Home Depot Inc. (NYSE:HD)

Inventory Turnover

The inventory turnover ratio exhibits moderate fluctuations over the observed periods. Beginning at 5 in early 2020, it increased to a peak around 5.83 later that year, then generally declined gradually to approximately 4.01 by mid-2022. Subsequently, there was a modest recovery stabilizing around the 4.2 to 4.85 range into 2024, maintaining relative consistency thereafter.

Receivables Turnover

A declining trend is noticeable in the receivables turnover ratio from about 52.34 in early 2020 to the high 20s by mid-2024. This reflects a steady decrease in the frequency of receivables collection. The pattern shows intermittent short-term increases but overall a downward trajectory, suggesting slower collection efficiency in later periods.

Payables Turnover

The payables turnover ratio shows variability but trends generally upward from 9.33 in early 2020 down to around 6.42 in early 2021, then rising again and reaching a peak of approximately 10.13 in late 2023. This indicates a tendency to pay suppliers more rapidly in certain periods, although fluctuations imply changing payment policies or conditions.

Working Capital Turnover

This ratio presents significant volatility. Starting at 76.81 in early 2020, it plunged sharply to values in the teens by late 2020 and early 2021, with an extremely high outlier around 417.56 in mid-2021. Following this, the ratio stabilized at lower, more moderate levels generally between 16 and 55, showing irregular but somewhat stabilizing working capital management.

Average Inventory Processing Period

The inventory processing period generally increased from 63-75 days early in the timeline to a peak near 92 days in mid-2022, indicating slower inventory turnover. After that, it gradually declined and remained in the mid-80s range through 2024, signaling a lengthening and then marginal improvement in inventory holding durations.

Average Receivable Collection Period

The receivable collection period consistently lengthened slightly over time, starting around 7-8 days, moving steadily to about 13-14 days by mid-2024. This trend aligns with the decreasing receivables turnover, suggesting customers take longer to pay on average.

Operating Cycle

The operating cycle, summing the inventory processing and receivables collection periods, reflects a gradual increase from around 71-80 days initially, peaking near 101 days in mid-2022, and then fluctuating between the high 80s and mid-90s days thereafter. This indicates a slow but noticeable extension in the overall cash flow cycle of the company.

Average Payables Payment Period

The average payables payment period showed an upward move from 39 days to highs near 57 days between early 2020 and mid-2021, followed by a gradual decline to the low 40s by 2024. This suggests some fluctuation in payment timing, with tendencies toward longer payment delays in the earlier years, then a return to quicker payments.

Cash Conversion Cycle

The cash conversion cycle demonstrates a moderate increasing trend, starting at 41 days in early 2020, dipping to 17 days near late 2020, but then rising steadily to stabilize in the low 50s from 2022 through 2024. This pattern indicates some initial efficiency gains in converting investments to cash, followed by a lengthening of the cycle consistent with slower receivables collection and longer inventory holdings.

Cost of Sales

The cost of sales experienced variability over the reported periods, starting at 17,364 million USD in May 2019 and generally trending upward with noticeable fluctuations. There was a significant increase in August 2020, reaching 25,112 million USD, followed by some decreases and rises in subsequent quarters. The costs peaked again at 30,152 million USD in August 2025, indicating a substantial rise over the six-year period. This pattern suggests periods of increased sales activity or rising input costs, interspersed with relative declines.

Merchandise Inventories

Merchandise inventories displayed a less consistent trend compared to cost of sales. Starting at 15,495 million USD in May 2019, the inventory levels dipped toward mid-2020 but increased significantly thereafter, peaking at 26,088 million USD in July 2022. Subsequently, inventories remained elevated but showed some moderate fluctuations, ending at 24,843 million USD in August 2025. The growth in inventory levels over time may reflect stock accumulation strategies or supply chain adjustments in response to demand or market conditions.

Inventory Turnover Ratio

The inventory turnover ratio, which is a measure of how efficiently inventory is managed relative to sales, generally declined from 5.83 in November 2019 to a low near 3.96 in mid-2022. This indicates a slowing in inventory turnover, potentially signaling slower sales or increased inventory holdings. However, from mid-2022 onwards, the turnover ratio improved gradually, reaching values around 4.43 by August 2025. This recovery suggests efforts to optimize inventory management and improve sales velocity after a period of reduced efficiency.

Overall Analysis

The data reveals periods of both growth and challenge. The notable increase in cost of sales along with rising inventory levels suggests the company faced escalating demand or possibly inflationary pressures on input costs. At the same time, the dip and subsequent recovery in inventory turnover ratio imply inventory management challenges during the mid-period, which appear to be addressed more recently. The interplay between these metrics highlights operational adjustments possibly related to supply chain dynamics, market trends, or strategic stockpiling practices.

Net Sales Trend

Net sales exhibited fluctuations over the analyzed periods, starting at $26,381 million in May 2019 and generally trending upward with notable variability. A significant increase occurred in August 2020, reaching $38,053 million, followed by a decrease and then subsequent rebounds. The highest peaks appeared around August 2021 ($41,118 million) and July 2024 ($45,277 million). These fluctuations suggest periods of strong sales growth interspersed with downturns, possibly reflecting seasonal effects, market conditions, or company-specific factors.

Receivables, Net Trend

Net receivables also showed an overall increasing pattern from $2,317 million in May 2019 to a peak of $5,878 million in October 2024. The growth in receivables generally aligns with rising net sales but at a somewhat more accelerated pace, especially evident from early 2023 onwards. The significant increases in receivables points to either extended credit terms or slower collections over time.

Receivables Turnover Ratio Analysis

The receivables turnover ratio, a measure of how efficiently receivables are collected, showed a declining trend from earlier periods into 2024. From a high range above 40 in 2019 and early 2020, the ratio again declined steadily to levels around 27-28 by late 2024. This decreasing turnover ratio indicates a slowdown in the rate at which receivables are collected relative to sales, suggesting that while sales increased, the efficiency of collections diminished.

Summary Insights

The data reflect a company experiencing growth in sales accompanied by rising receivables balances. However, the efficiency of converting sales into cash collections has weakened over time, as shown by the declining receivables turnover ratio. This trend may warrant further investigation into credit policies, customer payment behaviors, or collection practices to ensure that increased receivables do not negatively impact cash flow.

Cost of Sales

The cost of sales displays notable fluctuations over the analyzed quarters. Starting at 17,364 million USD in May 2019, it gradually increased until August 2020, peaking at 25,112 million USD. Following this peak, the metric experienced recurring oscillations, with values frequently surpassing 25,000 million USD, including a maximum of 30,152 million USD in August 2025. This upward trend in cost of sales across the years suggests increasing expenditure on goods sold, potentially reflecting growth in operational scale or changes in product pricing and sourcing costs.

Accounts Payable

Accounts payable exhibits variability without a clear linear trend, starting at 10,311 million USD in May 2019 and ending at 13,086 million USD in August 2025. There are periods of both increases and decreases. Notably, significant rises are observed in May 2021 and May 2022, reaching peaks of 14,494 million USD and 15,367 million USD respectively. However, these are followed by decreases and subsequent recoveries, indicating possible cyclical payment behaviors or fluctuations in credit terms with suppliers.

Payables Turnover Ratio

The payables turnover ratio, which reflects the frequency of payment to suppliers, demonstrates a generally fluctuating pattern with apparent seasonality and periodic peaks. Initially missing for several quarters, values appear beginning in February 2020, starting at 9.33 and dropping to a low of 6.42 in November 2020, indicating slower payment during that period. Subsequently, the ratio increases and peaks at 10.13 in January 2024, suggesting quicker payment cycles at that time. The ratio oscillates between approximately 6.4 and 10.1, highlighting irregularities or adjustments in the company's payment strategy over time.

Overall Insights

The data show that while cost of sales tends to increase over time, reflecting potential growth or inflationary effects, accounts payable and payables turnover ratio fluctuate without a consistent trend. These fluctuations could indicate variable supplier terms, working capital management adjustments, or seasonal effects impacting payment scheduling. The presence of multiple peaks and troughs in both payables and turnover ratio reveals dynamic management of payables in response to operational needs or market conditions.

The analysis of the quarterly financial data reveals several notable trends and fluctuations over the observed periods, primarily focusing on working capital, net sales, and working capital turnover ratios.

Working Capital Trends

Working capital exhibits significant variability through the quarters, starting with a modest level of 880 million USD in May 2019. It then increases substantially, reaching a peak of 9,401 million USD in October 2022. Subsequent periods show a general decline with some volatility, declining to around 2,940 million USD by August 2025 before rising again to 4,545 million USD in the final period reported. The pattern indicates periods of aggressive capital investment or liquidity changes followed by contractions, suggesting fluctuations in operational efficiency or shifts in asset and liability management.

Net Sales Dynamics

Net sales demonstrate an overall upward trend with cyclical fluctuations typical of retail businesses. Starting from approximately 26.4 billion USD in May 2019, sales generally increase through the periods, achieving peaks surpassing 43 billion USD in August 2025. Although some quarters reveal slight declines or plateaus, the long-term pattern is positive, signifying growth in revenue generation capacity. The pronounced sales growth between mid-2020 and mid-2021 could be linked to market conditions or strategic initiatives driving higher turnover.

Working Capital Turnover

The working capital turnover ratio shows extreme variability with some exceptionally high values, particularly in the earlier periods that contain data. These ratios fluctuate from as low as approximately 13.79 to extraordinarily high figures exceeding 400 in certain quarters. Such variations indicate inconsistent efficiency in utilizing working capital to generate sales, possibly due to large swings in working capital levels while sales remained relatively more stable. The ratio tends to stabilize around values between 16 and 55 in later periods, suggesting improvements in working capital management or more balanced growth in sales relative to changes in current assets and liabilities.

Overall Insights

The data reveals cyclical financial behavior consistent with a retail operation subject to market seasonality and economic factors. The substantial fluctuations in working capital contrasted with steadier growth in net sales imply active strategic management of operational liquidity. Additionally, the working capital turnover ratio's wide range highlights potential opportunities for improving asset utilization efficiency. The upward trajectory of net sales alongside fluctuating but ultimately recovering working capital suggests the company manages to sustain growth while periodically adjusting its working capital structure to support operational needs.

The data reveals an observable pattern in inventory management metrics over a series of quarterly periods, focusing on inventory turnover ratio and average inventory processing period measured in days.

Inventory Turnover Ratio

The inventory turnover ratio shows fluctuations throughout the reported quarters. Initially, the ratio was moderate, hovering around 5 to nearly 6 in the mid-2019 to early 2020 period, peaking at approximately 5.83. Subsequently, there is a general declining trend through 2021 and into mid-2022, reaching a low near 3.96, implying slower inventory movement during that time. From late 2022 to early 2024, the ratio shows a gradual recovery, moving back above 4.0 and continuing with slight variations around the 4.2 to 4.8 range, suggesting moderately improved inventory turnover efficiency in the more recent quarters.

Average Inventory Processing Period

The average inventory processing period in days is inversely related to the turnover ratio and exhibits a complementary trend. Starting with approximately 73 days in early reported terms, the period lengthens steadily through 2021 and 2022, peaking at over 90 days, which reflects slower inventory processing. This peak corresponds to the trough in the turnover ratio observed in the previous metric. After this period of elevated processing duration, there is a modest decrease in processing days from late 2022 into 2024, stabilizing around 81 to 87 days. Although this represents some improvement, the processing period remains higher than the early phases of the data set, indicating that inventory is generally held longer than in the initial quarters.

Overall, these trends suggest that inventory turnover slowed down significantly around 2021-2022, coinciding with an increase in the number of days inventory is held. This could be due to changes in supply chain dynamics, demand variability, or strategic inventory increases during this timeframe. The latter periods show partial recovery in turnover rates and reduction in processing days, indicating efforts to improve inventory efficiency are underway, although not yet restored to the earlier levels observed in 2019 and early 2020.

Receivables Turnover

The receivables turnover ratio demonstrates a fluctuating pattern over the observed periods. After a high point of 52.34 recorded in February 2020, the ratio experienced a significant decline, dropping to around the low 40s throughout much of 2021 and 2022. Periodic increases are noted, such as the rise to 47.45 in January 2023. However, from early 2023 onwards, the ratio shows a consistent downward trend, decreasing from approximately 37 in April 2023 to a low 26.74 by October 2024. This decline suggests a potential worsening in the efficiency of receivables collection in recent quarters.

Average Receivable Collection Period

The average receivable collection period moves largely inversely to the receivables turnover, fluctuating between 7 and 14 days during the given timeline. Initially low at 7 days in February 2020, it gradually increased to about 9 days through 2021 and 2022, indicating a slight elongation in collection time. Notably, from January 2023 onward, the collection period generally lengthened, peaking at 14 days around October 2024 before slightly improving to 13 days in subsequent months. This lengthening trend reflects a decline in the speed at which receivables are converted into cash.

Summary of Observations

Overall, the data indicates a deterioration in receivables management efficiency over the most recent periods. The steady decrease of the receivables turnover ratio combined with an increasing average collection period points toward a slower conversion of sales into cash. This trend could have implications for cash flow management and working capital efficiency if sustained.

Average Inventory Processing Period

The average inventory processing period shows an overall fluctuating trend with values ranging approximately between 63 and 92 days. Initially, the period was at 73 days in May 2020, reached a low point of 63 days in November 2020, and subsequently increased steadily, peaking at 92 days in July 2022. After this peak, the period demonstrates a gradual decline to around 81-87 days in the most recent quarters, reflecting some improvement in inventory turnover efficiency towards the end of the observed period.

Average Receivable Collection Period

The average receivable collection period remains relatively stable, primarily fluctuating between 7 and 14 days. Starting at 7 days in May 2020, it slightly increased over time with notable peaks at 13-14 days observed during mid and late 2024. Despite some volatility, the period mostly hovers around 8 to 10 days in the majority of the quarters, indicating consistent credit collection practices with occasional lengthening in more recent periods.

Operating Cycle

The operating cycle mirrors the trends observed in the inventory processing and receivable collection periods, exhibiting a fluctuating pattern. Beginning at 80 days in May 2020, it dipped to a minimum of 71 days in November 2020 before increasing gradually to a peak of 101 days in July 2022. Subsequently, it mildly decreases but remains elevated compared to the early periods, staying around 90 to 100 days in recent quarters. This pattern reflects the combined effects of changing inventory and receivable collection durations, suggesting variable operational efficiency over time.

Payables Turnover Ratio Trends

The payables turnover ratio data begins from May 3, 2020, showing an initial value of 9.33. Following this, there is a noticeable decline to the lowest observed figure of 6.42 by February 2, 2020. After this trough, the ratio generally exhibits a fluctuating upward trend, peaking at 10.13 in October 29, 2023. This peak represents the highest turnover efficiency during the observed period. Subsequent periods show a moderate decrease to around 7.39 by August 3, 2025.

Average Payables Payment Period Trends

The average payables payment period, expressed in days, initially increases from 39 days on May 3, 2020, to a high of 57 days by February 2, 2020, indicating a slower payment cycle. Following this peak, a decline occurs, with values decreasing to as low as 36 days by October 29, 2023. Thereafter, the payment period fluctuates moderately, ending at 43 days in August 3, 2025. This suggests an overall improvement in payment efficiency after the peak delay period.

Relationship Insights

The payables turnover ratio and the average payment period depict an inverse relationship, as expected. Periods with elevated payment days correspond with decreased turnover ratios and vice versa. This inverse correlation reinforces the interpretation that the company’s payment cycle lengthened initially, reducing turnover efficiency, followed by a reversal improving payable management efficiency towards the latter periods.

Overall Observations

The analyzed time frame reveals variability in supplier payment management, with a notable deterioration in turnover efficiency and increased payment periods early in the dataset, succeeded by recovery and optimization phases. The firm appears to have made efforts to shorten payment cycles after the peak delay period, resulting in enhanced turnover ratios and improved liquidity management reflected in the downward trend of average days payable.

Average inventory processing period

The average inventory processing period shows noticeable fluctuations over the analyzed timeframe. Starting from 73 days in May 2020, it initially decreased to a low of 63 days by November 2020, indicating an improvement in inventory turnover efficiency during that period. However, from early 2021 onwards, the period steadily increased, reaching a peak of 92 days in July 2022. After this peak, a gradual decline is observed, with values oscillating around the mid-80s in later periods, which suggests efforts to reduce inventory holding times but still higher than earlier readings.

Average receivable collection period

The average receivable collection period remained relatively stable throughout the reported quarters, fluctuating mostly between 8 and 10 days. There are occasional slight upticks to 13 and 14 days in mid to late 2024, which could indicate some difficulty or leniency in collecting receivables during this period. Overall, the collection efficiency appears consistent with minor variations that do not reflect major shifts in credit or collection policies.

Average payables payment period

The average payables payment period exhibits a less stable trend with notable variability. Starting at 39 days in May 2020, this period increased to around 57 days in early 2021, suggesting extended payment terms or delayed payments to suppliers. Following this, a general downward trend is visible, reaching lows near 36 days by mid-2023, before increasing again towards 49 days by mid-2025. These fluctuations may reflect changing supplier relationships, cash flow management strategies, or negotiation of payment terms over time.

Cash conversion cycle

The cash conversion cycle (CCC) demonstrates a pattern of improvement followed by gradual deterioration. Initially, the CCC improved, decreasing from 41 days in May 2020 to a low of 17 days in November 2020, implying faster conversion of resources into cash. From this point forward, the CCC steadily increased, rising to over 50 days by mid-2022 and maintaining levels around 50 to 52 days through mid-2025. This increase indicates a slowing of the overall cash cycle, potentially due to longer inventory holding periods, slower collections, or extended payment cycles. The prolonged CCC could impact operational liquidity and efficiency.