RH (RH)
Cash conversion cycle
| Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 92.38 | 92.55 | 88.25 | 76.12 | 66.67 |
| Days of sales outstanding (DSO) | days | 10.15 | 8.25 | 6.60 | 9.60 | 6.97 |
| Number of days of payables | days | 25.09 | 20.18 | 30.07 | 32.90 | 27.47 |
| Cash conversion cycle | days | 77.43 | 80.62 | 64.78 | 52.82 | 46.18 |
February 3, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 92.38 + 10.15 – 25.09
= 77.43
The cash conversion cycle for RH has fluctuated over the past five years, indicating changes in the efficiency of its cash management. The cycle has generally been increasing, reaching a peak of 80.62 days in Jan 28, 2023, and then decreasing slightly in the most recent period to 77.43 days on Feb 3, 2024.
A longer cash conversion cycle suggests that RH is taking more time to turn its investments in inventory into cash from sales, which may tie up more of its capital in operations. Conversely, a shorter cycle indicates that RH is more efficient in managing its working capital, allowing it to quickly convert inventory to sales and then into cash.
Overall, RH should aim to optimize its cash conversion cycle to strike a balance between managing inventory efficiently and maximizing cash flow to support its operations and growth strategies.
Peer comparison
Feb 3, 2024