Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
RH, short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
The analysis of the financial ratios and periods reveals several distinct trends in operational efficiency and liquidity management over the observed quarters.
- Inventory Turnover
- Inventory turnover exhibited variability across the period. Initially, the ratio declined slightly from 2.91 to 2.66, followed by a rise reaching a peak of 3.68 before a steady decrease to around 2.2 in the latest quarters. This suggests fluctuations in inventory management efficiency, with a period of improved turnover followed by a gradual slowing in inventory movement.
- Receivables Turnover
- The receivables turnover ratio showed a general downward trend from 63.07 to approximately 45 in mid-2020, indicating slower collection of receivables. However, from that point, it increased again, peaking at 69.47, before settling near 56 by the latest quarter. This indicates an initial decline in collection efficiency followed by recovery and some volatility in subsequent periods.
- Working Capital Turnover
- Working capital turnover data is sparse but indicates low values in the later periods, ranging from approximately 1.6 to 2.2. This suggests relatively stable but modest efficiency in utilizing working capital to generate sales during those periods.
- Average Inventory Processing Period
- The average inventory processing period increased from 125 days to a peak of 137 days early on, followed by a decline to around 99-103 days, indicating improved inventory management. However, from 2021 onwards, a consistent increase was observed, reaching about 165 days in the most recent quarter. This trend points to slower inventory turnover later in the period, potentially signaling excess inventory or challenges in sales.
- Average Receivable Collection Period
- The receivable collection period remained relatively steady, fluctuating mildly between 5 and 8 days. This stability reflects consistent credit and collection policies, with minor variations less likely to significantly affect liquidity.
- Operating Cycle
- The operating cycle mirrored inventory processing trends, initially fluctuating around 130-140 days, decreasing briefly, and then increasing steadily to a peak of around 172 days. The lengthening of the operating cycle in recent periods suggests delays in converting inventory and receivables into cash, potentially indicating operational inefficiencies or market challenges.
Overall, the company experienced periods of improved efficiency followed by gradual declines in inventory management and operating cycle length, while receivables collection remained relatively stable with some recovery after mid-period dips. The increasing inventory days and operating cycle towards the end may warrant attention to inventory control and turnover strategies to enhance operational effectiveness.
Turnover Ratios
Average No. Days
Inventory Turnover
RH, inventory turnover calculation (quarterly data)
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||||
| Cost of goods sold | 391,617) | 403,093) | 448,288) | 468,402) | 458,709) | 447,237) | 501,174) | 501,183) | 453,815) | 427,308) | 435,683) | 376,863) | 283,241) | 381,903) | 393,360) | 411,556) | 365,607) | 408,190) | 382,047) | 369,198) | 345,371) | |||||||
| Merchandise inventories | 766,301) | 801,841) | 819,299) | 859,078) | 817,327) | 734,289) | 633,591) | 645,987) | 593,946) | 544,227) | 497,076) | 487,639) | 494,260) | 438,696) | 429,189) | 480,688) | 530,190) | 531,947) | 566,117) | 551,343) | 530,657) | |||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||
| Inventory turnover1 | 2.23 | 2.22 | 2.22 | 2.18 | 2.33 | 2.59 | 2.97 | 2.81 | 2.85 | 2.80 | 2.97 | 2.94 | 2.97 | 3.54 | 3.68 | 3.26 | 2.88 | 2.83 | 2.66 | 2.73 | 2.91 | |||||||
| Benchmarks | ||||||||||||||||||||||||||||
| Inventory Turnover, Competitors2 | ||||||||||||||||||||||||||||
| Amazon.com Inc. | 9.94 | 9.15 | 8.41 | 8.01 | 8.49 | 8.40 | 7.80 | 7.30 | 7.90 | 8.34 | 8.69 | 10.90 | 10.54 | — | — | — | — | — | — | — | — | |||||||
| Home Depot Inc. | 4.08 | 4.20 | 4.07 | 3.96 | 4.01 | 4.55 | 4.76 | 5.06 | 4.87 | 5.25 | 5.13 | 5.83 | 4.93 | — | — | — | — | — | — | — | — | |||||||
| Lowe’s Cos. Inc. | 3.28 | 3.50 | 3.23 | 3.29 | 3.14 | 3.65 | 3.82 | 3.66 | 3.44 | 3.71 | 3.64 | 3.90 | 3.52 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 5.64 | 6.21 | 4.26 | 5.04 | 5.10 | 5.82 | 4.90 | 6.04 | 5.35 | 5.66 | 5.08 | 6.88 | 5.59 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Inventory turnover
= (Cost of goods soldQ1 2024
+ Cost of goods soldQ4 2023
+ Cost of goods soldQ3 2023
+ Cost of goods soldQ2 2023)
÷ Merchandise inventories
= (391,617 + 403,093 + 448,288 + 468,402)
÷ 766,301 = 2.23
2 Click competitor name to see calculations.
The cost of goods sold (COGS) exhibits notable fluctuations over the observed quarterly periods. Initially, there was a general upward trend from May 2018 through early 2020, peaking around October 2020. Following this peak, the COGS shows variability but with an overall declining trend towards early 2023, indicating a potential improvement in cost management or changes in sales volume.
Merchandise inventories demonstrate a gradual increase across the periods, with some variability. Starting at approximately 530 million USD in May 2018, inventory levels rise steadily, reaching a peak close to 859 million USD by late 2022 before experiencing a slight reduction by early 2023. This upward trajectory suggests either increased stock-holding to support sales growth or slower inventory turnover resulting in higher accumulated stock.
The inventory turnover ratio reflects how often the company sells and replaces its stock over a given period. The ratio begins around 2.9 in mid-2018, showing minor declines and rises, reaching a high near 3.68 in late 2019. Post-2019, the turnover ratio trends downward steadily, dropping to approximately 2.2 by early 2023. This decline points to slower inventory movement, indicating that assets tied up in inventory may be increasing relative to sales.
- Cost of Goods Sold
- Shows an initial increase through 2019, peaking in late 2020, followed by a downward trend into 2023.
- Merchandise Inventories
- Gradually increases over the period, peaking in late 2022 before slightly decreasing, suggesting accumulation of stock.
- Inventory Turnover
- Increases moderately through 2019 but declines steadily afterwards, indicating slower inventory movement.
Collectively, these trends indicate that while the company initially improved its inventory management efficiency up to 2019, there appeared to be challenges maintaining this efficiency in subsequent years. The rising inventory levels coupled with a declining turnover rate may signal potential issues with excess stock or reduced demand, which could impact liquidity and operational efficiency. The decrease in COGS in recent quarters may further reflect adjustments in purchasing or sales strategy.
Receivables Turnover
RH, receivables turnover calculation (quarterly data)
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||||
| Net revenues | 739,162) | 772,499) | 869,066) | 991,620) | 957,292) | 902,741) | 1,006,428) | 988,859) | 860,792) | 812,436) | 844,013) | 709,282) | 482,895) | 664,976) | 677,526) | 706,514) | 598,421) | 670,891) | 636,558) | 640,798) | 557,406) | |||||||
| Accounts receivable, net | 60,233) | 59,763) | 58,563) | 55,538) | 65,602) | 57,914) | 60,621) | 59,798) | 60,212) | 59,474) | 59,065) | 55,916) | 49,099) | 48,979) | 45,312) | 44,287) | 48,882) | 40,224) | 42,748) | 40,706) | 38,614) | |||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||
| Receivables turnover1 | 55.99 | 60.08 | 63.53 | 69.47 | 58.77 | 64.90 | 60.52 | 58.63 | 53.59 | 47.90 | 45.73 | 45.33 | 51.57 | 54.05 | 58.56 | 58.99 | 52.10 | 62.29 | 58.60 | 60.46 | 63.07 | |||||||
| Benchmarks | ||||||||||||||||||||||||||||
| Receivables Turnover, Competitors2 | ||||||||||||||||||||||||||||
| Home Depot Inc. | 36.97 | 47.45 | 42.15 | 41.67 | 38.76 | 44.12 | 41.81 | 43.47 | 39.00 | 44.15 | 47.12 | 46.57 | 42.95 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 85.71 | 88.70 | 86.31 | 89.32 | 86.53 | 93.79 | 74.20 | 70.21 | 60.88 | 69.69 | 72.02 | 75.94 | 213.66 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Receivables turnover
= (Net revenuesQ1 2024
+ Net revenuesQ4 2023
+ Net revenuesQ3 2023
+ Net revenuesQ2 2023)
÷ Accounts receivable, net
= (739,162 + 772,499 + 869,066 + 991,620)
÷ 60,233 = 55.99
2 Click competitor name to see calculations.
- Net Revenues
- The net revenues exhibit fluctuations across the observed periods, with a general upward trend from May 2018 through October 2021. Starting at approximately $557 million, revenues increased steadily to peak near $1 billion in late 2021. Following this peak, a decline is noted, with revenues falling to roughly $739 million by April 2023. Some volatility is evident, particularly a significant dip observed around May 2020, likely influenced by external market or economic conditions. The recovery and growth thereafter indicate resilience, though the recent downward movement warrants attention for potential underlying factors.
- Accounts Receivable, Net
- Accounts receivable, net, demonstrated a gradual increase from May 2018 through mid-2022, rising from approximately $39 million to over $65 million. This growth suggests an expanding volume of credit sales or extended collection periods. However, the amount decreased somewhat after mid-2022, settling near $60 million by early 2023. The variation over time may reflect changes in credit policies, customer payment behavior, or seasonal business cycles. Overall, the balances remain moderately stable without extreme fluctuations.
- Receivables Turnover
- The receivables turnover ratio shows a declining trend from May 2018 until about August 2020, dropping from around 63 times annually to a low near 45. This decline indicates a slowing in the efficiency of collecting accounts receivable, possibly due to longer payment terms or delayed customer payments. After mid-2020, the turnover ratio improves progressively, reaching a peak above 69 in late 2022, suggesting enhanced collection processes or improved credit quality. A slight decrease is observed again toward early 2023. The fluctuations in this ratio are consistent with changes seen in accounts receivable and revenues and highlight the company's varying efficiency in managing receivables over time.
Working Capital Turnover
RH, working capital turnover calculation (quarterly data)
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||||
| Current assets | 2,475,844) | 2,512,664) | 3,266,457) | 3,251,318) | 3,399,061) | 3,091,442) | 3,013,839) | 1,137,816) | 989,408) | 801,484) | 734,900) | 621,439) | 625,721) | 596,952) | 559,479) | 657,622) | 822,065) | 682,693) | 694,038) | 692,502) | 650,131) | |||||||
| Less: Current liabilities | 851,503) | 885,973) | 935,176) | 958,903) | 1,361,530) | 1,063,758) | 1,096,310) | 1,229,000) | 1,016,172) | 921,632) | 882,585) | 784,980) | 968,935) | 982,912) | 903,706) | 924,957) | 1,011,610) | 918,172) | 865,073) | 836,945) | 496,496) | |||||||
| Working capital | 1,624,341) | 1,626,691) | 2,331,281) | 2,292,415) | 2,037,531) | 2,027,684) | 1,917,529) | (91,184) | (26,764) | (120,148) | (147,685) | (163,541) | (343,214) | (385,960) | (344,227) | (267,335) | (189,545) | (235,479) | (171,035) | (144,443) | 153,635) | |||||||
| Net revenues | 739,162) | 772,499) | 869,066) | 991,620) | 957,292) | 902,741) | 1,006,428) | 988,859) | 860,792) | 812,436) | 844,013) | 709,282) | 482,895) | 664,976) | 677,526) | 706,514) | 598,421) | 670,891) | 636,558) | 640,798) | 557,406) | |||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||
| Working capital turnover1 | 2.08 | 2.21 | 1.60 | 1.68 | 1.89 | 1.85 | 1.91 | — | — | — | — | — | — | — | — | — | — | — | — | — | 15.85 | |||||||
| Benchmarks | ||||||||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | ||||||||||||||||||||||||||||
| Amazon.com Inc. | 53.59 | 77.32 | — | — | — | — | — | — | — | 24.33 | 31.50 | 19.23 | 69.81 | — | — | — | — | — | — | — | — | |||||||
| Home Depot Inc. | 22.32 | 16.81 | 16.73 | 30.40 | 43.84 | 417.56 | 41.45 | 90.49 | 48.51 | 24.87 | 13.79 | 16.66 | 28.53 | — | — | — | — | — | — | — | — | |||||||
| Lowe’s Cos. Inc. | 20.34 | 50.26 | 23.32 | 41.46 | 25.26 | 245.54 | 23.72 | 27.67 | 24.04 | 24.92 | 11.60 | 12.67 | 20.57 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 24.41 | 23.22 | 28.07 | 29.41 | 20.26 | 17.40 | 14.05 | 12.91 | 7.40 | 6.51 | 6.91 | 8.72 | 6.55 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Working capital turnover
= (Net revenuesQ1 2024
+ Net revenuesQ4 2023
+ Net revenuesQ3 2023
+ Net revenuesQ2 2023)
÷ Working capital
= (739,162 + 772,499 + 869,066 + 991,620)
÷ 1,624,341 = 2.08
2 Click competitor name to see calculations.
- Working Capital
- The working capital values exhibit significant volatility over the periods analyzed. Initially, the working capital was positive at approximately $153.6 million in May 2018 but then shifted sharply to negative territory, reaching a low of about -$386 million by February 2020. Following this low, there is a general trend of recovery, with working capital rising gradually and turning strongly positive again by October 2021. This positive momentum continues, exceeding $2 billion by early 2023. Despite some fluctuations, this indicates a substantial improvement in the company's short-term liquidity position in the most recent quarters.
- Net Revenues
- Net revenues showed an overall upward trend from May 2018 through October 2021, peaking near $1 billion in mid-2021. There is noticeable seasonality with fluctuations quarter-over-quarter, but the general direction remained positive until 2021. Starting in late 2021 and continuing into 2023, net revenues declined steadily, decreasing from approximately $1 billion to about $739 million by April 2023. This downward trend in revenues contrasts with the earlier growth period and suggests potential challenges in sales or market conditions in the more recent periods.
- Working Capital Turnover
- The working capital turnover ratio data is sparse and only reported sporadically. The initial recorded ratio is high at 15.85 in May 2018, indicating efficient use of working capital to generate sales. However, no ratios are available for several years following this date until late 2021, when the ratio stabilizes around 1.6 to 2.2. This lower range suggests a reduced efficiency compared to the initial period but reflects a more normalized level as working capital increased substantially. Overall, with increased working capital and relatively lower sales in recent periods, turnover ratios have decreased.
- Summary Insights
- The financial data reveals a company that experienced significant working capital deficits during 2018 through early 2020, potentially indicating liquidity pressures during those years. From late 2021 onward, the company reversed this trend with a marked improvement in cash conversion capacity reflected by a large increase in working capital. Conversely, net revenues after a peak period began to contract steadily post-2021, which may point to demand declines or operational headwinds. The working capital turnover ratios suggest that while the company holds increased short-term assets, the efficiency in generating revenues from working capital has decreased relative to earlier periods. These trends underscore a period of operational adjustment where liquidity has improved at the cost of revenue growth and working capital utilization efficiency.
Average Inventory Processing Period
RH, average inventory processing period calculation (quarterly data)
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||
| Inventory turnover | 2.23 | 2.22 | 2.22 | 2.18 | 2.33 | 2.59 | 2.97 | 2.81 | 2.85 | 2.80 | 2.97 | 2.94 | 2.97 | 3.54 | 3.68 | 3.26 | 2.88 | 2.83 | 2.66 | 2.73 | 2.91 | |||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||||||
| Average inventory processing period1 | 163 | 165 | 164 | 167 | 156 | 141 | 123 | 130 | 128 | 130 | 123 | 124 | 123 | 103 | 99 | 112 | 127 | 129 | 137 | 134 | 125 | |||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||||||
| Average Inventory Processing Period, Competitors2 | ||||||||||||||||||||||||||||
| Amazon.com Inc. | 37 | 40 | 43 | 46 | 43 | 43 | 47 | 50 | 46 | 44 | 42 | 33 | 35 | — | — | — | — | — | — | — | — | |||||||
| Home Depot Inc. | 89 | 87 | 90 | 92 | 91 | 80 | 77 | 72 | 75 | 70 | 71 | 63 | 74 | — | — | — | — | — | — | — | — | |||||||
| Lowe’s Cos. Inc. | 111 | 104 | 113 | 111 | 116 | 100 | 96 | 100 | 106 | 98 | 100 | 94 | 104 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 65 | 59 | 86 | 72 | 72 | 63 | 74 | 60 | 68 | 65 | 72 | 53 | 65 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 2.23 = 163
2 Click competitor name to see calculations.
The inventory turnover ratio exhibits notable fluctuations over the analyzed quarterly periods. Initially, the ratio decreased from 2.91 to 2.66 within the first three quarters, indicating a slowdown in the frequency of inventory being sold and replaced. Subsequently, there is a rising trend, peaking at 3.68, suggesting an improvement in inventory management and faster turnover. However, starting from early 2020, the turnover ratio declines steadily, reaching approximately 2.23 in the most recent quarter. This downward trend implies a reduced efficiency in converting inventory into sales over time.
The average inventory processing period, measured in days, inversely corresponds to the inventory turnover ratio trends. It starts higher at 125 days, increases slightly reaching a peak period of 137 days early in the timeline, then declines to 99 days, showing quicker inventory processing aligned with the increased turnover ratio observed. From 2020 onwards, the number of days begins to rise progressively, reaching around 165 days in the latest quarter, which reflects slower inventory movement and extended holding periods.
- Inventory Efficiency
- The initial phase shows moderate inventory efficiency that improves significantly during mid-2019 with the highest turnover and the shortest processing period.
- Recent Trends
- Since 2020, a reversal in trends is apparent with diminished turnover ratios and elongated processing periods, indicating potential challenges in inventory liquidation and possible buildup of stock.
- Overall Insight
- The data suggests cyclical inventory management performance with a peak efficiency phase followed by gradual decline, potentially impacting working capital management and sales operations.
Average Receivable Collection Period
RH, average receivable collection period calculation (quarterly data)
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||
| Receivables turnover | 55.99 | 60.08 | 63.53 | 69.47 | 58.77 | 64.90 | 60.52 | 58.63 | 53.59 | 47.90 | 45.73 | 45.33 | 51.57 | 54.05 | 58.56 | 58.99 | 52.10 | 62.29 | 58.60 | 60.46 | 63.07 | |||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||||||
| Average receivable collection period1 | 7 | 6 | 6 | 5 | 6 | 6 | 6 | 6 | 7 | 8 | 8 | 8 | 7 | 7 | 6 | 6 | 7 | 6 | 6 | 6 | 6 | |||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | ||||||||||||||||||||||||||||
| Home Depot Inc. | 10 | 8 | 9 | 9 | 9 | 8 | 9 | 8 | 9 | 8 | 8 | 8 | 8 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 4 | 4 | 4 | 4 | 4 | 4 | 5 | 5 | 6 | 5 | 5 | 5 | 2 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 55.99 = 7
2 Click competitor name to see calculations.
The receivables turnover ratio exhibits noticeable fluctuations over the analyzed time frame. Initially, the ratio starts at a high value of 63.07 and maintains a generally decreasing trend until reaching its lowest point around August 2020, with values near 45.33 to 45.73. Following this decline, there is a recovery phase where the ratio increases significantly, hitting a peak of 69.47 in July 2022. Toward the end of the period, the ratio slightly decreases but remains relatively elevated compared to the earlier periods.
The average receivable collection period displays an inverse trend relative to the receivables turnover ratio, as expected. The collection period begins consistently at 6 days, then sees an increase to 7 and 8 days around 2019 to 2020, which coincides with the lower turnover values during that period. After peaking at 8 days, the collection period gradually decreases back to about 6 days by early 2022 and briefly drops to 5 days in October 2022 before settling near 6 to 7 days in the most recent quarters.
- Receivables Turnover Ratio
- The ratio shows a downward movement from mid-2018 to mid-2020, suggesting a slower turnover of receivables during that period.
- A notable improvement occurs post mid-2020, indicating better management or recovery in receivables turnover speed.
- The turnover reaches its highest recorded value in July 2022, reflecting very efficient receivables collection at that point.
- There is a slight decline in the ratio toward early 2023, but it remains above the lower levels seen in earlier years.
- Average Receivable Collection Period
- The collection period increases slightly from 6 to 8 days during the timeframe corresponding with lower turnover ratios.
- The period shortens after mid-2021, reaching as low as 5 days, signifying faster collection post-peak delay.
- The trend stabilizes around 6 to 7 days in the last observed quarters, indicating a return to more normalized collection times.
Overall, the data indicates that the efficiency in receivables collection declined through 2018 to 2020, possibly reflecting operational challenges or external factors affecting liquidity. However, from 2020 onward, the company demonstrated recovery and improvement in its collection processes, achieving higher turnover rates and shorter collection periods by mid-2022. This suggests effective measures were taken to enhance working capital management, which may positively impact cash flow and financial stability.
Operating Cycle
RH, operating cycle calculation (quarterly data)
No. days
| Apr 29, 2023 | Jan 28, 2023 | Oct 29, 2022 | Jul 30, 2022 | Apr 30, 2022 | Jan 29, 2022 | Oct 30, 2021 | Jul 31, 2021 | May 1, 2021 | Jan 30, 2021 | Oct 31, 2020 | Aug 1, 2020 | May 2, 2020 | Feb 1, 2020 | Nov 2, 2019 | Aug 3, 2019 | May 4, 2019 | Feb 2, 2019 | Nov 3, 2018 | Aug 4, 2018 | May 5, 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||
| Average inventory processing period | 163 | 165 | 164 | 167 | 156 | 141 | 123 | 130 | 128 | 130 | 123 | 124 | 123 | 103 | 99 | 112 | 127 | 129 | 137 | 134 | 125 | |||||||
| Average receivable collection period | 7 | 6 | 6 | 5 | 6 | 6 | 6 | 6 | 7 | 8 | 8 | 8 | 7 | 7 | 6 | 6 | 7 | 6 | 6 | 6 | 6 | |||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||
| Operating cycle1 | 170 | 171 | 170 | 172 | 162 | 147 | 129 | 136 | 135 | 138 | 131 | 132 | 130 | 110 | 105 | 118 | 134 | 135 | 143 | 140 | 131 | |||||||
| Benchmarks | ||||||||||||||||||||||||||||
| Operating Cycle, Competitors2 | ||||||||||||||||||||||||||||
| Home Depot Inc. | 99 | 95 | 99 | 101 | 100 | 88 | 86 | 80 | 84 | 78 | 79 | 71 | 82 | — | — | — | — | — | — | — | — | |||||||
| TJX Cos. Inc. | 69 | 63 | 90 | 76 | 76 | 67 | 79 | 65 | 74 | 70 | 77 | 58 | 67 | — | — | — | — | — | — | — | — | |||||||
Based on: 10-Q (reporting date: 2023-04-29), 10-K (reporting date: 2023-01-28), 10-Q (reporting date: 2022-10-29), 10-Q (reporting date: 2022-07-30), 10-Q (reporting date: 2022-04-30), 10-K (reporting date: 2022-01-29), 10-Q (reporting date: 2021-10-30), 10-Q (reporting date: 2021-07-31), 10-Q (reporting date: 2021-05-01), 10-K (reporting date: 2021-01-30), 10-Q (reporting date: 2020-10-31), 10-Q (reporting date: 2020-08-01), 10-Q (reporting date: 2020-05-02), 10-K (reporting date: 2020-02-01), 10-Q (reporting date: 2019-11-02), 10-Q (reporting date: 2019-08-03), 10-Q (reporting date: 2019-05-04), 10-K (reporting date: 2019-02-02), 10-Q (reporting date: 2018-11-03), 10-Q (reporting date: 2018-08-04), 10-Q (reporting date: 2018-05-05).
1 Q1 2024 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 163 + 7 = 170
2 Click competitor name to see calculations.
The company's working capital management metrics over the analyzed periods reveal several noteworthy trends. The average inventory processing period exhibits a fluctuating but overall increasing trend after mid-2019, especially from early 2021 onward, indicating slower inventory turnover in recent quarters. Specifically, after reaching a low near 99 days in late 2019, the period progressively extends to values above 160 days by early 2023, suggesting lengthening inventory holding times.
The average receivable collection period remains relatively stable throughout the entire period, consistently around 6 to 7 days, with only marginal variation. This stability indicates consistent efficiency in collecting receivables, maintaining a short collection cycle without significant deterioration or improvement.
The operating cycle, being the sum of the average inventory processing period and the average receivable collection period, mirrors the movements of the inventory period closely due to the stability of receivables collection. It shows an increase over time, with a marked rise commencing in early 2021, peaking near 170 days in the latest quarters. This lengthening operating cycle implies a slower overall conversion of inventories and receivables into cash, potentially impacting liquidity negatively.
- Inventory Management
- Initially, inventory processing periods decreased from 125 days in mid-2018 to a low of 99 days by late 2019. However, from early 2020 onwards, this period extended progressively, reaching approximately 163 days by early 2023. This suggests inventory turnover has slowed, possibly pointing to challenges in inventory sales or supply chain issues.
- Receivables Collection
- The average receivable collection period remained relatively stable, ranging between 5 to 8 days across all periods. The consistency reflects steady credit policies and effective collection practices over time.
- Operating Cycle
- Correlated strongly with the inventory period, the operating cycle lengthened from about 131 days in mid-2018 to roughly 170 days in early 2023, indicating the total time to convert inventory and receivables into cash has increased. This trend may raise concerns about working capital efficiency and cash flow timing.