Home Depot Inc. (NYSE:HD)

The financial ratios over the analyzed periods reveal distinct and evolving patterns in inventory management, receivables and payables efficiency, and overall working capital utilization.

Inventory Turnover

The inventory turnover ratio exhibits fluctuations with an overall declining trend from an initial value near 5.83 to values predominantly in the low 4s in the later periods. This indicates a gradual slowdown in the frequency at which inventory is sold and replenished. Concurrently, the average inventory processing period shows an increase from mid-60s to around mid-80s in days, reinforcing the observation of slower inventory movement over time.

Receivables Turnover

The receivables turnover ratio demonstrates variability without a consistent upward or downward trend, fluctuating between mid-40s down to the mid-20s. Correspondingly, the average receivable collection period extends from roughly 8 days initially to about 15 days in later periods, suggesting an elongation in the time taken to collect receivables. This may signal increasing challenges or leniency in credit terms extended to customers.

Payables Turnover

The payables turnover ratio reveals a generally upward trajectory, increasing from approximately 6.4 to over 8 in later quarters, with a peak above 10 at one point. The average payables payment period correspondingly decreases from around 57 days down to the low 40s in days, indicating a trend toward faster payment of obligations to suppliers.

Working Capital Turnover

Working capital turnover exhibits significant volatility, with notable spikes reaching very high values in certain quarters, particularly one extreme outlier suggesting an abnormally high turnover. Excluding the outlier, values still vary widely, reflecting fluctuations in how efficiently the company utilizes working capital to generate sales. The large swings complicate interpretation but point to periods of both heightened and diminished capital efficiency.

Operating Cycle

The operating cycle generally lengthens over time, moving from approximately 70 days to values exceeding 90 days in episodes, reflecting elongation in the combined inventory holding and receivables collection periods. This extension suggests increased time is required to convert inventory purchases into cash inflows through sales and collections.

Cash Conversion Cycle

The cash conversion cycle exhibits a gradual increase, rising from a low near 17 days to above 50 days in later periods. The lengthening cash conversion cycle suggests a slower overall conversion of investments in resources back into cash, influenced by longer inventory holding and receivables collection periods, partially offset by shorter payables payment duration.

In summary, the data points to a trend where Home Depot's inventory turns slower while receivables are collected over longer periods, pressuring the working capital needs. Simultaneously, the company accelerates payments to suppliers, which may tighten liquidity but also reflect strategic supplier relationship management. The increase in both operating and cash conversion cycles signals a growing duration to cycle cash through the business, potentially impacting cash flow and operational flexibility. Volatility in working capital turnover suggests fluctuating capital efficiency, warranting close monitoring to optimize resource deployment.

Cost of Sales

The cost of sales exhibits a cyclical pattern with fluctuations across the reported periods. Initially, it rose significantly from 18,635 million USD to 25,112 million USD between May and August 2020, followed by a decline to 21,430 million USD in January 2021. Subsequent quarters generally showed an upward trend, peaking near 29,309 million USD in July 2022. After this peak, costs fluctuated moderately with repeated rises and falls, ending at 27,537 million USD in October 2024. Overall, the cost of sales demonstrates sensitivity to seasonality and other external factors, maintaining elevated levels in later periods compared to earlier ones.

Merchandise Inventories

Merchandise inventories increased notably from roughly 14,989 million USD in May 2020 to a high of 26,088 million USD in July 2022. This increase was gradual with some intermediate fluctuations. After the peak, inventories decreased somewhat but remained elevated compared to earlier years, hovering around the 23,000 to 26,000 million USD range through the end of the data in November 2025. The general upward trend suggests either a build-up of stock to meet anticipated demand or potentially slower inventory turnover in certain periods.

Inventory Turnover Ratio

The inventory turnover ratio started at 4.93 in May 2020 and showed an increase to 5.83 by August 2020, indicating improved efficiency in inventory management at that time. However, after this peak, the ratio declined steadily hitting lows near 3.96–4.01 during the 2021 and mid-2022 periods, reflecting slower movement of inventory during those times. From late 2022 onwards, turnover ratios experienced mild recovery, fluctuating between approximately 4.0 and 4.8. The ratio’s variability suggests changing dynamics in inventory management relative to sales, with periods of both inventory build-up and improved sales velocity.

Overall Analysis

The data illustrates a general increase in both cost of sales and merchandise inventories over the examined periods, with inventory levels rising faster relative to sales as indicated by the fluctuating and somewhat declining inventory turnover rate in certain phases. The trends may indicate a strategic stocking approach to anticipate demand or challenges in moving inventory efficiently in some quarters. The observed cyclical variations likely correspond to seasonal patterns or external economic factors impacting both the cost base and inventory management.

The financial data demonstrates notable trends in net sales, receivables, and receivables turnover over multiple quarterly periods.

Net Sales

Net sales exhibit fluctuating patterns with periods of both growth and decline. Initial quarters show an increase from US$28.26 billion to a peak of US$41.12 billion in August 2021, followed by declines and rebounds. The trend indicates a cyclical nature with peaks often reached around mid-year periods and troughs in early-year periods. The latest data indicates sales stabilizing around the US$40 billion mark with quarters displaying moderate variability.

Receivables, Net

Receivables tend to increase over time, moving from US$2.61 billion to US$6.77 billion by the most recent quarter. This steady rise indicates a growing amount of credit extended to customers. Notably, the increase in receivables is not always proportional to net sales movements, indicating changes in credit policies or customer payment behaviors. Sharp increases are evident in several quarters, suggesting periodic accumulation of outstanding debts.

Receivables Turnover

Receivables turnover ratio exhibits a declining trend overall, moving from a high of approximately 47.45 times to 24.57 times in the final period. This declining turnover ratio suggests that receivables are being collected more slowly over time. Such a pattern may reflect elongated payment cycles, increased credit risk, or less efficient collection processes. The ratio shows some volatility, with occasional upticks, but the general trend towards a lower turnover rate is clear.

In summary, while net sales demonstrate cyclical fluctuations with overall stability near higher levels, receivables have significantly increased, accompanied by a decline in the efficiency of receivables collection as indicated by the turnover ratio. This combination suggests a growing investment in accounts receivable, with potential implications for cash flow management. Monitoring the slowing turnover will be critical in assessing credit risk and operational effectiveness going forward.

Cost of Sales

The cost of sales experienced fluctuations over the observed period. Starting at 18,635 million USD, it increased sharply to a peak of 29,309 million USD by July 2022. This was followed by a decline and subsequent volatility with values oscillating between approximately 23,000 million and 29,000 million USD. The general pattern indicates periods of both growth and contraction, with notable peaks in mid-2022 and late 2024. Overall, the cost of sales shows a cyclical nature with upward and downward trends rather than steady growth or decline.

Accounts Payable

The accounts payable figures show an upward trend from 10,056 million USD initially to a high of roughly 15,000 million USD in mid-2022, before decreasing again. Subsequent values fluctuate in a moderate range between approximately 10,000 million and 15,000 million USD. This suggests variability in the company's liabilities related to suppliers, potentially influenced by inventory management, supplier payment terms, or purchasing volumes.

Payables Turnover Ratio

The payables turnover ratio varies meaningfully throughout the period. The ratio started at 7.35 and experienced a decline to about 6.4 in late 2020, indicating slower turnover of payables. However, it rebounded with some volatility, rising to levels above 9.0 in the early months of 2023 and reaching a peak of 10.13 by January 2024. After this peak, the ratio decreases moderately but remains above 7.0 in later periods. This fluctuation suggests changes in the speed with which the company settles its payables, potentially reflecting adjustments in working capital management or supplier payment strategies.

Overall Analysis

The financial data indicates that the company experienced significant variability in both cost of sales and accounts payable, with cost of sales showing peaks and troughs likely related to demand cycles or operational adjustments. Simultaneously, accounts payable movements correspond to these trends, reflecting changes in procurement or payment timing. The payables turnover ratio's fluctuation highlights variations in payment efficiency and liquidity management. Higher turnover ratios typically suggest faster payment to suppliers, potentially improving supplier relationships but requiring stronger cash position, whereas lower ratios may indicate extended payment periods.

Working Capital

Working capital exhibited considerable fluctuations over the reported periods. It reached a peak of 9,401 million USD in October 2022, followed by a generally declining trend with occasional increases. The lowest values were observed around early 2022 and mid-2025, indicating periods of tightened liquidity or asset management adjustments. Overall, working capital did not follow a stable trajectory but oscillated significantly throughout the timeframe.

Net Sales

Net sales demonstrated a positive overall trend with some volatility. The values generally increased from around 28,260 million USD in early 2020 to highs above 43,000 million USD in several quarters, particularly in mid-2022 and mid-2024. Despite some declines, net sales remained relatively robust, signaling sustained revenue generation capacity. The fluctuations suggest sensitivity to seasonal or market conditions but overall growth in sales volume or pricing power over the observed periods.

Working Capital Turnover

The working capital turnover ratio showed extreme variation across the timeline, ranging from single digits to an exceptionally high spike of 417.56 in early 2022. Such a sharp increase corresponds with a notably low working capital at that time, suggesting an operational scenario where sales volume was high relative to working capital available. Subsequently, turnover ratios stabilized at more moderate but still elevated levels compared to the early part of the record, generally oscillating between 15 and above 50. This metric indicates changes in operational efficiency and how well working capital supported sales activity, with periods of notably high turnover reflecting strong asset utilization or reduced capital intensity.

Summary

The data reveals a dynamic financial position characterized by fluctuating working capital and a generally increasing net sales trend. The working capital turnover ratio underscores changes in operational efficiency and capital management. Periods of high turnover correlate with constrained working capital and strong sales, while lower turnover aligns with higher liquidity positions. This interplay suggests active management of the balance sheet to optimize sales support and capital deployment over time.

The analysis of the quarterly financial data reveals notable trends in inventory management efficiency over the observed periods.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates fluctuations over time, starting at 4.93 and peaking at 5.83 early in the period. After this peak, there is a general declining trend reaching a low of 3.96. Subsequently, the ratio experiences moderate recovery and stabilizes around the mid-4 range during the later periods. This suggests variability in how quickly inventory is sold and replaced, with a period of decreasing efficiency followed by partial improvement and stabilization.

Average Inventory Processing Period

The average inventory processing period, expressed in days, exhibits an inverse relationship with the inventory turnover ratio, as expected. Initial values indicate a relatively short duration of 63 days at one point, increasing to a peak of 92 days, implying slower inventory processing. Later periods show fluctuations around the mid-80s to low 90s before improving slightly to the mid-70s towards the end of the timeline. This suggests periods of slower inventory movement followed by efforts to reduce inventory days.

Trend Insights

The data collectively suggests that the company faced challenges in maintaining high inventory turnover rates during certain quarters, possibly due to external factors affecting sales velocity or supply chain conditions. The inventory processing period increase aligns with these challenges, indicating extended holding times for inventory. Recent quarters show a tendency toward improvement and stabilization, which may indicate adjustments in operational or inventory management strategies aiming to enhance efficiency.

The analysis of the receivables turnover and the average receivable collection period reveals discernible trends over the observed periods.

Receivables Turnover

Initially, the receivables turnover ratio fluctuated around the low-to-mid 40s, peaking at 47.45 in January 2023. Following this peak, there was a noticeable declining trend, with the ratio dropping steadily to 24.57 by November 2025. This decline indicates a reduction in the frequency at which receivables are collected during the later periods, suggesting a slowdown in collections efficiency over time.

Average Receivable Collection Period

The collection period remained quite stable at around 8 to 9 days in the early periods. However, starting from mid-2023, there was a gradual increase in the number of days, reaching up to 15 days by November 2025. This increase in collection days corresponds inversely with the declining receivables turnover and points to a lengthening in the time required to collect receivables.

Overall Insights

The data indicates a weakening in receivables management effectiveness over the observed timeline. While early periods show relatively efficient collection processes with high turnover and low days outstanding, the latter periods demonstrate a deterioration with turnover ratios nearly halving and collection days nearly doubling. This trend may raise concerns about potential impacts on cash flow and working capital management.

Inventory Management

The average inventory processing period exhibits notable fluctuations over the observed intervals. Initially, there is a decline from 74 days to 63 days, followed by a gradual increase peaking around 92 days. Subsequently, this period demonstrates variability, with a general trend toward reduction before increasing again toward the final periods. This pattern suggests intermittent challenges in inventory turnover efficiency, with periods of extended holding times impacting overall operational effectiveness.

Receivables Collection

The average receivable collection period remains relatively stable in the early periods, consistently around 8 to 9 days. However, from mid-sequence, there is a discernible upward trend, reaching as high as 15 days towards the latter periods. This increase indicates a lengthening in the time taken to collect receivables, potentially affecting cash flow and liquidity management negatively.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, mirrors the trends observed in its components. It starts at 82 days and declines slightly before rising steadily to over 100 days at multiple points. A mild decrease follows before it again lengthens toward the end of the time frame. The elongated operating cycle implies a prolonged duration for the company to convert its investments in inventory and receivables back into cash, which could present operational and financial efficiency concerns.

Overall Insights

The data reveals that the company's operational efficiency in managing inventory and receivables has experienced variability, with tendencies toward longer processing and collection times in recent periods. These trends could signal potential inefficiencies or external factors impacting supply chain and customer payment behaviors. Close monitoring and proactive measures may be required to optimize working capital management and improve the operating cycle duration.

The analysis of the payables turnover ratio over the reported periods reveals some fluctuations with a general upward trend in recent quarters. Initially, the ratio declined from 7.35 to a low of 6.42 within the first three quarters, indicating slower payables turnover. However, from early 2021 onward, the ratio showed improvement, peaking at 10.13 in early 2024, which signifies an enhanced efficiency in paying off accounts payable. In the most recent periods, the ratio stabilizes between approximately 7.4 and 8.4, suggesting a consistent management of payables turnover.

Corresponding to this, the average payables payment period, expressed in number of days, exhibits an inverse pattern relative to the turnover ratio. The period initially increased from 50 to 57 days in mid-2020, implying a longer time to pay creditors. Following this, the payment period gradually shortened, reaching its lowest values of 36 to 40 days in late 2023 and early 2024, confirming quicker payments to suppliers. There is some subsequent variability with the period increasing modestly to the upper 40s, indicating a slight lengthening of the payment cycle in the latter quarters but remaining below the earlier peak values.

Overall, the data suggests that the company has improved the efficiency of its accounts payable management over the timeline. The decreasing average payment period alongside increasing payables turnover ratio indicates a strategic focus on quicker payments, potentially leveraging good supplier relationships or taking advantage of payment discounts. The recent stabilization of these metrics may reflect a balance between maintaining supplier goodwill and optimizing cash flow.

Payables Turnover Ratio

Shows an initial decline followed by a rising trend, peaking in early 2024, then stabilizing around 7.4 to 8.4 in recent quarters.

Average Payables Payment Period

Starts higher, peaks in mid-2020, then declines to its lowest in early 2024, with mild increases thereafter but remaining lower than initial values.

Insights

Improved efficiency in payables management over time, reflecting quicker payments and effective working capital management.

Average Inventory Processing Period

The average inventory processing period exhibited fluctuations throughout the examined timeframe. Starting at 74 days, it generally increased, reaching a peak near 92 days around mid-2022. Subsequently, the period showed moderate variation, trending downward and upward intermittently, ending at 86 days. This suggests a lengthening in the time inventory remains before sale, indicating potential changes in inventory management efficiency or shifts in demand and supply conditions.

Average Receivable Collection Period

The average receivable collection period remained relatively stable in the earlier periods, maintaining around 8 to 9 days. However, starting in early 2023, there is a noticeable upward trend with values increasing to as high as 15 days by late 2025. This trend could imply a lengthening of the credit collection cycle, potentially reflecting changes in customer payment behaviors or credit policy adjustments.

Average Payables Payment Period

The payables payment period showed variability with an initial increase from 50 days to a peak of 57 days during 2020, followed by a gradual decline to 36 days by early 2024. Afterward, the period stabilized somewhat around the mid-40 day range towards the end of the data period. This indicates the company initially extended its payment terms to suppliers but later shortened these periods, possibly to manage supplier relationships or cash flow dynamics.

Cash Conversion Cycle

The cash conversion cycle started at 32 days and generally trended upwards throughout the period, reaching a high of 57 days by late 2025. This increase reflects the combined effects of lengthening in inventory processing and receivables collection periods, somewhat offset by shorter payables payment periods in later periods. The rising cash conversion cycle suggests the cash tied up in operations has increased, potentially affecting liquidity and working capital management efficiency.