Best Buy Co. Inc. (NYSE:BBY)

Inventory Turnover

The inventory turnover ratio demonstrates a steady upward trend from 6.16 in 2017 to 6.73 in 2022. This indicates an improving efficiency in managing and selling inventory, with the company increasingly able to convert inventory into sales more frequently over time.

Receivables Turnover

The receivables turnover ratio shows a consistent increase from 29.25 in 2017 to 49.67 in 2022, suggesting enhanced effectiveness in collecting receivables. This improvement reflects a faster conversion of credit sales into cash, contributing positively to liquidity.

Payables Turnover

Payables turnover ratio initially increased from 6.01 in 2017 to a peak of 6.62 in 2018 but then exhibited some fluctuation and a decline to 5.26 in 2021, followed by a partial recovery to 5.9 in 2022. This indicates a varying pace in paying suppliers, with a tendency towards slower payments in recent years compared to earlier periods.

Working Capital Turnover

Working capital turnover increased markedly from 11.61 in 2017 to 54.75 in 2020, indicating heightened efficiency in utilizing working capital to generate sales. However, this was followed by a sharp decline to 23.41 in 2021 and missing data in 2022, suggesting instability or changes in operating conditions affecting working capital usage.

Average Inventory Processing Period

The average inventory processing period decreased gradually from 59-60 days in 2017-2019 to 54 days in 2022. This reduction reinforces the trend of improved inventory management and faster turnover.

Average Receivable Collection Period

This metric declined steadily from 12 days in 2017 to 7 days in 2022, highlighting increasingly prompt collection of receivables, consistent with the rising receivables turnover ratio.

Operating Cycle

The operating cycle has shortened from 71 days in 2017 to 61 days in 2022, indicating an overall acceleration in the company’s cash-to-cash operating process, reflecting efficiency improvements in inventory and receivables management.

Average Payables Payment Period

The average payables payment period decreased from 61 days in 2017 to 55 days in 2018, then increased to 69 days in 2021 before declining again to 62 days in 2022. This suggests fluctuating payment practices, with a recent tendency to extend payment periods compared to the earlier years.

Cash Conversion Cycle

The cash conversion cycle showed variability, initially increasing from 10 days in 2017 to 13 days in 2018, then declining to negative values in 2021 (-5 days) and 2022 (-1 day). Negative cash conversion cycles imply the company collects cash from customers before paying suppliers, a favorable liquidity position reflecting strong operational cash flow management in recent years.

Cost of sales

The cost of sales has exhibited a consistent upward trend over the six-year period. Starting at $29,963 million in 2017, it increased annually to reach $40,121 million in 2022. This represents a cumulative growth of approximately 34%, indicating rising expenses associated with goods sold, possibly due to increased sales volume or higher procurement costs.

Merchandise inventories

Merchandise inventories have gradually increased from $4,864 million in 2017 to $5,965 million in 2022. There was a minor dip observed in 2020, where inventories decreased from $5,409 million in 2019 to $5,174 million, before resuming an upward trajectory. Overall, the inventory levels grew by about 22.5% over the period, suggesting a buildup of stock possibly in anticipation of higher sales or to buffer supply chain uncertainties.

Inventory turnover ratio

The inventory turnover ratio remained relatively stable with slight fluctuations. It started at 6.16 in 2017, slightly increased to 6.2 in 2018, then dipped to 6.09 in 2019. From 2020 onward, the ratio rose steadily, reaching 6.73 in 2022. This increase in inventory turnover in the latter years indicates improved efficiency in managing inventory, reflecting faster sales of stock and possibly better inventory control practices.

The financial data over the analyzed periods reveals several noteworthy trends across revenue, receivables, and receivables turnover ratios.

Revenue

There is a consistent upward trajectory in revenue from 2017 to 2022. Starting at approximately 39.4 billion USD in January 2017, revenue increased steadily each year, reaching about 51.8 billion USD by January 2022. This represents a significant growth of roughly 31.4% over the six-year span, indicating expanding market presence or improved sales performance.

Receivables, net

Net receivables show a generally stable trend with minor fluctuations. The amount decreased from 1.35 billion USD in 2017 to around 1.05 billion USD in 2018 and 2019, followed by a slight increase to approximately 1.15 billion USD in 2020. Afterwards, it slightly declined again in the last two years, ending close to 1.04 billion USD in 2022. This stability suggests steady credit management policies without significant extension of credit terms despite growing revenues.

Receivables turnover

The receivables turnover ratio exhibits a strong positive trend over the period. Starting at 29.25 times in 2017, it improves substantially to nearly 50 times by 2022. This increasing ratio indicates faster collection of receivables relative to sales, reflecting enhanced efficiency in credit and collections management. The peak ratio in 2022 suggests a particularly effective reduction in the average collection period or improved credit risk management that aligns well with the rising revenue figures.

In summary, the company shows robust revenue growth complemented by stable net receivables and significantly improved receivables turnover. This combination points towards not only expanding operations but also improving asset management efficiency, which could positively impact liquidity and cash flow positions.

Cost of Sales

The cost of sales showed a consistent upward trend from 2017 through 2022. Beginning at approximately 29.96 billion USD in 2017, it increased steadily each year, reaching around 40.12 billion USD by 2022. This indicates rising expenses related to goods sold, which could reflect increased sales volume, inflationary pressures, or changes in procurement costs.

Accounts Payable

Accounts payable figures exhibited some variability across the years. Starting at approximately 4.98 billion USD in 2017, there was a slight decrease in 2018, followed by a moderate increase in subsequent years, peaking at about 6.98 billion USD in 2021 before slightly declining to 6.80 billion USD in 2022. This pattern suggests variations in payment practices or supplier credit terms over time.

Payables Turnover Ratio

The payables turnover ratio showed fluctuations during the period under review. It increased from 6.01 in 2017 to a peak of 6.62 in 2018, then gradually declined to its lowest point of 5.26 in 2021 before recovering somewhat to 5.90 in 2022. This ratio indicates the frequency with which payables are settled; the decline could imply that payments to suppliers are being made less frequently or over a longer period, impacting liquidity or terms negotiations.

Overall Insights

The rising cost of sales alongside fluctuating accounts payable and a decreasing payables turnover ratio in recent years suggests a shifting dynamic in the company’s procurement and payment strategies. The increase in cost of sales may have put pressure on working capital, potentially leading to extended payment periods as reflected in the lower turnover ratio. However, the slight recovery in payables turnover in 2022 could indicate a normalization or adjustment in payment policies.

Working Capital

The working capital exhibited a declining trend from 2017 through 2020, decreasing from $3,394 million to $797 million. However, in 2021, there was a notable rebound to $2,019 million before dropping sharply into negative territory at -$135 million in 2022. This fluctuation indicates potential issues with the company's short-term liquidity and operational efficiency in the most recent year.

Revenue

Revenue showed consistent growth over the period, increasing steadily from $39,403 million in 2017 to $51,761 million in 2022. This signifies ongoing expansion in the company’s sales volume or pricing power, with a total approximate increase of 31% over six years.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently the company uses its working capital to generate revenue, increased dramatically from 11.61 in 2017 to a peak of 54.75 in 2020. This suggests enhanced efficiency or a significant reduction in working capital relative to revenue during that time. However, after 2020, the ratio declined to 23.41 in 2021, and no data is reported for 2022, potentially related to the sharp decline and negative working capital observed that year.

An analysis of the inventory management metrics over the given periods reveals a generally positive trend in operational efficiency. The inventory turnover ratio has shown a gradual increase from 6.16 in early 2017 to 6.73 by early 2022, indicating an improvement in how frequently inventory is sold and replaced over the course of a year. This upward trend in turnover suggests better inventory management or higher sales velocity relative to inventory levels.

Supporting this observation, the average inventory processing period, measured in days, exhibits a downward trend from 59 days in 2017 and 2018 to 54 days in 2022. The decrease in days indicates that inventory is held for a shorter time before being sold, which corresponds to the increasing turnover ratio. Reduced inventory days generally reflect enhanced supply chain efficiency and potentially lower holding costs.

Inventory Turnover Ratio

Steady increase over the six-year period, rising from 6.16 to 6.73, denoting more frequent inventory renewal.

Average Inventory Processing Period

Decreased from 59 days to 54 days, reflecting faster inventory movement and potentially improved operational management.

Overall, these trends collectively indicate an improvement in inventory management practices, with inventory being sold and replenished more quickly over time, which can contribute positively to working capital efficiency and profitability.

Receivables Turnover

The receivables turnover ratio demonstrates a consistent upward trend over the analyzed periods, increasing from 29.25 in early 2017 to 49.67 by early 2022. This indicates an improvement in the company's efficiency in collecting receivables, reflecting enhanced management of credit sales or more effective collection processes.

Average Receivable Collection Period

The average receivable collection period shows a corresponding decreasing trend, dropping from 12 days in early 2017 to 7 days by early 2022. This reduction suggests that the company is able to convert its receivables into cash more quickly, which can positively affect liquidity.

Summary of Trends

The inverse relationship observed between the receivables turnover ratio and the average collection period aligns with normal financial dynamics, where a higher turnover ratio correlates with a shorter collection period. The data points to an overall enhancement in receivables management efficiency throughout the time frame, implying tighter credit policies, improved collection efforts, or a shift towards customers with better payment behaviors.

Average Inventory Processing Period

The average inventory processing period shows a gradual decline over the six-year period, decreasing from 59 days in 2017 and 2018 to 54 days by 2022. This trend indicates improved efficiency in inventory management, with the company reducing the time inventory is held before being sold or processed.

Average Receivable Collection Period

The average receivable collection period also exhibits a consistent downward trend, falling from 12 days in 2017 to 7 days in 2022. This improvement suggests enhanced effectiveness in collecting receivables, which potentially contributes to better cash flow management.

Operating Cycle

The operating cycle, which combines the inventory processing period and receivable collection period, decreases steadily from 71 days in 2017 to 61 days in 2022. This reduction reflects overall operational efficiency gains, indicating that the company is shortening the total time from inventory acquisition to cash collection.

Payables Turnover

The payables turnover ratio exhibited fluctuations across the observed periods. It initially increased from 6.01 in 2017 to a peak of 6.62 in 2018, indicating a faster payment cycle to suppliers. Subsequently, the ratio experienced a decline to 6.26 in 2019 and a slight increase to 6.35 in 2020, followed by a more notable drop to 5.26 in 2021. This decrease suggests a slower payment rate during that year. In 2022, the ratio partially recovered to 5.9, implying some improvement but still below the earlier higher turnover levels.

Average Payables Payment Period

The average payables payment period inversely mirrors the payables turnover trend. It decreased from 61 days in 2017 to 55 days in 2018, reflecting quicker payments. Thereafter, it rose slowly to 58 days in 2019 and slightly declined to 57 days in 2020, suggesting a relatively stable payment duration in these years. The period then extended significantly to 69 days in 2021, indicating a delay in payments, which corresponds with the dip in payables turnover. In 2022, the payment period shortened to 62 days, marking an improvement but still longer than the initial years.

Insight Summary

Overall, the data reveals an initial trend toward faster payment cycles in the early years, followed by a period of payment delays around 2021. The partial rebound in 2022 indicates efforts to enhance payables management, although payment speed has not fully returned to the earlier levels. These fluctuations may reflect changing operational conditions, supplier negotiation strategies, or cash flow management priorities over the reported years.

Average Inventory Processing Period

The average inventory processing period remained relatively stable between 2017 and 2019, fluctuating slightly between 59 and 60 days. From 2020 onward, a gradual decrease is observed, reaching 54 days by 2022. This indicates an improvement in inventory turnover efficiency over the later years.

Average Receivable Collection Period

The average receivable collection period shows a consistent declining trend throughout the observed periods. Starting at 12 days in 2017, it decreases steadily to 7 days by 2022, suggesting enhanced effectiveness in collecting receivables.

Average Payables Payment Period

The average payables payment period experienced fluctuations. It decreased from 61 days in 2017 to 55 days in 2018, then rose slightly in subsequent years, peaking at 69 days in 2021 before dropping to 62 days in 2022. This irregular pattern implies variable management of payables with a tendency to extend payment periods, notably in 2021.

Cash Conversion Cycle

The cash conversion cycle (CCC) displayed modest variation, initially increasing from 10 days in 2017 to 13 days in 2018, then declining to negative values from 2021 onwards (-5 days in 2021 and -1 day in 2022). The negative CCC in recent years indicates that the company is able to collect cash from operations faster than it pays its suppliers, signifying improved operational liquidity and working capital management.