Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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Short-term Activity Ratios (Summary)
RH, short-term (operating) activity ratios
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
- Inventory turnover
- The inventory turnover ratio shows a general downward trend, decreasing from 3.02 in 2018 to 2.22 in 2023. There was a peak in 2020 at 3.54, followed by a consistent decline afterwards, indicating slower inventory movement in recent years.
- Receivables turnover
- Receivables turnover declined steadily from 77.68 in 2018 to 47.9 in 2021, showing a reduction in the efficiency of collecting receivables. There was some recovery in 2022 to 64.9 and a modest decline again to 60.08 in 2023, suggesting fluctuating but overall reduced collection efficiency compared to 2018.
- Payables turnover
- Payables turnover was relatively stable between 2018 and 2020 (around 8.15 to 8.59), then declined to 6.77 in 2021, implying slower payments. However, it rebounded sharply to 10.71 in 2023, indicating significantly faster payments to suppliers in the latest year.
- Working capital turnover
- Data is incomplete, but available figures for 2022 and 2023 show an increase from 1.85 to 2.21. This suggests improved efficiency in generating sales from working capital in the most recent period compared to the previous year.
- Average inventory processing period
- The average inventory processing period increased from 121 days in 2018 to 165 days in 2023, reflecting longer holding times for inventory. Despite a dip to 103 days in 2020, the overall trend points to slower inventory turnover.
- Average receivable collection period
- The average receivable collection period gradually increased from 5 days in 2018 to 8 days in 2021, signaling slower collection. In 2022 and 2023, it decreased slightly back to 6 days but remains higher than early years.
- Operating cycle
- The operating cycle extended from 126 days in 2018 to 171 days in 2023, indicating a lengthening of the total cash-to-cash cycle. Despite a dip to 110 days in 2020, the increase in subsequent years highlights delays in inventory turnover and receivables collection.
- Average payables payment period
- The average payables payment period was fairly stable around mid-40 days from 2018 to 2020, increased to 54 days in 2021, then decreased sharply to 34 days in 2023. This denotes a more aggressive payment approach towards suppliers in recent years.
- Cash conversion cycle
- The cash conversion cycle shows a general upward trend, increasing from 81 days in 2018 to 137 days in 2023. The lowest point was 68 days in 2020, but it has lengthened notably since, suggesting a longer duration to convert investments in inventory and receivables back into cash.
Turnover Ratios
Average No. Days
Inventory Turnover
RH, inventory turnover calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Cost of goods sold | |||||||
| Merchandise inventories | |||||||
| Short-term Activity Ratio | |||||||
| Inventory turnover1 | |||||||
| Benchmarks | |||||||
| Inventory Turnover, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Inventory Turnover, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Inventory Turnover, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Inventory turnover = Cost of goods sold ÷ Merchandise inventories
= ÷ =
2 Click competitor name to see calculations.
- Cost of Goods Sold
-
The cost of goods sold (COGS) exhibits some fluctuations over the analyzed periods, starting at approximately 1,591,107 thousand US dollars in early 2018. It decreased slightly in 2019 to about 1,504,806 thousand and rebounded in 2020 to roughly 1,552,426 thousand. The value remained relatively stable in 2021 but then increased significantly in 2022 to around 1,903,409 thousand, followed by a moderate decrease in 2023 to approximately 1,778,492 thousand.
- Merchandise Inventories
-
Merchandise inventories show a generally increasing trend throughout the periods. Starting at approximately 527,026 thousand US dollars in 2018, inventory levels remained relatively stable into 2019 but declined notably in 2020 to about 438,696 thousand. Subsequently, inventories rose markedly in 2021, continuing to increase in 2022 and 2023, reaching a peak of roughly 801,841 thousand in the latest period.
- Inventory Turnover Ratio
-
The inventory turnover ratio demonstrates a declining trend over the years under review. Beginning at 3.02 in 2018, the ratio decreased to 2.83 in 2019, then climbed to 3.54 in 2020, which represents the period's peak. After 2020, however, the ratio consistently declined, dropping to 2.80 in 2021, then further down to 2.59 in 2022, and reaching the lowest level of 2.22 in 2023.
- Overall Observations
-
The data indicate that while merchandise inventories have grown substantially since 2020, the inventory turnover ratio has concurrently declined, especially after peaking in 2020. This trend suggests slower inventory movement in recent years despite higher inventory levels. The fluctuations in cost of goods sold, with a notable increase in 2022, may reflect changes in sales volume, pricing, or supply chain dynamics. The combination of higher inventories and a reduced turnover ratio may warrant further investigation into inventory management efficiency and demand forecasting accuracy.
Receivables Turnover
RH, receivables turnover calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net revenues | |||||||
| Accounts receivable, net | |||||||
| Short-term Activity Ratio | |||||||
| Receivables turnover1 | |||||||
| Benchmarks | |||||||
| Receivables Turnover, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Receivables Turnover, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Receivables Turnover, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Receivables turnover = Net revenues ÷ Accounts receivable, net
= ÷ =
2 Click competitor name to see calculations.
- Net Revenues
- Net revenues demonstrated a generally upward trend over the examined periods. Starting at approximately 2.44 billion USD in early 2018, revenues increased modestly each year until early 2021, reaching around 2.85 billion USD. A significant jump occurred by early 2022, with revenues peaking near 3.76 billion USD. However, this was followed by a slight decline in early 2023, with revenues at approximately 3.59 billion USD. Overall, the revenue growth reflects a strong expansion phase with a slight contraction in the most recent year.
- Accounts Receivable, Net
- Net accounts receivable grew steadily from about 31.4 million USD in early 2018 to roughly 59.8 million USD by early 2023. This increase is consistent but exhibits a slowing pace between early 2021 and early 2023, where values hovered around the high 50 million USD range. The rise in receivables aligns broadly with the growth in net revenues, suggesting greater credit sales or extended collection periods.
- Receivables Turnover Ratio
- The receivables turnover ratio showed a declining trend from 77.68 in early 2018 to a low of 47.9 in early 2021, implying a slower collection of receivables or more extended credit terms over this interval. After 2021, the ratio increased to 64.9 in early 2022 but slightly declined again to 60.08 by early 2023. These fluctuations in turnover ratio indicate variability in the efficiency of accounts receivable management, with some improvement in 2022 following a prior decline, but not reaching earlier efficiency levels by 2023.
Payables Turnover
RH, payables turnover calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Cost of goods sold | |||||||
| Accounts payable | |||||||
| Short-term Activity Ratio | |||||||
| Payables turnover1 | |||||||
| Benchmarks | |||||||
| Payables Turnover, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Payables Turnover, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Payables Turnover, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Payables turnover = Cost of goods sold ÷ Accounts payable
= ÷ =
2 Click competitor name to see calculations.
- Cost of Goods Sold
- The cost of goods sold exhibited a fluctuating trend over the six-year period. Initially, it decreased from approximately 1,591,107 thousand US dollars in early 2018 to around 1,504,806 thousand in early 2019. Subsequently, there was a slight increase to about 1,552,426 thousand in 2020, followed by a minor decline to 1,523,095 thousand in 2021. A notable increase occurred in 2022, reaching 1,903,409 thousand, before decreasing again to 1,778,492 thousand in 2023. Overall, the cost of goods sold shows volatility with a significant peak in 2022.
- Accounts Payable
- Accounts payable demonstrated a generally inconsistent pattern. Beginning at 195,313 thousand US dollars in 2018, it gradually declined to 183,039 thousand in 2019 and further to 180,714 thousand in 2020. A marked increase occurred in 2021, rising to 224,906 thousand, and it continued to grow to 242,035 thousand in 2022. However, in 2023, accounts payable sharply declined to 166,082 thousand, the lowest level over the period assessed. This suggests variability in payment obligations, with a recent trend toward reduction.
- Payables Turnover Ratio
- The payables turnover ratio saw fluctuations indicative of changes in the rate at which the company settled its payables. It held steady around the 8.1 to 8.6 range from 2018 to 2020, then declined to 6.77 in 2021, suggesting slower payment cycles. The ratio partially recovered to 7.86 in 2022 and increased significantly to 10.71 in 2023, indicating a substantially faster payment rate in the most recent year. This shift could reflect an improved liquidity position or changes in supplier payment terms.
Working Capital Turnover
RH, working capital turnover calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Current assets | |||||||
| Less: Current liabilities | |||||||
| Working capital | |||||||
| Net revenues | |||||||
| Short-term Activity Ratio | |||||||
| Working capital turnover1 | |||||||
| Benchmarks | |||||||
| Working Capital Turnover, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Working Capital Turnover, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Working Capital Turnover, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Working capital turnover = Net revenues ÷ Working capital
= ÷ =
2 Click competitor name to see calculations.
- Working Capital
- The working capital showed significant fluctuations over the periods analyzed. Initially, there was a positive working capital of 125,595 thousand USD in early 2018. This was followed by a sharp decline to negative values in 2019 (-235,479 thousand USD) and 2020 (-385,960 thousand USD), indicating worsening liquidity conditions. In 2021, the working capital improved but remained negative at -120,148 thousand USD. A notable reversal occurred in 2022 and 2023 with substantial positive working capital values of 2,027,684 thousand USD and 1,626,691 thousand USD, respectively, suggesting a considerable enhancement in short-term financial health.
- Net Revenues
- Net revenues exhibited a consistent upward trend over the majority of the analyzed periods, rising from 2,440,174 thousand USD in 2018 to a peak of 3,758,820 thousand USD in 2022. This represents a significant increase in sales or service income over five years. However, in 2023, net revenues declined modestly to 3,590,477 thousand USD, indicating a slight contraction after continuous growth.
- Working Capital Turnover
- The working capital turnover ratio was reported only for selected years. In early 2018, it was high at 19.43, likely reflecting the positive working capital and efficient use of short-term assets to generate revenue. This ratio was not available for the intermediate years but reappeared with much lower values in 2022 (1.85) and 2023 (2.21). The decline in this ratio suggests that working capital was considerably higher relative to revenues in recent years, possibly due to the increased working capital positions observed. This may imply either more conservative working capital management or accumulation of working capital assets exceeding revenue growth rate.
- Overall Analysis
- The data reveals a period of financial strain in terms of working capital from 2019 through 2021, which aligns with a gradual yet steady increase in net revenues during the same period. The recovery and marked improvement in working capital in 2022 and 2023, paired with the peak and slight retreat in revenues, suggest a strategic shift towards strengthening liquidity and short-term financial stability. The lower working capital turnover ratios in the recent years may indicate changes in operational or financial management practices, focusing more on maintaining adequate working capital buffers.
Average Inventory Processing Period
RH, average inventory processing period calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||
| Inventory turnover | |||||||
| Short-term Activity Ratio (no. days) | |||||||
| Average inventory processing period1 | |||||||
| Benchmarks (no. days) | |||||||
| Average Inventory Processing Period, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Average Inventory Processing Period, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Average Inventory Processing Period, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio exhibits a fluctuating downward trend over the analyzed periods. Beginning at 3.02 in early 2018, it slightly decreases to 2.83 in 2019, increases to 3.54 in 2020, but subsequently declines steadily to reach 2.22 by early 2023. This decline after 2020 suggests a reduced frequency of inventory being sold and replaced over the later periods.
- Average Inventory Processing Period
- The average inventory processing period, measured in the number of days, shows an overall increasing trend. Starting at 121 days in 2018, it rises modestly to 129 days in 2019, drops to 103 days in 2020, then increases consistently each year thereafter, reaching 165 days in early 2023. This indicates that inventory is being held for a longer duration before sale or use in recent years.
- Interrelation and Interpretation
- The inverse movements between inventory turnover and the average inventory processing period are consistent with typical inventory management dynamics. The decline in inventory turnover after 2020 coupled with the increase in processing days suggests a slowing inventory movement. This could imply challenges in sales velocity, potential overstocking, or shifts in inventory management strategies. The peak turnover ratio in 2020 paired with the lowest processing period during the same year indicates more efficient inventory management or stronger sales performance at that time.
Average Receivable Collection Period
RH, average receivable collection period calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||
| Receivables turnover | |||||||
| Short-term Activity Ratio (no. days) | |||||||
| Average receivable collection period1 | |||||||
| Benchmarks (no. days) | |||||||
| Average Receivable Collection Period, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Average Receivable Collection Period, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Average Receivable Collection Period, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio demonstrates a generally declining trend from 77.68 in February 2018 to 47.9 in January 2021. This indicates a decrease in the frequency with which receivables are collected over this four-year period. However, there is a noticeable recovery in the ratio in the following years, rising to 64.9 in January 2022 before slightly declining again to 60.08 in January 2023. The fluctuation suggests variability in the efficiency of receivables management, with some improvement after the significant dip observed by early 2021.
- Average Receivable Collection Period
- The average collection period, measured in days, inversely corresponds to the receivables turnover ratio. It increased from 5 days in February 2018 to 8 days by January 2021, reflecting a lengthening in the time taken to collect outstanding receivables. This trend is consistent with the earlier noted decrease in turnover ratio and suggests a temporary weakening in cash flow efficiency. Post-2021, the average collection period shortens to 6 days for both January 2022 and January 2023, indicating an improvement, although still slightly above the initial 5-day period.
- Overall Analysis
- Over the six-year span, there is evidence of a decline in receivables management efficiency reaching a low point around 2021. This is captured by both the reduction in turnover ratio and the extension of the collection period. Nonetheless, the subsequent partial recovery in the turnover ratio and reduction in collection days indicates corrective measures or changing conditions that improved the company's ability to manage receivables more effectively, though not fully returning to the initial efficiency levels observed in 2018.
Operating Cycle
RH, operating cycle calculation, comparison to benchmarks
No. days
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||
| Average inventory processing period | |||||||
| Average receivable collection period | |||||||
| Short-term Activity Ratio | |||||||
| Operating cycle1 | |||||||
| Benchmarks | |||||||
| Operating Cycle, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Operating Cycle, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Operating Cycle, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= + =
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period shows a generally increasing trend over the six-year span. It started at 121 days in 2018, fluctuated slightly in 2020 with a decrease to 103 days, but then consistently increased to reach 165 days by 2023. This indicates that inventory is being held longer over time, which could imply slower turnover or possible challenges in inventory management.
- Average Receivable Collection Period
- The average receivable collection period exhibits a modest upward trend from 5 days in 2018 to 8 days in 2021, followed by a slight reduction to 6 days in both 2022 and 2023. This suggests a brief lengthening of the time taken to collect receivables, but a return to a quicker collection pace in the more recent years which may indicate improved accounts receivable management or tighter credit policies.
- Operating Cycle
- The operating cycle, which combines inventory processing and receivable collection periods, generally mirrors the pattern observed in the inventory processing period. It increased from 126 days in 2018 to a peak of 171 days in 2023, with a noticeable dip in 2020 at 110 days. The extended operating cycle in recent years suggests that the company’s overall efficiency in converting inventory into cash has decreased, potentially impacting liquidity and operational effectiveness.
Average Payables Payment Period
RH, average payables payment period calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||
| Payables turnover | |||||||
| Short-term Activity Ratio (no. days) | |||||||
| Average payables payment period1 | |||||||
| Benchmarks (no. days) | |||||||
| Average Payables Payment Period, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Average Payables Payment Period, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Average Payables Payment Period, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio exhibits fluctuations over the analyzed periods. Initially, it remains relatively stable around 8.15 to 8.59 from 2018 through 2020, suggesting consistent management of payables. However, a notable decline to 6.77 occurs in 2021, indicating a slower rate of payment to suppliers during that year. This is followed by a recovery and an increase to 7.86 in 2022 and a significant rise to 10.71 in 2023, reflecting an accelerated turnover of payables and a trend toward faster payments at the end of the period.
- Average Payables Payment Period
- The average payables payment period, measured in days, shows an inverse trend relative to the payables turnover ratio, as expected. From 2018 to 2020, there is a gradual reduction from 45 days to 42 days, indicating a steady decrease in the time taken to settle payables. A sharp increase to 54 days in 2021 corresponds with the dip in payables turnover, signifying a slowdown in payment practices. Subsequently, the period decreases to 46 days in 2022 and further contracts to 34 days in 2023, the shortest duration recorded within the timeframe, underscoring a trend toward more prompt payments to creditors in the latest period.
Cash Conversion Cycle
RH, cash conversion cycle calculation, comparison to benchmarks
No. days
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||
| Average inventory processing period | |||||||
| Average receivable collection period | |||||||
| Average payables payment period | |||||||
| Short-term Activity Ratio | |||||||
| Cash conversion cycle1 | |||||||
| Benchmarks | |||||||
| Cash Conversion Cycle, Competitors2 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| Lowe’s Cos. Inc. | |||||||
| TJX Cos. Inc. | |||||||
| Cash Conversion Cycle, Sector | |||||||
| Consumer Discretionary Distribution & Retail | |||||||
| Cash Conversion Cycle, Industry | |||||||
| Consumer Discretionary | |||||||
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 2023 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= + – =
2 Click competitor name to see calculations.
- Inventory Processing Period
- The average inventory processing period exhibited fluctuations over the six-year span. Beginning at 121 days in early 2018, it increased slightly to 129 days in 2019, then decreased sharply to 103 days in 2020. However, this trend reversed in subsequent years, increasing to 130 days in 2021 and further rising to 141 days in 2022, ultimately reaching 165 days by early 2023. This pattern suggests a variability in inventory turnover efficiency with a notable lengthening of the processing period in the most recent years.
- Receivable Collection Period
- The average receivable collection period generally experienced a modest upward movement. Starting at 5 days in 2018, it increased gradually to 6 in 2019, and peaked at 8 days in 2021. Following this peak, the period shortened slightly and stabilized at 6 days for the last two reported years. This indicates relatively consistent efficiency in collecting receivables with only minor variations.
- Payables Payment Period
- The average payables payment period showed some fluctuations with an overall decreasing tendency toward the end of the period. Initially, the period was 45 days in 2018, declining slightly to 44 and 42 days in the next two years. A significant increase to 54 days occurred in 2021, but the period then dropped sharply to 46 days in 2022 and further down to 34 days in 2023. This trend implies changing payment strategies, with a recent tendency toward quicker settlement of payables.
- Cash Conversion Cycle
- The cash conversion cycle reveals notable variability and an overall lengthening trend over the six years. It began at 81 days in 2018, rose to 91 days in 2019, then decreased to 68 days in 2020. Afterward, the cycle increased to 84 days in 2021, further extended to 101 days in 2022, and reached its highest recorded value of 137 days in 2023. This increasing cash conversion cycle suggests that the company’s operational liquidity cycle has been lengthening, potentially indicating a greater investment in working capital or slower cash flow turnover in recent years.