Ross Stores Inc. (NASDAQ:ROST)

Inventory Turnover

The inventory turnover ratio exhibited moderate fluctuations throughout the periods analyzed. Values mostly ranged between 5.0 and 6.5, with a notable peak at 8.91 in August 2020. This spike suggests a temporary increase in the efficiency of inventory management during that quarter. However, the ratio generally returned to the 5.0 to 6.5 range afterwards, indicating a relatively stable pace in inventory turnover over time.

Receivables Turnover

Receivables turnover displayed considerable volatility. Initial ratios hovered around 120 to 130, with occasional spikes up to around 160 and an extreme elevation to 283.84 in May 2020. Such a dramatic increase likely reflects a significant reduction in receivables, possibly due to enhanced collection efforts or changes in credit policies during that quarter. Subsequent values generally declined but remained higher than initial levels, implying some enduring improvement in receivables management.

Payables Turnover

The payables turnover ratio demonstrated pronounced variability, with values ranging from roughly 4.0 to over 15.0. The exceptional peak at 15.18 in May 2020 indicates a rapid payment cycle during that quarter, contrasting sharply with lower ratios observed in the surrounding periods, especially in late 2020 and early 2021 when values dropped below 5.0. This trend points to a shift in payment practices, possibly reflecting changes in supplier management or liquidity strategy over time.

Working Capital Turnover

Working capital turnover showed an increasing trend from around 10 in early periods to peaks above 21 by late 2019 and early 2020, followed by a sharp decline to values below 6.0 during and after mid-2020. The initial rise suggests improving efficiency in using working capital to generate sales, while the subsequent reduction indicates a slowdown or increased capital retention during the pandemic-affected periods.

Average Inventory Processing Period

The inventory processing period fluctuated between approximately 41 and 72 days. A significant reduction to 41 days occurred in August 2020, coinciding with the high inventory turnover in that quarter, followed by subsequent increases. Overall, the average period remained mostly stable but with notable short-term variations consistent with shifts in inventory management intensity.

Average Receivable Collection Period

The average receivable collection period remained consistently low, mostly within 2 to 3 days, indicative of prompt collection practices. A brief increase to 5 days occurred in August 2020, reflecting temporary collection delays, but it quickly normalized, demonstrating strong credit management continuity.

Operating Cycle

The operating cycle typically ranged between 54 and 75 days, with occasional reductions to as low as 46 days in August 2020. These variations closely mirror changes in inventory and receivables periods, indicating integrated shifts in overall operational efficiency throughout the periods. The shorter operating cycles are suggestive of improved cash flow timing during certain quarters.

Average Payables Payment Period

The average payables payment period exhibited significant variation, with values declining from around 45-50 days in early periods to as low as 24 days in May 2020, and then markedly increasing to between 74 and 89 days from late 2020 into early 2021. This suggests a strategic extension of payment terms or delay in payables during the latter period, possibly aimed at preserving cash during challenging times.

Cash Conversion Cycle

The cash conversion cycle varied substantially, ranging from positive values around 20 to negative figures as low as -25 days between late 2020 and early 2021. Negative cash conversion cycles indicate that payables are being paid after cash is collected from sales, reflecting a highly efficient cash management system. The return to positive values in 2022 suggests a normalization of cash flow patterns post-pandemic disruptions.

The financial data shows several key trends concerning cost of goods sold, merchandise inventory, and inventory turnover over the analyzed periods.

Cost of Goods Sold

The cost of goods sold (COGS) exhibits fluctuations but generally follows an increasing trend from the early periods through January 2022. Initial values range around $2.3 million to $3.2 million (in thousands). A notable decline occurs around May to August 2020, with COGS dropping to approximately $1.9 million to $2.1 million (in thousands), likely indicative of an operational or market impact during this timeframe. Following this dip, COGS resumes an upward trajectory, peaking around $3.7 million (in thousands) by early 2022, suggesting a recovery and growth phase.

Merchandise Inventory

Merchandise inventory levels show considerable variability across quarters. Starting near $1.6 million (in thousands), inventory levels experience significant increases and decreases throughout the period. For example, inventory peaks at about $2.7 million to $2.7 million (in thousands) in late 2019 and late 2021, with an extreme low point around August 2020 at approximately $1.1 million (in thousands). The sharp drop during mid-2020 aligns temporally with the decrease in COGS, possibly reflecting reduced procurement or inventory adjustments. After this period, inventory levels trend upward again, reaching approximately $2.5 billion (in thousands) by late 2022, indicating expanded stock holding.

Inventory Turnover Ratio

The inventory turnover ratio displays notable variation but maintains a general range between approximately 5 and 7 over most periods. Particularly, turnover reaches a distinct high around August 2020 at 8.91, implying a rapid movement of inventory during that quarter, potentially due to reduced inventory bases or heightened sales efficiency. Outside this spike, turnover ratios fluctuate, dipping to values just above 5 around late 2019 and 2022, suggesting slower inventory movement during those times. Overall, this metric reflects periods of both high and low operational efficiency in managing inventory relative to sales.

In summary, the data indicates that the company experienced a significant disruption around mid-2020, as evidenced by reduced COGS and inventory levels coupled with a spike in inventory turnover. This suggests operational adjustments possibly in response to external market conditions. Subsequent quarters reveal recovery and growth in both inventory and COGS, although inventory turnover ratios indicate variability in inventory management effectiveness across the periods.

Sales Trend

Sales showed a fluctuating but generally upward trend over the analyzed periods. Initial quarters saw sales around 3.3 to 3.4 billion US dollars, with some growth peaks notably in early 2018 and early 2019, reaching beyond 4 billion. A significant disruption occurred starting with the quarter ending May 2, 2020, where sales dropped sharply to approximately 1.8 billion, likely impacted by external adverse conditions. Subsequently, sales recovered steadily, climbing back above 4 billion by early 2021 and peaking near 5 billion in early 2022. The latter periods stabilized around the 4.5 billion level, indicating recovery and stabilization after the disruption.

Accounts Receivable Dynamics

The accounts receivable balances fluctuated moderately over the periods, beginning near 100 million US dollars and generally increasing with some volatility. Noteworthy spikes occurred in mid-2020, particularly August 2020, where receivables surpassed 160 million, coinciding with the sales decline, which may reflect changes in collection patterns or credit terms. Following this period, balances oscillated in a range between 115 million to 170 million, with no clear long-term upward or downward trend but indicating variability in outstanding customer credits relative to sales.

Receivables Turnover Ratio

The receivables turnover ratio exhibited significant variation, generally aligning inversely with accounts receivable and sales patterns. Initially stable around 120-130, the turnover spiked above 150 in early 2018 and early 2019, corresponding to periods of stronger sales or improved collection efficiency. A dramatic peak near 284 occurred in May 2020, during the sales trough, indicating rapid collection or substantially reduced receivables. After this event, the ratio dropped to a low of around 79 and then gradually increased again, stabilizing around 110 toward the end of the data. This fluctuation highlights changing efficiency in receivables management throughout varying sales volumes and external conditions.

The analysis of the quarterly financial data reveals several notable trends in cost of goods sold, accounts payable, and payables turnover ratios over the examined periods.

Cost of Goods Sold (COGS)

Cost of goods sold displayed a fluctuating pattern with an overall upward trend from 2017 through early 2020, ranging from approximately 2.33 billion to over 3.22 billion US dollars. A significant decline is observed in the second quarter of 2020, dropping to about 1.89 billion US dollars, likely reflecting extraordinary market or operational conditions during that period. Following this dip, COGS recovered and resumed an upward trajectory through 2021 and into 2022, reaching a peak around 3.77 billion US dollars before slightly declining towards the latest quarter.

Accounts Payable

Accounts payable values demonstrated variability but maintained a general declining trend from 2017 until mid-2020, starting around 1.18 billion US dollars and falling to a low of approximately 706 million US dollars in the second quarter of 2020. After this trough, a sharp increase occurred, peaking at approximately 2.58 billion US dollars in the fourth quarter of 2018 and fluctuating around the 2.0 to 2.5 billion range thereafter. Toward the end of the dataset, a decreasing trend reemerged, with accounts payable declining from approximately 2.18 billion to 1.93 billion US dollars.

Payables Turnover Ratio

The payables turnover ratio, which measures how quickly the company pays off its suppliers, showed considerable fluctuation. Initially, the ratio remained relatively stable between 7.49 and 9.48 from early 2017 through early 2020, reflecting consistent payment efficiency. However, a pronounced spike to 15.18 occurred in the second quarter of 2020, concurrent with the significant drop in accounts payable and cost of goods sold. Post-2020, the ratio sharply declined to below 5 at its lowest and then gradually rose again, reaching about 7.16 by the latest period. These fluctuations suggest variability in payment timing and potentially altered supplier credit terms or cash management strategies, especially around 2020.

Overall, the data indicates that the company experienced notable operational disruptions around the second quarter of 2020, as shown by sharp changes in cost of goods sold, accounts payable, and payables turnover. After this period, financial metrics gradually stabilized but continued to show moderate fluctuations. The interplay of these indicators suggests adjustments in procurement and payment processes, possibly in response to external economic conditions or strategic changes in working capital management.

Working Capital

The working capital exhibited a generally increasing trend from April 2017 through February 2019, rising from approximately 1.13 billion USD to around 1.39 billion USD. However, a significant decline occurred during the periods from May 2019 to February 2020, with values dropping to approximately 730 million USD. This decrease was abrupt and marked, indicating potential operational or liquidity shifts. Subsequently, starting from May 2020, working capital rebounded sharply, reaching a peak of over 3.36 billion USD by July 2021. After this peak, the value stabilized, maintaining a range above 3.2 billion USD through October 2022, suggesting restored liquidity and operational capacity.

Sales

Sales figures showed moderate fluctuations between April 2017 and February 2019, remaining mostly within the range of 3.3 to 4.1 billion USD per quarter. A notable drop occurred in May 2020, with sales declining to approximately 1.84 billion USD, nearly half of the prior quarter’s sales, likely reflecting significant external disruptions. Following this low, sales recovered steadily and surpassed previous levels, peaking at approximately 5.02 billion USD in January 2022. The subsequent quarters maintained sales levels above 4.5 billion USD, which indicates strong recovery and growth momentum in the later periods.

Working Capital Turnover

The working capital turnover ratio remained relatively stable and high from April 2017 to February 2019, fluctuating between approximately 10.5 and 11.6. A sharp increase started in May 2019, achieving a peak turnover ratio above 21.9 in February 2020, suggesting an improvement in the efficiency of working capital utilization during that time frame despite the decline in working capital. However, post-February 2020, there was a considerable decline in the turnover ratio, falling to below 5 by January 2021, indicating less efficient use of working capital during the recovery period. From May 2021 onward, the turnover ratio gradually increased and stabilized around 5.5 to 5.8, indicating moderate improvement in capital efficiency but not reaching the earlier high efficiency levels.

Overall Trend and Insight

The data reflects substantial operational and financial disruptions around early 2020, likely associated with broader market and economic conditions. The company’s working capital and sales levels both experienced sharp declines, followed by significant recovery and growth in subsequent quarters. Despite the recovery in absolute metrics, working capital turnover decreased markedly, signaling a lower efficiency level in asset utilization compared to pre-disruption periods. Stabilization in working capital and sales after mid-2021, alongside modest improvements in turnover, suggests successful adjustments to operational strategy and market conditions but also indicates potential areas for efficiency enhancements moving forward.

The analysis of inventory management metrics over the series of quarterly periods reveals several notable trends and fluctuations.

Inventory Turnover

The inventory turnover ratio exhibits variability throughout the observed timeframe, generally oscillating between approximately 5.0 and 8.9. Early periods show ratios around the mid-5 range with a slight upward trend as the ratio reaches peaks exceeding 6.1 multiple times. A significant spike occurs during the quarter ending August 1, 2020, where the ratio reaches 8.91, indicating a substantial increase in turnover speed. Following this peak, the ratio reverts to values closer to the 5 to 7 range, demonstrating some volatility but no sustained upward or downward trend. The most recent quarters show a gradual decline in inventory turnover, approaching values just above 5, which may suggest a slowing in inventory movement.

Average Inventory Processing Period

Correspondingly, the average number of days inventory is held inversely tracks the turnover ratio, ranging primarily between 41 and 72 days. Early periods report processing durations near 60 to 70 days, reflecting a relatively steady inventory holding time. The quarter ending August 1, 2020, coincides with a marked reduction to 41 days, aligning with the highest turnover ratio and indicating faster inventory processing. Subsequently, the processing period generally increases again, nearing or exceeding 70 days in recent quarters, which aligns with the observed decline in turnover ratio values. This suggests a lengthening in inventory holding times and potentially slower movement or sales.

In summary, the inventory management dynamics show periods of accelerated turnover and reduced holding times, notably in mid-2020, likely reflecting operational adjustments or market conditions favoring quicker inventory sales. However, the subsequent quarter-to-quarter fluctuations indicate a lack of consistent direction, culminating in a trend towards slower inventory processing and reduced turnover in the latest periods analyzed. These patterns highlight the need for continuous monitoring to optimize inventory levels and turnover rates in response to market and operational changes.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates notable fluctuations over the reported periods. Initially, the ratio fluctuates moderately around the 120 to 130 range, with intermittent peaks reaching approximately 160. A distinct sharp increase occurs in early 2020, where the ratio spikes dramatically to nearly 284, indicating a substantial acceleration in the efficiency of collecting receivables. This surge is followed by a significant drop to around 79 later in 2020, suggesting a sudden decline in collection efficiency. Subsequent periods show a gradual recovery with the ratio ranging between 90 and 160, although it does not consistently return to previous peak levels. The overall pattern reveals periods of both strong efficiency and volatility, potentially reflecting changes in credit policies, customer payment behavior, or external economic conditions affecting payment collection.

Average Receivable Collection Period

The average number of days to collect receivables generally remains stable, with typical values around 2 to 3 days across most periods. There is a short-term variation coinciding with the extreme changes in receivables turnover ratio; during the peak turnover periods, the collection period drops to a minimum of 1 day, indicating very rapid collections. Conversely, when the turnover ratio declines sharply, the days increase temporarily to around 4 to 5 days. Despite these temporary changes, the collection period quickly reverts to its usual range, suggesting the company maintains a generally consistent collection period throughout the analyzed timeframe.

Overall Insights

The analysis of the receivables turnover and the corresponding collection period confirms an inverse relationship between these two metrics, as expected, where higher turnover ratios correlate with shorter receivable collection times. The pronounced peak and trough in 2020 denote an extraordinary event or operational adjustment that significantly impacted receivables management within a short timeframe. Aside from this anomaly, the company exhibits relatively stable receivables management efficiency, maintaining collection periods mostly close to 2 to 3 days and turnover ratios within a moderate range. These trends suggest effective monitoring and maintenance of credit and collection policies, with some exceptional volatility likely tied to external or situational factors during the analyzed periods.

Inventory Processing Period

The inventory processing period exhibits notable fluctuations over the analyzed timeframe. Initially, values range between 59 and 70 days, suggesting moderate inventory turnover rates. A pronounced decrease occurs around August 2020, where the period drops sharply to 41 days, indicating enhanced inventory efficiency during that quarter. Following this dip, the period stabilizes but generally remains below earlier higher values until the most recent quarters, where it rises again to the high 60s and low 70s. This volatility may reflect operational adjustments or changing market conditions impacting inventory management.

Receivable Collection Period

The receivable collection period remains relatively stable throughout, predominantly oscillating between 2 and 3 days. An outlier emerges around August 2020 with an increase up to 5 days, followed by a gradual return to the typical 2-3 day range. This indicates a generally consistent and prompt collection process, with only brief disruptions, potentially due to external factors or changes in credit policies during that quarter.

Operating Cycle

The operating cycle largely mirrors the trends observed in the inventory processing period, with overall values fluctuating between the low 60s and low 70s. A significant reduction is again evident around August 2020, where the operating cycle sharply declines to the mid-40s, denoting improved operational efficiency during that period. Post this improvement, the cycle extends gradually back toward previous levels, suggesting temporary enhancement rather than a sustained change. The operating cycle stability, barring the noted period, reflects consistent management of inventory and receivables combined.

The payables turnover ratio and the average payables payment period demonstrate notable fluctuations across the examined quarters. Initially, the payables turnover ratio hovers mostly between approximately 7.5 and 9.5, with some quarters showing a slight increase or decrease but generally maintaining a relatively stable pattern from 2017 through early 2020. This ratio peaked sharply at 15.18 in the quarter ending May 2, 2020, indicating a significant acceleration in payables turnover during this period.

Following this peak, the payables turnover dropped markedly to 9.87 and then sharply declined to its lowest observed values of around 4.08 to 4.94 during the quarters spanning late 2020 through early 2022. Toward the end of the data period, the turnover ratio gradually improves again, reaching above 7 by late 2022.

Correspondingly, the average payables payment period inversely mirrors this pattern. It starts mostly in the range of mid-40s to high 40s of days, with occasional dips to around 39 days early in 2018. The payment period then dramatically contracts to as low as 24 days in May 2020, coinciding with the peak in payables turnover. Subsequently, the payment period extends significantly, reaching a maximum of 89 days in the quarter ending October 31, 2020. Over the following quarters, it remains elevated in the 70s and 80s days before steadily decreasing to about 51 days by the last quarter.

Payables Turnover Ratio

Generally stable around 7.5 to 9.5 from 2017 to early 2020.

Sharp peak to 15.18 in May 2020, followed by steep decline to lows around 4 in late 2020 to early 2022.

Gradual recovery above 7 by late 2022.

Average Payables Payment Period

Mostly ranges between 40 to 49 days initially, with some variability.

Sharp reduction to 24 days in May 2020, coincident with turnover peak.

Substantial increase to 89 days by October 2020, then remains elevated before declining to approximately 51 days at the end.

The inverse relationship between the payables turnover ratio and the average payment period is apparent, reflecting shorter payment periods correlate with higher turnover ratios and vice versa. The spike in turnover and compression of payment days around early 2020 could be indicative of altered payment policies or liquidity management amid external conditions affecting the company. The prolonged extension of payment period following that spike might reflect strategic cash flow management or responses to supply chain or financial constraints. The subsequent partial normalization of these metrics suggests a gradual stabilization in payables management practices toward late 2022.

Inventory Processing Period

The average inventory processing period exhibits fluctuations throughout the observed timeframe. Initially, values range mostly between 58 and 70 days, indicating varying inventory turnover speeds. A notable decline occurs around mid-2020, with the period dropping as low as 41 days, suggesting improved inventory efficiency during that quarter. However, in subsequent periods, the processing days rise again, reaching up to 72 days by late 2022, which may imply slower inventory movement or increased stockholding during that time.

Receivable Collection Period

The average receivable collection period remains consistently low, generally between 1 and 5 days. This stability reflects efficient collection practices and strong credit management. Minor variations do not indicate any significant trend shifts, thereby maintaining a relatively steady cash inflow cycle in terms of receivables.

Payables Payment Period

The average payables payment period shows considerable variability. Initially fluctuating mostly between 39 and 49 days, a pronounced increase occurs from late 2020 into 2021, with payment periods extending up to a high of 89 days. This prolonged payment timeframe suggests a strategy of delayed payments to suppliers during this period. Subsequently, the payment period declines again to around 51 days by the end of 2022, moving closer to earlier levels.

Cash Conversion Cycle (CCC)

The cash conversion cycle, which combines the receivables, inventory, and payables periods, generally persists within a range of roughly 18 to 25 days before 2020. A notable deviation occurs during 2020 and early 2021, where the CCC sharply decreases, even reaching negative values (up to -25 days). Negative CCC indicates that the company collects cash from customers before needing to pay suppliers, reflecting improved liquidity management or altered operational conditions during this time. From mid-2021 onward, the CCC increases again, fluctuating back to positive values around 16 to 19 days, indicating a return to more typical cash flow timing.