Payables turnover remains relatively consistent, fluctuating between 8 and 13. Working capital turnover shows significant variability, with complete absence of values for several periods, but demonstrates a peak in August 2021 and a more recent increase in May 2025. The average processing, collection, and payment periods all show relatively small changes, indicating consistent operational efficiency in these areas.

Inventory Turnover

Inventory turnover generally remained within a narrow band of 10.08 to 13.24 over the period. A slight downward trend is observed in the most recent quarters, falling from 13.13 to 11.56. The average inventory processing period correspondingly increased slightly from 28 to 32 days, suggesting a potential slowing in inventory liquidation.

Receivables Turnover & Collection Period

Receivables turnover experienced a consistent decline from 102.87 to 74.20, indicating a lengthening of the average collection period. The average receivable collection period remained consistently low, at 4 days for most of the period, but increased to 5 days in the final period. This suggests a potential increase in the time required to collect outstanding receivables, despite the period remaining short overall.

Payables Turnover & Payment Period

Payables turnover showed moderate fluctuations, generally remaining between 8.83 and 12.56. The average payables payment period remained relatively stable, fluctuating between 29 and 41 days. A slight decrease in payables turnover and corresponding decrease in the payment period is observed in the most recent quarters.

Working Capital Turnover

Working capital turnover is highly variable, with missing values for several periods. When available, it demonstrates significant fluctuations, peaking at 3,000.81 in August 2021 and reaching 460.95 in May 2025. The absence of consistent values limits the ability to draw definitive conclusions regarding working capital efficiency.

Operating & Cash Conversion Cycles

The operating cycle remained relatively stable, generally between 33 and 40 days. The cash conversion cycle fluctuated between negative values and 3 days for most of the period, indicating efficient cash management. The final period shows a cash conversion cycle of 3 days, consistent with prior performance.

Inventory turnover exhibited a generally positive trend over the analyzed period, though with notable fluctuations. Initially, the ratio demonstrated an increasing pattern from November 2020 to August 2021, followed by a period of relative stability and then a surge in early 2023. Subsequent quarters show continued variability, with a recent slight increase as of May 2025.

Initial Increasing Trend (Nov 2020 - Aug 2021)

The inventory turnover ratio increased from 10.08 in November 2020 to 12.01 in August 2021. This suggests an improving efficiency in managing inventory during this timeframe, with goods being sold more quickly. This increase likely reflects strong demand and effective inventory management practices.

Subsequent Stabilization and Surge (Nov 2021 - Feb 2023)

Following August 2021, the ratio experienced a slight decline before a significant increase to 12.82 in February 2023. This peak suggests a particularly efficient period of inventory management, potentially driven by promotional activities or a surge in sales. The period between November 2021 and February 2023 shows a general trend of inventory being converted into sales at a faster rate.

Volatility and Recent Performance (May 2023 - May 2025)

From May 2023 onwards, the inventory turnover ratio has demonstrated more volatility, fluctuating between 11.56 and 13.24. While remaining generally above the levels observed in late 2021, the ratio has not consistently maintained the peak achieved in February 2023. The most recent value, 12.60 in May 2025, indicates a slight improvement from the previous quarter, suggesting a potential stabilization or renewed positive trend.

Correlation with Merchandise Costs and Inventories

The observed fluctuations in inventory turnover appear to correlate with changes in both merchandise costs and inventory levels. Periods of higher merchandise costs, such as August 2021 and September 2023, often coincide with increased inventory turnover, suggesting a strong sales volume. Conversely, periods of relatively stable merchandise costs and inventory levels tend to result in more consistent, though potentially lower, turnover ratios.

Overall, the inventory turnover ratio indicates a generally healthy and efficient inventory management system. While fluctuations are present, the ratio consistently remains above 10, suggesting that the company effectively converts its inventory into sales. Continued monitoring of this ratio, alongside merchandise costs and inventory levels, will be crucial for maintaining optimal inventory management practices.

The receivables turnover ratio exhibits fluctuations over the observed period, generally ranging between approximately 74 and 115. An initial decline is noted from November 2020 to February 2021, followed by a recovery and peak in May 2021. Subsequent quarters demonstrate a generally decreasing trend through February 2023, before exhibiting some volatility. The most recent periods show a potential stabilization, though at a lower level than earlier in the series.

Overall Trend

The ratio demonstrates a generally declining trend over the entire period, despite several interim increases. The initial values are relatively high, exceeding 90 in most quarters between November 2020 and August 2021. The latter half of the observed period consistently shows values below 95, with a notable drop to 74.20 in the final period observed.

Seasonal Patterns

A potential seasonal pattern appears to exist, with higher turnover ratios often observed in quarters with significantly higher net sales, such as May 2021, August 2021, August 2022, and September 2023. This suggests a correlation between increased sales volume and faster collection of receivables. However, this pattern is not consistent across all periods.

Recent Performance

The most recent four quarters (November 2023 – May 2025) show a more stable, albeit lower, range of receivables turnover, fluctuating between approximately 84 and 92. This suggests a potential shift in the company’s credit and collection policies or a change in customer payment behavior. The final period observed shows a decline to 74.20, warranting further investigation.

Notable Fluctuations

A significant decrease in the receivables turnover ratio is observed between February 2023 (92.34) and November 2023 (87.83). This is followed by a slight recovery, but the ratio remains below the levels seen in earlier periods. The most recent decline from February 2025 (84.67) to May 2025 (91.71) and then to August 2025 (84.27) and November 2025 (85.08) and finally to February 2026 (74.20) is particularly noteworthy.

The observed trends in receivables turnover suggest potential changes in the efficiency of credit and collection processes. Further analysis, considering factors such as credit terms offered to customers and the composition of the customer base, would be beneficial to fully understand these fluctuations.

The accounts payable turnover ratio exhibits a generally stable pattern with fluctuations over the observed period. Initially, the ratio increased from 8.83 in November 2020 to a peak of 10.79 in February 2021, before stabilizing around the 10.45 to 10.80 range through May and August 2021. A slight decrease to 9.06 was noted in November 2021, followed by a rebound and subsequent increase to 12.56 in February 2022, representing the highest value in the series.

Overall Trend

The ratio generally remained within a range of 10 to 13 for most of the period, indicating consistent efficiency in managing payments to suppliers. There is no clear long-term upward or downward trend, but rather cyclical variations.

Fluctuations and Potential Drivers

A notable increase in the ratio occurred between November 2021 (9.06) and February 2022 (12.56). This suggests a faster rate of paying down accounts payable during that period, potentially due to increased cash flow or a strategic decision to take advantage of early payment discounts. A similar, though less pronounced, increase is observed between February 2023 (12.28) and May 2023 (12.16). Conversely, a dip to 10.37 was observed in August 2022 and a further decrease to 10.39 in May 2024.

The most recent values indicate a slight increase from 10.39 in May 2024 to 12.07 in February 2026, suggesting a return to a higher turnover rate. The ratio remains relatively consistent throughout the observed period, indicating a stable relationship between merchandise costs and accounts payable balances. The fluctuations observed are likely influenced by seasonal purchasing patterns and the timing of payments to suppliers.

Recent Performance

The ratio in the latest period (February 2026) is 12.07, which is above the average for the observed period. This suggests efficient management of supplier credit and a healthy liquidity position.

The observed fluctuations in the payables turnover ratio do not appear to be drastic and remain within a reasonable range, suggesting consistent and effective management of short-term liabilities.

The working capital turnover ratio exhibits considerable fluctuation over the observed period. Initially, the ratio is unavailable for the first three reporting periods. A significant peak of 3,000.81 is recorded in August 2021, followed by a substantial decline to 391.97 in November 2021. Subsequent quarters demonstrate a generally decreasing trend through February 2023, reaching a low of 89.52.

A moderate recovery is then observed in May 2023, with the ratio increasing to 103.53, before declining again to 72.76 in September 2023. The ratio then becomes unavailable for four consecutive quarters, before reappearing in May 2025 at 460.95. This is followed by a decrease to 171.17 in May 2026.

Overall Trend

The working capital turnover ratio demonstrates high volatility. While there are periods of increase, the overall pattern suggests a decreasing efficiency in utilizing working capital to generate sales, particularly when considering the period from August 2021 to February 2023. The reappearance of the ratio in May 2025 indicates a potential shift, but further observation is needed to confirm a sustained trend.

Peak and Subsequent Decline (Aug 2021 - Feb 2023)

The exceptionally high ratio in August 2021 suggests a very efficient use of working capital during that period. However, the rapid and consistent decline in subsequent quarters indicates a potential issue with either increasing working capital levels relative to sales, or a decrease in sales relative to working capital. The ratio falling below 100 in February 2023 suggests that working capital is not efficiently supporting sales generation.

Recent Fluctuations (May 2025 - May 2026)

The significant increase in May 2025, followed by a decline in May 2026, warrants further investigation. This could be due to seasonal factors, changes in inventory management, or alterations in credit policies. The return of the ratio after a period of unavailability suggests a change in reporting practices or a correction of previous issues.

The periods with unavailable data introduce uncertainty into the overall analysis. Without information for those quarters, it is difficult to assess the continuity of any underlying trends. The substantial fluctuations observed throughout the period suggest a dynamic operating environment and the need for ongoing monitoring of working capital management practices.

The average inventory processing period demonstrates a generally decreasing trend over the observed timeframe, with some fluctuations. Initially, the period stood at 36 days in November 2020, and generally declined to a low of 28 days in several periods between February 2023 and February 2026. However, the period experienced increases at times, indicating potential shifts in inventory management or sales patterns.

Overall Trend

From November 2020 through February 2026, the average inventory processing period generally decreased. The period moved from 36 days to 28 days, representing a reduction of 8 days over the period. This suggests increasing efficiency in managing inventory, potentially through improved supply chain management, faster sales cycles, or more effective inventory control systems.

Short-Term Fluctuations

While the overall trend is downward, there are noticeable short-term fluctuations. For example, the period increased to 35 days in November 2021, before resuming its decline. Similarly, a rise to 34 days was observed in August 2022 and again in November 2024. These increases could be attributed to seasonal demand, promotional activities leading to increased stock levels, or temporary disruptions in the supply chain.

Recent Performance

The most recent periods show some variability. The period was 28 days in February 2026, consistent with the lowest values observed. Prior to this, the period was 32 days in August 2025, and 29 days in May 2025. This suggests that while the overall efficiency remains strong, there may be some recent challenges in maintaining the consistently low processing times achieved earlier in the period.

The observed changes in the average inventory processing period warrant further investigation to understand the underlying drivers. Analyzing these fluctuations in conjunction with sales figures, supply chain performance indicators, and promotional calendars could provide valuable insights into the company’s operational efficiency and inventory management strategies.

The average receivable collection period remained remarkably stable over the analyzed period, spanning from November 2020 to May 2025. The metric consistently registered at 4 days for the vast majority of the observed quarters, indicating highly efficient management of accounts receivable.

Overall Trend

The average receivable collection period demonstrated exceptional consistency. Fluctuations were minimal, with the metric holding steady at 4 days for thirteen consecutive quarters. A slight increase to 5 days was observed in the final period analyzed (August 2025), representing the only deviation from the established pattern.

Recent Performance

The most recent observation shows a shift, with the average collection period increasing to 5 days. While a single period increase does not necessarily indicate a significant trend, it warrants monitoring in subsequent quarters to determine if this represents a sustained change in collection efficiency.

Relationship to Receivables Turnover

The stability in the average collection period aligns with the trends in receivables turnover. While receivables turnover experienced some variation, generally fluctuating between approximately 84 and 115, the inverse relationship between the two metrics remained consistent. A higher receivables turnover generally corresponds to a lower average collection period, and vice versa. The observed fluctuations in turnover appear to have been offset, maintaining the collection period at a consistent level.

In conclusion, the company consistently collected its receivables very quickly throughout the analyzed timeframe. The recent slight increase in the average collection period should be monitored to assess its potential implications for future financial performance.

The operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, demonstrates a generally stable pattern over the analyzed period, with some fluctuations. A review of the individual components and the resulting operating cycle reveals insights into the company’s short-term asset management efficiency.

Average Inventory Processing Period

The average inventory processing period generally ranged between 30 and 36 days. A slight downward trend was observed from November 2020 to May 2021, decreasing from 36 days to 31 days. The period then fluctuated between 30 and 35 days through November 2021. A noticeable decrease occurred in February 2023, dropping to 28 days, before returning to the 29-32 day range for the subsequent periods. A slight increase to 34 days was noted in November 2024, followed by a return to 30 days in February 2025, and a further fluctuation to 32 days in August 2025. The period concluded at 28 days in February 2026.

Average Receivable Collection Period

The average receivable collection period remained remarkably consistent throughout the observed timeframe, consistently between 3 and 5 days. The majority of periods registered a collection period of 4 days. A slight increase to 5 days was observed in February 2026, representing the only period exceeding 4 days. This indicates a highly efficient collection of receivables.

Operating Cycle

The operating cycle generally ranged between 32 and 40 days. The cycle decreased from 40 days in November 2020 to a low of 32 days in February 2023, reflecting improvements in both inventory management and receivable collection. Following February 2023, the operating cycle fluctuated between 32 and 38 days. The cycle increased to 38 days in November 2024, then decreased to 34 days in February 2025. The cycle concluded at 36 days in February 2026. The overall trend suggests a relatively efficient operating cycle, with a slight increase in recent periods.

In summary, the company demonstrates a consistent ability to convert inventory into cash. The stable and short receivable collection period contributes significantly to the overall efficiency of the operating cycle. While fluctuations exist, the operating cycle remains within a manageable range, indicating effective short-term asset management practices.

The average payables payment period exhibited fluctuations over the observed period, generally remaining within a relatively narrow range. An initial decrease was followed by periods of stability and subsequent variation. Overall, the company demonstrates consistent management of its payment obligations to suppliers.

Overall Trend

The average payables payment period generally ranged between 29 and 41 days throughout the analyzed timeframe. While there isn't a strong, consistent upward or downward trend, the metric demonstrates cyclical behavior. Periods of lower payment periods were interspersed with periods of higher payment periods.

Initial Phase (Nov 2020 - Aug 2021)

The period commenced with a payment period of 41 days in November 2020, decreasing to 34 days by February 2021. This was followed by stability at 35 days for two consecutive quarters before increasing slightly to 40 days in November 2021.

Period of Lower Payment Periods (Feb 2022 - Aug 2022)

From February 2022 through August 2022, the average payables payment period remained consistently low, fluctuating between 33 and 34 days. This indicates a period of efficient cash management and potentially favorable supplier terms.

Increased Volatility (Nov 2022 - Sep 2023)

The period from November 2022 to September 2023 showed increased volatility. The payment period decreased to 29 days in February 2023, then increased to 30 and 30 days in the subsequent quarters. A rise to 35 days was observed in November 2022 and again in May 2023, before decreasing to 30 days in September 2023.

Recent Period (Nov 2023 - Sep 2024)

The average payables payment period decreased to 29 days in November 2023, then increased to 31 and 32 days in the following two quarters. A subsequent increase to 35 days was observed in November 2024, before decreasing to 29 days in February 2025.

Latest Observations (May 2025 - Sep 2024)

The most recent observations show a payment period of 30 days in May 2025, 30 days in August 2025, 35 days in November 2025, 30 days in February 2026. This suggests a return to the range observed in the earlier periods.

The fluctuations in the average payables payment period may be attributable to changes in supplier agreements, seasonal variations in purchasing patterns, or broader economic conditions. Further investigation would be required to determine the specific drivers of these changes.

The operating activity ratios indicate a generally stable cash conversion cycle over the analyzed period, with some fluctuations. The components of the cycle – inventory processing, receivable collection, and payables payment – exhibit distinct patterns that contribute to the overall trend.

Average Inventory Processing Period

The average inventory processing period demonstrates a slight degree of variability, generally fluctuating between 30 and 36 days. A dip to 31 days was observed in May 2021, followed by a rise to 35 days in November 2021. The period then stabilized around 33-34 days through much of 2022. A slight increase to 34 days was noted in November 2024, before returning to 30 days in February 2025. The most recent observation in May 2025 shows a value of 29 days. Overall, the trend suggests efficient inventory management, with no significant prolonged deviations.

Average Receivable Collection Period

The average receivable collection period remains remarkably consistent throughout the observed timeframe, consistently around 3 to 4 days. A slight increase to 5 days is observed in the most recent period, February 2026. This indicates highly effective credit and collection policies, resulting in rapid conversion of receivables into cash.

Average Payables Payment Period

The average payables payment period exhibits more noticeable fluctuations than the other two components. It began at 41 days in November 2020, decreasing to 34 days by February 2021. The period remained relatively stable around 33-40 days through August 2022. A decrease to 29 days was observed in February 2023, followed by a return to 35 days in May 2023. The period then fluctuated between 29 and 35 days through the remainder of the observed period, ending at 30 days in February 2026. These variations suggest some flexibility in managing payment terms with suppliers.

Cash Conversion Cycle

The cash conversion cycle generally remains short, often negative or close to zero. Negative values, observed in several periods between November 2020 and August 2021, indicate that the company receives cash from customers before it needs to pay its suppliers. The cycle increased to 3 days in several periods between February 2022 and May 2023. A slight increase to 5 days was observed in May 2025, before decreasing to 2 days in August 2025 and 1 day in November 2025. The most recent observation in February 2026 shows a value of 3 days. The overall trend suggests efficient working capital management, with a minimal time lag between paying for inventory and receiving cash from sales.

In summary, the analyzed ratios suggest a well-managed working capital cycle. The consistently short receivable collection period and efficient inventory management contribute to a generally short and often negative cash conversion cycle. Fluctuations in the payables payment period appear to be managed effectively without significantly impacting the overall cycle length.