Lowe's Companies Inc (LOW)

Cash conversion cycle

		Jan 31, 2025	Feb 2, 2024	Jan 31, 2024	Feb 3, 2023	Jan 31, 2023
Days of inventory on hand (DOH)	days	113.88	82.42	107.18	74.28	104.38
Days of sales outstanding (DSO)	days	—	—	—	—	—
Number of days of payables	days	—	42.46	—	42.18	—
Cash conversion cycle	days	113.88	39.95	107.18	32.10	104.38

January 31, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 113.88 + — – —
= 113.88

The cash conversion cycle (CCC) measures how efficiently a company manages its working capital by considering the time it takes to convert inventory into sales and then into cash. Analyzing Lowe's Companies Inc's CCC based on the provided data reveals fluctuations over the years:

- As of January 31, 2023, the CCC stands at 104.38 days. This indicates that, on average, it takes Lowe's about 104.38 days to turn its investments in inventory into cash.
- By February 3, 2023, the CCC has significantly decreased to 32.10 days. This sharp reduction suggests an improvement in managing inventory and collections, leading to a faster conversion of assets into cash.
- The CCC increases to 107.18 days by January 31, 2024, signaling a potential slowdown in the conversion cycle compared to the previous year.
- However, by February 2, 2024, the CCC drops to 39.95 days, showcasing a swift recovery or improvement in efficiency in working capital management.
- Lastly, as of January 31, 2025, the CCC reaches 113.88 days, indicating a longer cash conversion cycle compared to the previous year, potentially pointing to challenges in converting sales to cash efficiently.

Overall, the fluctuations in Lowe's CCC over the years suggest varying levels of efficiency in managing its working capital, with improvements seen in some periods and potential challenges in others. It is essential for Lowe's to continue monitoring and optimizing its CCC to ensure healthy cash flow and operational efficiency.