Lowe’s Cos. Inc. (NYSE:LOW)

An analysis of the available financial ratios and periods reveals distinct trends in operational efficiency and liquidity management over time.

Inventory Turnover

The inventory turnover ratio shows moderate fluctuations with no consistent upward or downward trend over the periods observed. Starting at 3.73, it dips to around 3.14 in early 2022, recovers somewhat through 2023 and early 2024, and then gradually decreases again, reaching approximately 3.03 by May 2025. This indicates periodic changes in how quickly inventory is sold and replenished, suggesting variability in inventory management or sales cycles.

Payables Turnover

The payables turnover ratio exhibits notable variability across the analyzed periods. An initial sharp decline from 6.42 to around 4.18 is observed early on, followed by intermittent recoveries and falls, with values oscillating in the 5.0 to 6.6 range thereafter. This pattern implies fluctuating speed in paying suppliers, potentially influenced by liquidity conditions, supplier terms, or strategic payment management.

Working Capital Turnover

This ratio displays extreme variability, with very high values (e.g., 530.5 and 245.54) suggesting possible data anomalies or extraordinary elements affecting working capital components in specific quarters. Outside these outliers, the ratio generally ranges between approximately 11.6 and 52.3. These fluctuations point to changing efficiency in using working capital to support sales, which may reflect seasonal factors, operational adjustments, or financial strategy shifts.

Average Inventory Processing Period

The average inventory processing period, measured in days, generally remains within the 90 to 120-day range. Notably, there is some increase starting in early 2022, peaking around 121 days by May 2025. This trend towards longer processing periods could indicate slower inventory turnover or increased inventory holding times, potentially impacting liquidity and storage costs.

Average Payables Payment Period

The average payables payment period also shows variability, with an initial increase from 57 days to peaks above 80 days, followed by reductions to as low as 55 days and subsequent fluctuations. The periods with longer payment durations suggest attempts to conserve cash or negotiate more extended payment terms, while shorter periods may reflect improved liquidity or strategic supplier relationship priorities.

The cost of sales exhibits notable fluctuations across the observed periods. Initially, it decreases from 14,252 million USD in August 2019 to a low of 11,045 million USD in January 2020. Following this trough, the cost of sales rises significantly, peaking at 18,343 million USD in July 2022. Afterward, a general declining trend is observed, with values dropping to around 12,458 million USD by May 2025. This pattern suggests periods of increased sales activity or pricing adjustments, followed by a tapering off in more recent quarters.

The net merchandise inventory demonstrates an overall increasing trend from May 2019 through May 2025. Starting at 15,026 million USD, the inventory level dips slightly in the second quarter of 2019 but then steadily climbs, reaching as high as 20,239 million USD in April 2022. Despite a few minor declines, inventory remains elevated relative to the initial values, stabilizing between approximately 16,800 million USD and 18,300 million USD towards the latter periods. This elevation in inventory levels could indicate strategic stockpiling or a response to anticipated demand shifts.

Inventory turnover, available starting November 2019, fluctuates between roughly 3.0 and 3.9 times over the periods. Early values are higher, around 3.7 to 3.9, suggesting relatively efficient inventory management or strong sales relative to inventory. From mid-2021 onwards, the turnover ratios tend to decline, stabilizing near 3.0 to 3.3 by May 2025. This decline in turnover rate, alongside increasing inventory levels, may point to slower inventory movement or potentially less aggressive sales performance.

In summary, the data indicates a period of increasing cost of sales and inventory accumulation through mid-2022, followed by a moderation in these metrics toward 2025. The slowing inventory turnover ratio during this period could reflect challenges in converting inventory into sales at previous rates, possibly signaling shifts in market demand or operational adjustments. Monitoring these metrics moving forward will be essential to assess the effectiveness of inventory management and sales strategies.

Cost of Sales

Marked by volatility with an initial decline early in the timeframe, followed by a pronounced increase peaking mid-2022, and a decline thereafter to levels below initial highs.

Net Merchandise Inventory

General upward movement from 2019 through 2025, with inventory peaking in early 2022 and sustained higher levels afterward, indicating increased inventory holdings.

Inventory Turnover Ratio

Available data shows higher turnover ratios initially, followed by a gradual decline, signifying slower inventory movement relative to sales in recent periods.

The cost of sales presented fluctuations over the observed periods, revealing some volatility in procurement and inventory expenses. Initially, there was an increase from May 2019 (US$12,160 million) to August 2019 (US$14,252 million), followed by a notable decrease into the early months of 2020. However, from May 2020 onward, cost of sales generally showed an upward trend with some cyclical declines. Peaks occurred around July 2020 (US$17,998 million), July 2021 (US$18,258 million), and July 2022 (US$18,343 million), indicating potential seasonality or larger inventory movements during mid-year quarters. The latest quarters reveal a moderate reduction in cost of sales, suggesting improved cost control or changes in sales volume.

Accounts payable figures similarly exhibited variation, but with less pronounced peaks compared to cost of sales. From May 2019 to January 2020, a sharp decline occurred, possibly reflecting quicker payment cycles or lower procurement levels. Following that period, accounts payable generally increased with some oscillations, reaching a high around April 2021 (US$13,964 million), then fluctuating downward and upward across subsequent quarters. This pattern implies adjustments in supplier payment policies or inventory purchasing strategies. The presence of multiple peaks and troughs suggests dynamic management of liabilities to suppliers in response to operational needs or market conditions.

The payables turnover ratio, which inversely relates to the average payment period to suppliers, showed considerable variation. Early values are missing, but from November 2019 onward, the ratio ranged mostly between about 4 and 6, indicating that payables were turned over between approximately 1.5 to 2.5 months on average. Periodic increases in turnover ratio, such as those seen around late 2020 and early 2023, suggest faster payments to suppliers during those times. Conversely, lower ratios hint at slower payment cycles. The variability reflects changing working capital strategies, potentially influenced by liquidity management and vendor negotiations.

Summary of trends:

Cost of sales exhibited seasonal tendencies with mid-year peaks and occasional downward corrections, indicating variability in purchasing or sales volume.

Accounts payable fluctuated moderately, with periods of both tightening and extension of payment terms, reflecting dynamic supplier relationship management.

The payables turnover ratio varied between 4 and 6, showing cycles of accelerating and decelerating payment speeds, aligning with changes in accounts payable levels.

The data reveals notable fluctuations in the financial metrics over the presented periods. Working capital values demonstrate pronounced volatility, with periods of both significant increase and decrease. Initially, working capital declined sharply from 1,554 million USD in early May 2019 to 136 million USD by late January 2020. This was followed by a steep rise, peaking at 7,352 million USD in late October 2020. Subsequent quarters show a pattern of decreases and increases, with working capital falling to as low as 287 million USD by early May 2025.

Net sales exhibit a cyclical but overall dynamic movement. Starting at 17,741 million USD in early May 2019, net sales increased to a high of 27,570 million USD by late July 2021. Following this peak, sales show a general downward trend, falling to 18,554 million USD by early May 2025. The variations appear to align with seasonal cycles, but the decline in recent periods suggests possible challenges in maintaining sales momentum.

Working capital turnover ratios, available only from the period beginning May 1, 2020, also reflect significant variability. Ratios begin at an exceptionally high level of 530.5 but quickly normalize to a range between approximately 11.6 and 41.46 in subsequent quarters. This ratio tends to fluctuate within these bounds, indicating changes in the efficiency with which working capital supports net sales. The spikes in some periods, such as 245.54 and 290.03, suggest temporary distortions likely tied to abnormal working capital levels.

Working Capital Trends

The volatility in working capital indicates fluctuating liquidity management or operational adjustments. The sharp rise in late 2020 could coincide with atypical inventory or receivable changes, potentially linked to external economic factors.

Net Sales Patterns

Net sales show peaks around mid-2021 before declining toward mid-2025. This pattern may suggest cyclical market demand variations or competitive pressures affecting revenue.

Working Capital Turnover Insights

The turnover ratio's irregular spikes reflect inconsistent efficiency in using working capital to generate sales. Generally, turnover remains within a plausible range, pointing to moderate to high asset utilization, but occasional extremes indicate possible operational disruptions or accounting timing effects.

Overall, the data portrays a business experiencing operational fluctuations with intermittent liquidity and efficiency challenges. The trends call for careful monitoring of working capital components and sales drivers to sustain financial stability and growth.

The data reflects trends in two key inventory management metrics over multiple quarterly periods.

Inventory Turnover Ratio

This ratio displays fluctuations within a relatively narrow range. Beginning around 3.7 to 3.9 in early 2020, it demonstrates some volatility with values generally oscillating between approximately 3.1 and 3.8. Notably, the ratio declined from 3.82 in early 2022 to around 3.14-3.3 by mid to late 2022, indicating a slowdown in inventory turnover during that period.

Subsequently, the ratio shows minor increases followed by declines, ultimately trending slightly downward toward the last observed periods in 2024-2025, where it reaches close to 3.0 to 3.2. This soft downward trend may suggest more inventory is being held relative to sales over time or reduced sales velocity.

Average Inventory Processing Period (days)

This measure inversely relates to the turnover ratio, representing the average duration inventory remains on hand. The data begins around 98 days in early 2020, increases to over 100 days in several periods, and peaks at 116-121 days in late 2022 through 2024.

Specifically, from early 2020 to late 2022, the average inventory processing period shows an overall upward trend, reflecting slower inventory movement. The increase to periods exceeding 110 days coincides with the lower inventory turnover ratios observed, confirming a lengthening of inventory holding times.

In the most recent quarters, the processing period remains elevated, often above 110 days, with minor fluctuations. This persistence at higher levels reinforces the interpretation of more prolonged inventory retention or possible challenges in inventory management or demand.

In summary, the analyzed metrics depict a pattern of moderately declining inventory turnover alongside increasing average inventory processing time across the observed timeline. This suggests a slowdown in the speed of inventory turnover and longer durations to process inventory, which might indicate changes in demand, supply chain dynamics, or inventory management practices requiring further investigation.

The payables turnover ratio exhibits a fluctuating trend throughout the analyzed periods. Initially, there is a notable decline from 6.42 to 4.18, indicating a slower rate of payables turnover. Subsequently, the ratio experiences intermittent increases and decreases, reaching peaks such as 6.16 in October 2022 and 6.61 in February 2024, as well as troughs including 4.52 in April 2021 and 4.86 in May 2024. This volatility suggests varying payment behaviors and possible changes in vendor terms or purchasing patterns over time.

Correspondingly, the average payables payment period, expressed in number of days, inversely mirrors the payables turnover ratio. The payment period initially escalates from 57 to a high of 87 days, implying lengthening payment terms or delayed payments. Following this peak, the payment period decreases and fluctuates between approximately 55 and 81 days. Noteworthy reductions to around 59 days appear in early 2023, while increases to the mid-70s occur periodically, such as in July 2020 and August 2024.

Relationship Between Ratios

The inverse relationship observed between the payables turnover ratio and the average payables payment period aligns with fundamental financial principles: as the turnover ratio decreases, the payment period extends, and vice versa, indicating the company alternates between faster and slower payments to suppliers.

Implications of Trends

The variability in these metrics may reflect operational adjustments, cash management strategies, or external factors impacting supplier payment terms. Periods with lower turnover and longer payment periods might indicate efforts to conserve cash or renegotiate payable terms, whereas higher turnover and shorter payment periods could suggest improved liquidity or a strategic choice to strengthen supplier relationships.

Volatility Considerations

The observed fluctuations suggest a degree of inconsistency in accounts payable management, which could warrant further analysis to understand underlying causes and potential impacts on supplier relations and working capital efficiency.