Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
The analysis of the financial turnover and cycle metrics reveals several notable trends over the six-year period. Inventory turnover has experienced moderate fluctuation, starting at 1.33 in August 2018, decreasing slightly to 1.27 by August 2019, then gradually increasing again to 1.45 by August 2023. This indicates some variability in inventory management efficiency, with an overall slight improvement toward the end of the period.
Receivables turnover demonstrates a consistent decline from 43.47 in August 2018 to 33.55 in August 2023, suggesting a lengthening in the collection period or a reduction in the speed of converting receivables into cash. Correspondingly, the average receivable collection period increased from 8 days to 11 days, confirming slower cash inflows from receivables over the years.
Payables turnover remained relatively stable, fluctuating narrowly between 1.07 and 1.19 during the period, indicating consistent payment practices to suppliers. The average payables payment period correspondingly showed a gradual increase from 307 days in 2018 to a peak of 343 days in 2022 before decreasing to 313 days in 2023. This suggests a more extended use of supplier credit, particularly around 2022.
Inventory processing periods decreased notably from 274 days in 2018 to a low of 245 days in 2021, reflecting improved inventory movement, though it increased slightly to 265 days in 2022 and then declined again to 251 days in 2023. The operating cycle, which combines inventory and receivables timings, shortened from 282 days in 2018 to 254 days in 2021 before rising to 276 days in 2022 and declining again to 262 days in 2023, indicating overall improvements with some variability.
The cash conversion cycle remained negative throughout the period, ranging from -25 days to as much as -67 days, with a notable dip to -67 days in 2022 and a rebound to -51 days in 2023. A negative cash conversion cycle means the company is able to collect cash from operations faster than it needs to pay its suppliers, an advantageous position reflecting strong working capital management.
Working capital turnover data is incomplete but presents a notably high figure of 23.89 in 2020, suggesting efficient use of working capital during that year, though comparable data for other years is unavailable.
In summary, the company exhibited generally improving efficiency in inventory management and maintained stable payables practices, though with some extension in payment periods during recent years. Receivables collection trends indicate a modest slowing in collection speed. The overall negative cash conversion cycle underscores effective cash flow management, allowing the company to finance its operations efficiently by leveraging supplier credit effectively.
Turnover Ratios
Average No. Days
Inventory Turnover
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Cost of sales, including warehouse and delivery expenses | 8,386,787) | 7,779,580) | 6,911,800) | 5,861,214) | 5,498,742) | 5,247,331) | |
Merchandise inventories | 5,764,143) | 5,638,004) | 4,639,813) | 4,473,282) | 4,319,113) | 3,943,670) | |
Short-term Activity Ratio | |||||||
Inventory turnover1 | 1.45 | 1.38 | 1.49 | 1.31 | 1.27 | 1.33 | |
Benchmarks | |||||||
Inventory Turnover, Competitors2 | |||||||
Amazon.com Inc. | 9.15 | 8.40 | 8.34 | 9.80 | — | — | |
Home Depot Inc. | 4.20 | 4.55 | 5.25 | 5.00 | — | — | |
Lowe’s Cos. Inc. | 3.50 | 3.65 | 3.71 | 3.73 | — | — | |
TJX Cos. Inc. | 6.21 | 5.82 | 5.66 | 6.13 | — | — | |
Inventory Turnover, Sector | |||||||
Consumer Discretionary Distribution & Retail | 6.18 | 6.10 | 6.36 | 6.83 | — | — | |
Inventory Turnover, Industry | |||||||
Consumer Discretionary | 6.99 | 6.67 | 7.04 | 7.48 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Inventory turnover = Cost of sales, including warehouse and delivery expenses ÷ Merchandise inventories
= 8,386,787 ÷ 5,764,143 = 1.45
2 Click competitor name to see calculations.
- Cost of Sales, Including Warehouse and Delivery Expenses
- The cost of sales, including warehouse and delivery expenses, showed a consistent upward trend over the six-year period. Starting at approximately 5.25 billion USD in 2018, it increased each year and reached about 8.39 billion USD by 2023. The rate of increase appeared to accelerate particularly from 2020 onwards, indicating rising operational costs or possibly increased sales volume during these years.
- Merchandise Inventories
- Merchandise inventories also exhibited a steady increase from 3.94 billion USD in 2018 to 5.76 billion USD in 2023. The largest relative increases occurred in the last two years of the period, suggesting a buildup of inventory. This may indicate either preparation for anticipated demand growth or potential challenges in inventory turnover efficiency.
- Inventory Turnover Ratio
- The inventory turnover ratio fluctuated over the period but generally remained within a narrow range. It started at 1.33 in 2018, declined slightly to 1.27 by 2019, then increased to 1.49 by 2021, reflecting improved efficiency in managing inventory. After a dip to 1.38 in 2022, it rose again to 1.45 in 2023. These fluctuations suggest some variability in how quickly inventory is sold and replaced but indicate an overall moderate level of turnover efficiency.
- Summary of Trends
- Overall, the financial data reveals steady growth in both costs and inventory levels, with a generally stable inventory turnover ratio. The rising cost of sales could reflect expanded operations or increased market demand. Meanwhile, the growth in inventory levels coupled with relatively stable turnover suggests an effort to optimize inventory management. However, the modest fluctuations in turnover ratio imply that inventory management remains an area for continuous attention to maintain operational efficiency.
Receivables Turnover
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Net sales | 17,457,209) | 16,252,230) | 14,629,585) | 12,631,967) | 11,863,743) | 11,221,077) | |
Accounts receivable | 520,385) | 504,886) | 378,392) | 364,774) | 308,995) | 258,136) | |
Short-term Activity Ratio | |||||||
Receivables turnover1 | 33.55 | 32.19 | 38.66 | 34.63 | 38.39 | 43.47 | |
Benchmarks | |||||||
Receivables Turnover, Competitors2 | |||||||
Amazon.com Inc. | 16.86 | 19.32 | 23.26 | 26.09 | — | — | |
Home Depot Inc. | 47.45 | 44.12 | 44.15 | 52.34 | — | — | |
Lowe’s Cos. Inc. | — | — | — | — | — | — | |
TJX Cos. Inc. | 88.70 | 93.79 | 69.69 | 108.00 | — | — | |
Receivables Turnover, Sector | |||||||
Consumer Discretionary Distribution & Retail | 23.15 | 26.52 | 30.59 | 35.28 | — | — | |
Receivables Turnover, Industry | |||||||
Consumer Discretionary | 17.85 | 17.96 | 21.22 | 21.85 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Receivables turnover = Net sales ÷ Accounts receivable
= 17,457,209 ÷ 520,385 = 33.55
2 Click competitor name to see calculations.
- Net Sales
- Net sales demonstrated a consistent upward trend across the six-year period. Beginning at approximately $11.22 billion in 2018, sales steadily increased each year, reaching about $17.46 billion by 2023. The growth was particularly notable from 2020 to 2021, where there was a marked increase of nearly $2 billion, suggesting enhanced revenue generation or market expansion efforts.
- Accounts Receivable
- Accounts receivable also showed an overall rising trajectory, moving from around $258 million in 2018 to over $520 million in 2023. The increase was relatively gradual initially but accelerated notably between 2021 and 2022, with outstanding receivables jumping from roughly $378 million to approximately $505 million, before a modest rise in 2023. This pattern could indicate either extended credit terms, increased sales on credit, or potential challenges in collection efficiency.
- Receivables Turnover Ratio
- The receivables turnover ratio exhibited fluctuations, starting at 43.47 in 2018 and declining to a low point of 32.19 in 2022 before slightly recovering to 33.55 in 2023. The downward trend suggests a slowing in the rate at which receivables are collected relative to sales, potentially reflecting longer collection periods or changes in credit policy. The partial rebound in the last year indicates a possible improvement in receivables management or collection processes.
Payables Turnover
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Cost of sales, including warehouse and delivery expenses | 8,386,787) | 7,779,580) | 6,911,800) | 5,861,214) | 5,498,742) | 5,247,331) | |
Accounts payable | 7,201,281) | 7,301,347) | 6,013,924) | 5,156,324) | 4,864,912) | 4,409,372) | |
Short-term Activity Ratio | |||||||
Payables turnover1 | 1.16 | 1.07 | 1.15 | 1.14 | 1.13 | 1.19 | |
Benchmarks | |||||||
Payables Turnover, Competitors2 | |||||||
Amazon.com Inc. | 3.59 | 3.63 | 3.46 | 3.22 | — | — | |
Home Depot Inc. | 9.14 | 7.45 | 7.52 | 9.33 | — | — | |
Lowe’s Cos. Inc. | 6.16 | 5.65 | 5.51 | 6.42 | — | — | |
TJX Cos. Inc. | 9.53 | 7.77 | 5.09 | 11.17 | — | — | |
Payables Turnover, Sector | |||||||
Consumer Discretionary Distribution & Retail | 4.61 | 4.48 | 4.19 | 4.25 | — | — | |
Payables Turnover, Industry | |||||||
Consumer Discretionary | 5.18 | 4.80 | 4.66 | 4.74 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Payables turnover = Cost of sales, including warehouse and delivery expenses ÷ Accounts payable
= 8,386,787 ÷ 7,201,281 = 1.16
2 Click competitor name to see calculations.
The financial data over the six-year period reveals several notable trends in cost management and liabilities.
- Cost of Sales, including warehouse and delivery expenses
- This figure demonstrated a steady and consistent increase each year, rising from approximately 5.25 billion USD in 2018 to nearly 8.39 billion USD in 2023. This represents a significant growth, reflecting potentially increased sales volume, inflationary impacts, or expanded operational costs related to warehousing and delivery.
- Accounts Payable
- Accounts payable generally increased from about 4.41 billion USD in 2018 to a peak near 7.30 billion USD in 2022, followed by a slight decrease to approximately 7.20 billion USD in 2023. The growth trend suggests that the company has been lengthening payment terms or increasing purchases on credit, while the slight decline in 2023 may indicate a change in payment policies or supplier negotiation dynamics.
- Payables Turnover Ratio
- The payables turnover ratio exhibited relative stability, fluctuating around the range of 1.07 to 1.19 over the period. It started at 1.19 in 2018, decreased gradually to 1.07 in 2022, then increased again to 1.16 in 2023. This ratio's modest variation suggests consistency in how quickly the company settles its payables relative to its credit purchases, with a slight tendency toward slower payments in recent years before an uptick in 2023.
Overall, the data points to growing operational scale as evidenced by rising costs and payables. Despite increases in accounts payable, the company's turnover ratio has remained relatively stable, indicating consistent payment behavior. The slight fluctuation in turnover ratio and recent decrease in payables might signal emerging changes in supplier relationships or internal cash management strategies.
Working Capital Turnover
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Current assets | 6,779,426) | 6,627,984) | 6,415,303) | 6,811,872) | 5,028,685) | 4,635,869) | |
Less: Current liabilities | 8,511,856) | 8,588,393) | 7,369,754) | 6,283,091) | 5,512,141) | 5,028,681) | |
Working capital | (1,732,430) | (1,960,409) | (954,451) | 528,781) | (483,456) | (392,812) | |
Net sales | 17,457,209) | 16,252,230) | 14,629,585) | 12,631,967) | 11,863,743) | 11,221,077) | |
Short-term Activity Ratio | |||||||
Working capital turnover1 | — | — | — | 23.89 | — | — | |
Benchmarks | |||||||
Working Capital Turnover, Competitors2 | |||||||
Amazon.com Inc. | 77.32 | — | 24.33 | 60.82 | — | — | |
Home Depot Inc. | 16.81 | 417.56 | 24.87 | 76.81 | — | — | |
Lowe’s Cos. Inc. | 50.26 | 245.54 | 24.92 | 530.50 | — | — | |
TJX Cos. Inc. | 23.22 | 17.40 | 6.51 | 23.97 | — | — | |
Working Capital Turnover, Sector | |||||||
Consumer Discretionary Distribution & Retail | 42.11 | — | 21.83 | 63.17 | — | — | |
Working Capital Turnover, Industry | |||||||
Consumer Discretionary | 14.99 | 18.57 | 11.02 | 13.68 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Working capital turnover = Net sales ÷ Working capital
= 17,457,209 ÷ -1,732,430 = —
2 Click competitor name to see calculations.
- Working Capital
- The working capital figures exhibit significant volatility over the analyzed years. Beginning with a negative value of -392,812 thousand US dollars in 2018, the trend worsened in 2019 to -483,456 thousand US dollars. A notable positive turnaround occurred in 2020 when working capital rose sharply to 528,781 thousand US dollars. However, this improvement was short-lived as the subsequent years saw a steep decline to -954,451 thousand US dollars in 2021, then further deteriorating to -1,960,409 thousand US dollars in 2022, and slightly improving but remaining negative at -1,732,430 thousand US dollars in 2023. Overall, the working capital demonstrates a pattern of instability with predominantly negative values in most years, pointing to potential liquidity challenges.
- Net Sales
- Net sales followed a strong upward trajectory throughout the period under review. Starting at approximately 11.22 billion US dollars in 2018, net sales increased consistently each year, reaching 11.86 billion in 2019, 12.63 billion in 2020, 14.63 billion in 2021, 16.25 billion in 2022, and ultimately 17.46 billion US dollars in 2023. This continuous growth trend signifies robust revenue expansion and increasing market demand or effective sales strategies during the time frame.
- Working Capital Turnover
- Working capital turnover data is only reported for 2020, indicating a ratio of 23.89. The absence of comparative data from other years limits the ability to analyze trends or drawing conclusions on operational efficiency related to working capital management. Nevertheless, the available figure suggests a high turnover relative to working capital in that year.
Average Inventory Processing Period
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data | |||||||
Inventory turnover | 1.45 | 1.38 | 1.49 | 1.31 | 1.27 | 1.33 | |
Short-term Activity Ratio (no. days) | |||||||
Average inventory processing period1 | 251 | 265 | 245 | 279 | 287 | 274 | |
Benchmarks (no. days) | |||||||
Average Inventory Processing Period, Competitors2 | |||||||
Amazon.com Inc. | 40 | 43 | 44 | 37 | — | — | |
Home Depot Inc. | 87 | 80 | 70 | 73 | — | — | |
Lowe’s Cos. Inc. | 104 | 100 | 98 | 98 | — | — | |
TJX Cos. Inc. | 59 | 63 | 65 | 60 | — | — | |
Average Inventory Processing Period, Sector | |||||||
Consumer Discretionary Distribution & Retail | 59 | 60 | 57 | 53 | — | — | |
Average Inventory Processing Period, Industry | |||||||
Consumer Discretionary | 52 | 55 | 52 | 49 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 1.45 = 251
2 Click competitor name to see calculations.
- Inventory Turnover Ratio
- The inventory turnover ratio showed some fluctuations over the six-year period. It started at 1.33 in 2018, slightly declined to 1.27 in 2019, then rose modestly to 1.31 in 2020. A more pronounced increase occurred in 2021, reaching 1.49, followed by a slight decrease to 1.38 in 2022. The ratio increased again in 2023 to 1.45. Overall, this indicates that the company improved its efficiency in selling and replenishing inventory over the period, especially marked by the peak in 2021.
- Average Inventory Processing Period
- The average inventory processing period, expressed in number of days, demonstrated an inverse pattern relative to the turnover ratio. Starting at 274 days in 2018, it increased to 287 days in 2019, suggesting slower inventory movement. It then decreased to 279 days in 2020 and saw a significant reduction to 245 days in 2021, indicating faster inventory processing. In 2022, the period lengthened to 265 days before decreasing again to 251 days in 2023. This overall variation reflects shifts in inventory management efficiency, with the shortest processing time in 2021 aligning with the highest turnover ratio of that year.
- Summary of Trends
- Analysis of both metrics indicates that inventory management efficiency experienced periods of both decline and improvement. The notable improvement in 2021, characterized by a higher turnover ratio and reduced inventory processing days, suggests an enhanced operational focus on inventory movement during that year. Although some regression occurred in 2022, the 2023 data shows a return toward improved efficiency. This pattern might reflect responses to external factors affecting inventory demand and supply chain dynamics.
Average Receivable Collection Period
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data | |||||||
Receivables turnover | 33.55 | 32.19 | 38.66 | 34.63 | 38.39 | 43.47 | |
Short-term Activity Ratio (no. days) | |||||||
Average receivable collection period1 | 11 | 11 | 9 | 11 | 10 | 8 | |
Benchmarks (no. days) | |||||||
Average Receivable Collection Period, Competitors2 | |||||||
Amazon.com Inc. | 22 | 19 | 16 | 14 | — | — | |
Home Depot Inc. | 8 | 8 | 8 | 7 | — | — | |
Lowe’s Cos. Inc. | — | — | — | — | — | — | |
TJX Cos. Inc. | 4 | 4 | 5 | 3 | — | — | |
Average Receivable Collection Period, Sector | |||||||
Consumer Discretionary Distribution & Retail | 16 | 14 | 12 | 10 | — | — | |
Average Receivable Collection Period, Industry | |||||||
Consumer Discretionary | 20 | 20 | 17 | 17 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 33.55 = 11
2 Click competitor name to see calculations.
The receivables turnover ratio demonstrates a fluctuating trend over the six-year period. Initially, there is a decline from 43.47 in 2018 to 34.63 in 2020, indicating that the company was collecting its receivables less frequently during these years. Subsequently, the ratio shows a partial recovery in 2021 at 38.66 before decreasing again to 33.55 by 2023. This overall downward movement from 2018 to 2023 suggests a lengthening in the credit collection cycle or potentially less efficient receivables management.
Correspondingly, the average receivable collection period, expressed in days, reflects an inverse relationship to the receivables turnover ratio. The collection period increased from 8 days in 2018 to 11 days by 2020. After a brief reduction to 9 days in 2021, it reverted to 11 days in 2022 and remained steady through 2023. This indicates that, on average, customers are taking longer to pay their invoices compared to earlier periods, leading to a lengthening of the cash conversion cycle.
The interplay between these two metrics suggests a slight deterioration in the company's efficiency in managing accounts receivable over the period reviewed. While there was a temporary improvement in 2021, the overall trend points toward an extended collection period and reduced turnover, which could have implications on liquidity and working capital management if the trend continues.
Operating Cycle
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data | |||||||
Average inventory processing period | 251 | 265 | 245 | 279 | 287 | 274 | |
Average receivable collection period | 11 | 11 | 9 | 11 | 10 | 8 | |
Short-term Activity Ratio | |||||||
Operating cycle1 | 262 | 276 | 254 | 290 | 297 | 282 | |
Benchmarks | |||||||
Operating Cycle, Competitors2 | |||||||
Amazon.com Inc. | 62 | 62 | 60 | 51 | — | — | |
Home Depot Inc. | 95 | 88 | 78 | 80 | — | — | |
Lowe’s Cos. Inc. | — | — | — | — | — | — | |
TJX Cos. Inc. | 63 | 67 | 70 | 63 | — | — | |
Operating Cycle, Sector | |||||||
Consumer Discretionary Distribution & Retail | 75 | 74 | 69 | 63 | — | — | |
Operating Cycle, Industry | |||||||
Consumer Discretionary | 72 | 75 | 69 | 66 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 251 + 11 = 262
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period experienced fluctuations over the observed years. It started at 274 days in 2018, increased to a peak of 287 days in 2019, then decreased to 279 days in 2020 and dropped more significantly to 245 days by 2021. Following this decline, the period rose again to 265 days in 2022 before slightly reducing to 251 days in 2023. Overall, there is a trend of reduction in inventory processing time after 2019, indicating improvements in inventory management efficiency.
- Average Receivable Collection Period
- The average receivable collection period showed a modest upward trend with some stability toward the end. It began at 8 days in 2018, increased to 10 days in 2019, and then to 11 days by 2020. Although it decreased to 9 days in 2021, it rose back to 11 days in 2022 and remained steady at 11 days in 2023. This suggests a slight lengthening in the time taken to collect receivables compared to the initial year, with some variability in the middle years.
- Operating Cycle
- The operating cycle, a sum of inventory processing and receivable collection periods, exhibited a pattern similar to the inventory period. It increased from 282 days in 2018 to a high of 297 days in 2019, then declined to 290 days in 2020 and markedly to 254 days in 2021. After this reduction, it increased to 276 days in 2022 and decreased again to 262 days in 2023. The general decline after 2019 indicates an improvement in overall operational efficiency, although there was a temporary reversal in 2022.
Average Payables Payment Period
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data | |||||||
Payables turnover | 1.16 | 1.07 | 1.15 | 1.14 | 1.13 | 1.19 | |
Short-term Activity Ratio (no. days) | |||||||
Average payables payment period1 | 313 | 343 | 318 | 321 | 323 | 307 | |
Benchmarks (no. days) | |||||||
Average Payables Payment Period, Competitors2 | |||||||
Amazon.com Inc. | 102 | 101 | 105 | 113 | — | — | |
Home Depot Inc. | 40 | 49 | 49 | 39 | — | — | |
Lowe’s Cos. Inc. | 59 | 65 | 66 | 57 | — | — | |
TJX Cos. Inc. | 38 | 47 | 72 | 33 | — | — | |
Average Payables Payment Period, Sector | |||||||
Consumer Discretionary Distribution & Retail | 79 | 81 | 87 | 86 | — | — | |
Average Payables Payment Period, Industry | |||||||
Consumer Discretionary | 70 | 76 | 78 | 77 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 1.16 = 313
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio exhibits relatively stable behavior over the six-year period with minor fluctuations. It started at 1.19 in 2018, experienced a slight decline to 1.13 and 1.14 in 2019 and 2020 respectively, followed by a marginal increase to 1.15 in 2021. The ratio decreased again to 1.07 in 2022 before recovering to 1.16 in 2023. Overall, the ratio remains close to the initial value, indicating consistent management of payables relative to purchases or cost of sales.
- Average Payables Payment Period (Days)
- The average payables payment period reveals more pronounced variability. It increased from 307 days in 2018 to 323 days in 2019, remaining relatively stable at 321 and 318 days in 2020 and 2021. A notable increase occurred in 2022, reaching 343 days, which is the highest in the period under review. This was followed by a reduction to 313 days in 2023. The generally long payment periods suggest extended payment terms or slower disbursement of payables, with the peak in 2022 possibly indicating a strategic delay in payments or other influencing factors.
- Overall Insights
- The inverse relationship between payables turnover and average payment period is observed, as expected. The increase in payment period in 2022 corresponds with a decline in payables turnover that year. Despite fluctuations, the company appears to maintain a consistent approach to managing payables, balancing between turnover efficiency and cash flow considerations. The reduction in payment days in 2023 combined with the improvement in turnover ratio may suggest renewed emphasis on faster settling of obligations.
Cash Conversion Cycle
Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data | |||||||
Average inventory processing period | 251 | 265 | 245 | 279 | 287 | 274 | |
Average receivable collection period | 11 | 11 | 9 | 11 | 10 | 8 | |
Average payables payment period | 313 | 343 | 318 | 321 | 323 | 307 | |
Short-term Activity Ratio | |||||||
Cash conversion cycle1 | -51 | -67 | -64 | -31 | -26 | -25 | |
Benchmarks | |||||||
Cash Conversion Cycle, Competitors2 | |||||||
Amazon.com Inc. | -40 | -39 | -45 | -62 | — | — | |
Home Depot Inc. | 55 | 39 | 29 | 41 | — | — | |
Lowe’s Cos. Inc. | — | — | — | — | — | — | |
TJX Cos. Inc. | 25 | 20 | -2 | 30 | — | — | |
Cash Conversion Cycle, Sector | |||||||
Consumer Discretionary Distribution & Retail | -4 | -7 | -18 | -23 | — | — | |
Cash Conversion Cycle, Industry | |||||||
Consumer Discretionary | 2 | -1 | -9 | -11 | — | — |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 2023 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 251 + 11 – 313 = -51
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited fluctuations over the examined years. It increased from 274 days in 2018 to a peak of 287 days in 2019, followed by a decline to 245 days by 2021. The figure then rose again to 265 days in 2022 before decreasing to 251 days in 2023. This indicates variability in inventory management efficiency, with no consistent directional trend but a general tendency to shorten the period after 2019.
- Average Receivable Collection Period
- The average receivable collection period showed a gradual upward trend. Starting at 8 days in 2018, it increased to 10 days in 2019 and further to 11 days by 2020, maintaining at 11 days through 2023 with a slight decrease to 9 days in 2021. This suggests a mild lengthening in the time taken to collect receivables over the analyzed period, indicating a potential slight deterioration in credit management or customer payment terms.
- Average Payables Payment Period
- The average payables payment period exhibited an overall increasing trend from 307 days in 2018 to a high of 343 days in 2022 before declining to 313 days in 2023. The increase between 2021 and 2022 is notable, potentially indicating extended supplier payment terms or increased leveraging of credit from suppliers, followed by a reduction the subsequent year.
- Cash Conversion Cycle
- The cash conversion cycle, which measures the net duration between cash outflows and inflows, remained negative throughout the period, indicating the company consistently used supplier financing to support operations. The negative cycle deepened notably from -25 days in 2018 to -67 days in 2022, before improving to -51 days in 2023. This implies an increasing efficiency in converting resources into cash up to 2022, followed by a slight decrease in efficiency but still maintaining a significant negative cycle, which reflects strong working capital management.