Best Buy Co. Inc. (NYSE:BBY)

Inventory Turnover

Inventory turnover experienced fluctuations over the periods, generally oscillating between roughly 4 and 8. Notable peaks occurred around early 2020 with a value of 8.32 and mid-2020 with 8.12, indicating periods of more rapid inventory movement. Conversely, several troughs near 4.0 to 5.2 were seen in late 2017, late 2018, and late 2021, suggesting slower inventory turnover during those intervals. The most recent periods show a moderate turnover around 5.16.

Receivables Turnover

This ratio exhibited an overall upward trend over the analyzed timeframe. Starting in the upper 30s to low 40s range in 2017, the turnover increased consistently, peaking above 63 in mid-2022. This suggests an improvement in the efficiency of collecting receivables, with the latest figures still comparatively high, indicating effective credit and collection policies.

Payables Turnover

Payables turnover also displayed variability, fluctuating mostly between approximately 4 and 7.5. Peaks reaching above 7.0 appeared a few times, such as in mid-2020, mid-2022, and late 2017, while several declines to around 4-5 were evident in late 2017, late 2019, and late 2020. This pattern points to fluctuating payment pacing to suppliers, alternating between faster and slower settlements across quarters.

Working Capital Turnover

Working capital turnover showed a strong upward trajectory through much of the dataset, moving from low double digits around 12-28 in 2017 and 2018, to a substantial spike beyond 224 in mid-2020. Even though the turnover declined somewhat after this peak, it remained relatively elevated, over 23 in early 2021. This indicates increasing efficiency in generating sales from working capital, albeit with some extreme variation.

Average Inventory Processing Period

The average days inventory remained in stock broadly corresponded inversely to inventory turnover data. It ranged from around 55-62 days in early periods, rising sharply to nearly 90 days in late 2017 and late 2018, before dropping back to mid-40s days around early to mid-2020. Values again reached approximately 70+ days in late 2022. The periods of higher days in inventory suggest slower stock movement, while lower days indicate improved inventory management.

Average Receivable Collection Period

This metric remained relatively stable, predominantly fluctuating between 6 and 10 days throughout the periods. Minor decreases to as low as 6 days in some quarters around 2020-2022 suggest slight improvements in collection speed, complementing the increasing receivables turnover ratio.

Operating Cycle

The operating cycle, summing inventory and receivables processing periods, mirrored the inventory period's fluctuations but remained within a range of approximately 50 to 97 days. The cycle peaked in late 2017 and late 2018 near 90+ days, while notable reductions to about 50 days occurred in early 2020. This indicates varying durations to convert raw materials into cash through sales and collection, with some improvement visible in recent years.

Average Payables Payment Period

The average time taken to pay suppliers varied between roughly 49 and 94 days, showing a significant peak above 90 days in late 2020. Generally, the payables period was near 50-60 days in most periods, with increases indicating extended payment terms or slower supplier payments at times. These fluctuations imply management's changing strategies in balancing cash outflows.

Cash Conversion Cycle

The cash conversion cycle exhibited considerable variability, oscillating between positive double digits and slightly negative values. It reached a minimum of negative 19 days in mid-2020 and generally remained low afterward, including some small positive values around 10-13 days in certain quarters. Negative or near-zero cash conversion cycles suggest the firm was effectively timing its cash inflows and outflows, reducing the amount of capital tied up in the operating cycle, particularly around 2020.

Cost of Sales

The cost of sales exhibits a pattern of seasonal fluctuations with notable peaks in the first quarter of each year, reflecting cyclical business activity. There is a distinct increase in cost of sales during the February periods, particularly visible in 2018, 2019, and 2021, with values significantly higher than other quarters within the same fiscal year. Over the analyzed period, the trend suggests moderate growth in cost of sales with intermittent upward spikes corresponding to seasonal demand. The data from 2020 and 2021 show a recovery and strong increase after the initial pandemic impact, indicating rebound and growth patterns.

Merchandise Inventories

Merchandise inventories display irregular fluctuations across quarters with periodic spikes, particularly in the fourth quarter of several years such as 2017, 2018, and 2021. These increases align with retail cycles, likely reflecting preparations for higher sales volumes during peak seasons. A significant drop is noticeable in mid-2020, which correlates with the onset of the COVID-19 pandemic's operational impact. Following this period, inventory levels generally trend upwards again, suggesting normalization and adjustment to new demand conditions. Inventory values tend to decrease slightly in the early quarters each year before rising again toward year-end.

Inventory Turnover

The inventory turnover ratio exhibits a distinct seasonal pattern, typically dipping in the fourth quarter, which corresponds to periods of increased inventory accumulation. Conversely, turnover peaks in the early part of the year, often around the first quarter, reflecting rapid inventory movement post-holiday season. The ratio trend indicates periods of both increased efficiency and temporary buildups of stock, consistent with the cyclical nature of retail operations. Notably, turnover ratios show improvement in certain years such as 2020, where it reaches above 8.0, suggesting more efficient inventory management during these periods possibly driven by pandemic-influenced changes in sales and supply chain dynamics.

Overall Insights

The data collectively reveal a business with strong seasonal effects impacting sales costs, inventory levels, and turnover efficiency. Peaks in cost of sales and inventory accumulation in late calendar quarters point to strategic stock building for seasonal sales increases. Variability in inventory turnover highlights changing efficiency and demand conditions, with notable improvement in some pandemic-affected periods. The interplay between these metrics suggests responsive inventory management practices, adjusted for fluctuating market conditions and demand cycles over time.

Revenue Trend

The revenue figures exhibit a pronounced seasonal pattern with notable increases in early fiscal quarters, particularly around February. The revenue peaks were consistently observed in the first quarter of each fiscal year, with several spikes such as $15,363 million in February 2018 and $16,937 million in January 2021. Between these peaks, there are moderate declines in subsequent quarters, followed by a steady recovery. Over the entire period, revenue ranges approximately from $8,500 million to over $16,000 million, indicating strong cyclical sales performance likely aligned with holiday seasons or promotional periods.

Receivables, Net Trend

The net receivables demonstrate slight fluctuations over the quarters, generally varying between approximately $750 million and $1,150 million. Similar to revenue, receivables tend to be lower in the quarters following revenue peaks, reflecting a potentially effective collection process after high sales periods. Periods with the highest receivables do not always coincide directly with revenue peaks, indicating some variability in the timing of cash collections or credit sales management.

Receivables Turnover Ratio Trend

The receivables turnover ratio shows a fluctuating but generally high level, varying predominantly from around 37 to over 63 times. Higher turnover ratios, often above 50, indicate efficient collections and quick conversion of receivables into cash. Notable increases in turnover are observed in some mid-period quarters, suggesting improvements in credit management or payment terms. However, occasional dips below 40 imply periods where receivables may have aged more, potentially indicating temporary collection challenges.

Overall Insights

The cyclical pattern of revenue and accompanying trends in receivables and turnover ratios align with expected retail seasonality. The company appears to maintain relatively strong receivables management, with turnover ratios generally signaling effective credit and collection policies. The significant revenue surges in early fiscal quarters, followed by collected receivables and variable turnover, illustrate a typical retail operational cycle characterized by seasonal demand spikes and subsequent cash collection phases.

Cost of Sales

The cost of sales shows a pattern of seasonal fluctuations with notable peaks in the first quarter of each fiscal year, corresponding to the February dates. For example, sharp increases occur in Feb 3, 2018; Feb 2, 2019; Feb 1, 2020; Jan 30, 2021; and Jan 29, 2022. Outside of these peaks, the quarterly costs remain relatively stable, fluctuating in the range of approximately $6.5 billion to $9 billion. Additionally, the highest observed cost was $13.394 billion in January 2021, indicating a significant seasonal demand or inventory purchase at this time.

Accounts Payable

Accounts payable also demonstrates a strong seasonal pattern aligned closely with the cost of sales peaks. There are larger amounts recorded during the quarters with the higher cost of sales, such as Nov 3, 2018, and Oct 30, 2021, reaching levels above $7 billion and at times exceeding $8 billion. Outside these intervals, payables fluctuate between roughly $4.4 billion and $7 billion, showing some volatility but generally following the cyclical trends of cost activity within the company.

Payables Turnover Ratio

The payables turnover ratio, which measures how many times the company pays off its accounts payable during the period, reveals a corresponding inverse trend relative to accounts payable balances. The ratio falls to lower values when accounts payable are high; for instance, notable troughs occur in Oct 28, 2017 (4.67), Nov 3, 2018 (4.19), and Oct 31, 2020 (3.87). Conversely, the ratio peaks when payables are lower, such as May 2, 2020 (7.5) and Jul 30, 2022 (7.12). This pattern suggests that during periods of elevated payables, the company takes longer to pay its suppliers, possibly reflecting cash flow management strategies during peak inventory or sales periods.

Overall Insights

The data indicates that the company experiences consistent quarterly seasonality characterized by sharp increases in cost of sales and accounts payable chiefly in the first quarter of each fiscal year. This seasonality influences the payables turnover ratio, which decreases during these peak times suggesting extended payment cycles. The periodic fluctuations in payables and their turnover ratio imply strategic cash flow and working capital management to accommodate elevated operational demands during certain quarters.

The financial data reveals several significant trends and patterns over the observed periods. Working capital demonstrates a clear declining trajectory from April 2017 through the end of 2019, dropping from 3,186 million US dollars to a low of 449 million US dollars. This downward movement indicates a tightening of short-term liquidity and resource availability. However, beginning in early 2020, there is a noticeable increase in working capital values, peaking at 2,019 million US dollars in May 2021, before resuming a downward trend into negative territory by early 2022 with values such as -135 million US dollars and further declines thereafter. The shift into negative working capital suggests potential challenges related to managing short-term assets and liabilities during this latter period.

Revenue figures exhibit a repeating seasonal pattern, with spikes generally occurring in the first quarter of each year (February to early May), likely reflecting strong sales during holiday and promotional periods. For example, revenues surge to values above 15,000 million US dollars in early 2018 and early 2019, and again in early 2021 and early 2022 with values reaching as high as 16,365 million US dollars. Between these peaks, revenue tends to stabilize around 9,000 to 12,000 million US dollars, indicating a consistent underlying business performance punctuated by significant quarterly increases. The general trend in revenue is upward, with higher peak values and stronger overall quarterly revenues observed in the later periods compared to the earlier years.

The working capital turnover ratio reflects the efficiency of using working capital to generate revenue. Starting at 12.39 in April 2017, this ratio increases substantially over the following quarters, reaching an exceptionally high 224.26 in May 2020. Such a dramatic increase suggests a sharp reduction in working capital relative to revenue during that period, consistent with the observed low working capital value. Subsequent values show considerable fluctuation, but generally remain elevated compared to the earlier years, with ratios often above 20 or 30, indicating an overall more aggressive or tighter management of working capital relative to revenue generation. However, missing data in the last three quarters precludes evaluation of continuity in this ratio toward the end of the period.

In summary, the company appears to have increasingly optimized or compressed its working capital relative to revenue, as evidenced by the rising working capital turnover ratio despite ongoing fluctuations and even intermittent negative working capital levels. Meanwhile, revenue growth has been steady with strong seasonal peaks, suggesting resilience in demand or successful sales strategies. The negative working capital figures toward the end of the timeline may merit careful analysis to assess liquidity risks or changes in operational management practices.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a fluctuating trend over the observed periods. Initial values start around 6.51, then decline to a low of approximately 4.08 in late 2018. Subsequently, there is a recovery with peaks reaching over 8.3 in mid-2020, indicating improved efficiency in inventory management during that time. Later periods show a pattern of oscillation between roughly 4.7 and 6.8, suggesting some variability but generally maintaining a moderate turnover pace. The most recent data towards late 2022 indicate a decline to approximately 5.16, reflecting a slight reduction in inventory turnover.

Average Inventory Processing Period (Days)

The average inventory processing period shows an inverse relationship with the turnover ratio as expected. The period spans from about 56 days initially to a high of 89 days in November 2018, aligning with the lowest turnover at that time. Following this peak, the processing period decreases sharply to around 44–45 days in mid-2020, corresponding with the highest turnover ratio. Afterwards, it rises again, fluctuating between approximately 54 and 77 days. By the end of the dataset, a notable increase is observed, reaching 71 days, indicative of slower inventory processing.

Overall Analysis

The data suggest periods of both efficient and strained inventory management within the company. Peaks in turnover and corresponding troughs in processing periods imply times when inventory was managed more effectively, likely minimizing holding costs and responding well to sales demand. Conversely, intervals with lower turnover and longer processing times may indicate challenges such as excess stock, supply chain delays, or reduced sales velocity. The recurring pattern of fluctuations points to cyclical or seasonal influences and potentially variable market conditions impacting inventory performance.

Receivables Turnover

The receivables turnover ratio demonstrates noticeable fluctuations over the observed periods. Initial values remained relatively stable around the 39 to 41 range from early 2017 through early 2018. Subsequently, there was an increase peaking near 49 to 51 in mid to late 2018 and mid-2019, indicating improved effectiveness in collections during these times. A decline followed in late 2019 to early 2020, reaching a low near 38. However, the ratio sharply increased again in mid-2020, achieving its highest levels above 57 in multiple periods through 2021, suggesting highly efficient receivable management. In the last periods into late 2022, the ratio declined substantially to approximately 45, indicating a moderate reduction in collection efficiency.

Average Receivable Collection Period

The average collection period, expressed in days, inversely mirrors the trend seen in receivables turnover, which aligns with expected financial relationship between these metrics. The collection period remained steady at about 9 days in early 2017 and early 2018, with a gradual reduction to 7-8 days during mid to late 2018 and mid-2019. Notably, it increased to 10 days in early 2020, signifying slower collections. After this peak, the period decreased to as low as 6 days in mid-2020 and maintained these lower values through much of 2021 and into early 2022, reflecting enhanced collection efficiency. Towards the final periods, it slightly increased again to around 8 days, indicating a modest slowdown in collections.

Summary

The financial data reflect a pattern of fluctuating collection efficiency, with periods of both improvement and decline. The overall trend suggests responsiveness to operational or market conditions impacting receivable management. Particularly notable are the peaks in receivables turnover and corresponding troughs in the average collection period during 2020 and 2021, which denote periods of very effective receivable collections. The recent moderate decline in turnover and slight increase in collection period point to a potential easing in collection discipline or changing client payment behaviors towards the latter part of the timeline.

Average Inventory Processing Period

The average inventory processing period exhibits significant fluctuations over the observed quarters. Initially, the period increased from 56 days to 79 days within the first three quarters, suggesting slower inventory turnover during that time. Subsequently, it decreased to around 55-58 days, indicating improved inventory management or faster sales cycles. Notable spikes occur intermittently, with marked increases to 89 days, 83 days, and 77 days at various points, hinting at occasional periods of inventory buildup or reduced sales efficiency. The most recent data shows a moderate lengthening, with the period rising to 71 days, reflecting a slight downward adjustment in inventory turnover velocity.

Average Receivable Collection Period

The average receivable collection period has remained relatively stable over the entire timeframe, mostly fluctuating between 6 and 10 days. There is minimal variation, with a general tendency toward shorter collection periods (closer to six days) in more recent quarters. This pattern suggests consistent and effective credit and collections policies with only minor cyclical deviations. The stability indicates that the company manages its receivables efficiently, maintaining adequate liquidity without significant delays in customer payments.

Operating Cycle

The operating cycle, representing the overall time to convert inventory and receivables into cash, follows a pattern closely aligned with the inventory processing period. It ranges from around 50 days in the lowest quarters to peaks near 97 and 92 days during the periods of extended inventory turnover. The cycle mirrors the inventory processing period's fluctuations more than the relatively stable receivable collection period, reinforcing that changes in operating efficiency are primarily driven by variations in inventory management. More recently, the operating cycle shows moderate increases toward the end of the series, settling in the high 70s, which may warrant attention to inventory or sales processes to avoid liquidity strain.

Payables Turnover Ratio

The payables turnover ratio exhibits considerable fluctuations over the analyzed quarters, indicating variability in the company's payment efficiency to suppliers. The ratio peaks at 7.50 in the period ending May 2, 2020, suggesting a relatively high rate of payables turnover during that quarter. Conversely, the lowest value of 3.87 is observed in the quarter ending October 31, 2020, reflecting a slower payables turnover. Overall, the ratio demonstrates cyclicality with recurring rises and falls, suggesting changes in payment terms, purchasing patterns, or supply chain conditions. In the most recent periods, the ratio remains moderately stable, hovering around 5.33 to 7.19, indicating a tendency towards improved payment frequency compared to some previous low points.

Average Payables Payment Period

The average payables payment period in days shows an inverse trend to the payables turnover ratio, as expected. Periods with higher turnover ratios correspond to shorter payment periods, while rises in the number of days coincide with lower turnover ratios. The payment period ranges from a minimum of 49 days (May 2, 2020) to a maximum of 94 days (October 31, 2020). The extended payment period observed in late 2020 points to a slowdown in settling obligations, which might be associated with strategic cash flow management or external financial conditions. Following that peak, the payment period generally decreases or stabilizes, indicating a return to faster payments or more regular settlement cycles. The latest data show payment periods around the low 50s to high 60s, suggesting moderate payment durations relative to the historical range.

Observations and Insights

The inverse relationship between payables turnover and average payment period throughout the timeline is consistent with typical financial behavior. The fluctuations in both metrics highlight periods where the company may have altered its payment policies or experienced changes in supplier dynamics. Sharp increases in payment days and corresponding decreases in turnover could reflect efforts to optimize working capital or respond to external pressures. Conversely, higher turnover ratios and shorter payment periods may indicate improved liquidity or strong supplier relationships.

In summary, the data reflects a dynamic approach to managing payables, with multiple cycles of acceleration and deceleration in payments. There is no sustained long-term trend towards either markedly faster or slower payments, suggesting adaptive financial management responsive to operational or market conditions over the observed timeframe.

Inventory Processing Period

The average inventory processing period exhibits notable fluctuations across the observed quarters. Initial values show a range between 55 to 62 days, followed by peaks reaching up to 89 days in late 2018 and again around 83 days towards the end of 2019. A marked decrease occurs in early 2020 and mid-2020, with the period lowering significantly to the mid-40-day range. However, the cycle lengthens again in late 2020 and early 2022, reaching values between 70 and 77 days. These variations suggest intermittent changes in inventory turnover efficiency, with periods of both faster and slower inventory processing.

Receivable Collection Period

The average receivable collection period remains relatively stable throughout, consistently ranging between 6 and 10 days. Minor declines are observed in some quarters, notably reaching a low of 6 days on several occasions, indicating improved efficiency in collecting receivables. Conversely, slight increases to 9 or 10 days are infrequent and not sustained over multiple periods. Overall, this stability points to effective and consistent credit and collection management.

Payables Payment Period

The average payables payment period tracks similarly to the inventory processing period, with periods of extension and contraction. Early periods show values in the mid-50s to high 70s in number of days, peaking at 94 days in late 2020. Thereafter, the period shortens somewhat but remains variable, with values oscillating between about 50 and 76 days. This variability suggests a flexible payment strategy towards suppliers, possibly adapting to operational needs or liquidity conditions.

Cash Conversion Cycle

The cash conversion cycle demonstrates significant volatility and notable improvement in some quarters. Starting around 9 to 13 days, it dramatically shortens and turns negative or near zero from mid-2020 through early 2021, indicating that payables turnover exceeds the length of inventory and receivables turnover combined during these periods. This suggests improved working capital efficiency or favorable supplier payment terms. In subsequent quarters, the cycle returns to positive values between 8 and 13 days, highlighting some normalization but retaining relatively low cash conversion durations compared to earlier periods.