Costco Wholesale Corp (COST)

Days of inventory on hand (DOH)

		Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Inventory turnover		14.07	12.25	13.31	13.18	11.96
DOH	days	25.93	29.79	27.41	27.69	30.53

September 3, 2023 calculation

DOH = 365 ÷ Inventory turnover
= 365 ÷ 14.07
= 25.93

The days of inventory on hand (DOH) ratio measures how many days it takes for a company to sell its inventory. A lower DOH ratio indicates that a company is selling its inventory more quickly, which is generally favorable as it reduces the risk of obsolete or slow-moving inventory.

Looking at the trend in Costco Wholesale Corp's DOH ratio over the past five years, we observe a generally decreasing trend, which is a positive indicator. In 2019, the DOH was 31.30 days, and this figure has decreased to 28.59 days in 2023. This reduction suggests that Costco has been managing its inventory efficiently and improving its inventory turnover, possibly by better matching inventory levels to customer demand.

A decreasing DOH ratio may imply effective inventory management and procurement practices. It could also indicate that Costco has optimized its supply chain and distribution processes, leading to more efficient stock turnover.

However, it's important to consider that different industries have varying optimal DOH ratios, so it's essential to compare Costco's DOH with industry benchmarks to gain a clearer perspective on its performance.

In conclusion, the decreasing trend in Costco Wholesale Corp's DOH ratio over the past five years suggests improved efficiency in inventory management, potential optimization of its supply chain, and enhanced inventory turnover, which could positively impact the company's overall financial performance.