Costco Wholesale Corp (COST)

Days of inventory on hand (DOH)

		Feb 18, 2024	Nov 26, 2023	Sep 3, 2023	May 7, 2023	Feb 12, 2023	Nov 20, 2022	Aug 28, 2022	May 8, 2022	Feb 13, 2022	Nov 21, 2021	Aug 29, 2021	May 9, 2021	Feb 14, 2021	Nov 22, 2020	Aug 30, 2020	May 10, 2020	Feb 16, 2020	Nov 24, 2019	Sep 1, 2019	May 12, 2019
Inventory turnover		10.62	6.95	7.33	7.50	10.78	12.03	12.25	8.50	8.65	8.02	9.07	12.90	12.46	11.22	13.18	13.83	12.42	10.19	11.96	12.11
DOH	days	34.35	52.55	49.82	48.64	33.87	30.34	29.79	42.95	42.20	45.50	40.25	28.29	29.30	32.54	27.70	26.40	29.39	35.81	30.53	30.15

February 18, 2024 calculation

DOH = 365 ÷ Inventory turnover
= 365 ÷ 10.62
= 34.35

Days of Inventory on Hand (DOH) is a key efficiency ratio that helps measure how quickly a company is able to sell its inventory. A lower DOH value indicates that the company is selling its inventory more quickly, which is generally seen as a positive sign.

In the case of Costco Wholesale Corp, the DOH has varied over the past few reporting periods. The average DOH for the company over these periods is approximately 35 days. This suggests that, on average, Costco holds enough inventory to last for about 35 days based on its cost of goods sold.

Looking at the trend in DOH over the periods provided, we can see some fluctuations. For example, there was a significant increase in DOH from Feb 2018 to Nov 2018, indicating that Costco was holding inventory for a longer period during that time. However, the DOH decreased gradually from Nov 2018 to Aug 2021, suggesting that Costco was able to manage its inventory more efficiently during those periods.

It's important to note that a lower DOH does not always mean better performance, as it could also indicate inventory shortages or difficulties in meeting customer demand. Thus, it is essential for Costco to strike a balance between holding too much inventory (resulting in higher carrying costs) and too little inventory (risking stockouts).

In conclusion, while Costco's average DOH of around 35 days indicates efficient inventory management overall, the company should continue to monitor and optimize its inventory levels to support its operations and meet customer demand effectively.