RH (RH)
Cash conversion cycle
| Feb 3, 2024 | Oct 28, 2023 | Jul 29, 2023 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 92.53 | 94.48 | 96.53 | 96.55 | 92.32 | 98.71 | 102.93 | 98.73 | 88.31 | 80.36 | 81.92 | — | 76.12 | 74.28 | — | — | 85.71 | — | — | — |
| Days of sales outstanding (DSO) | days | 10.15 | 10.35 | 8.37 | 8.55 | 8.24 | 18.66 | 21.36 | 21.64 | 6.60 | 7.76 | 9.46 | — | 9.41 | 11.08 | — | — | 6.49 | — | — | — |
| Number of days of payables | days | 25.13 | 23.59 | 19.67 | 19.72 | 20.13 | 21.74 | 22.32 | 30.75 | 30.09 | 26.08 | 30.26 | 31.16 | 32.90 | 28.00 | 29.08 | 23.85 | 35.31 | 26.84 | 28.07 | 34.68 |
| Cash conversion cycle | days | 77.54 | 81.23 | 85.24 | 85.37 | 80.44 | 95.63 | 101.96 | 89.62 | 64.81 | 62.04 | 61.12 | -31.16 | 52.63 | 57.36 | -29.08 | -23.85 | 56.89 | -26.84 | -28.07 | -34.68 |
February 3, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 92.53 + 10.15 – 25.13
= 77.54
The cash conversion cycle of RH, a measure of how efficiently the company manages its working capital, has exhibited fluctuations over the periods analyzed. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
From the data provided, we can see that the cash conversion cycle has varied significantly, ranging from negative days to over 100 days. A negative cash conversion cycle indicates that RH is able to collect cash from customers before paying its suppliers, which is a favorable situation. On the other hand, a positive cash conversion cycle suggests that RH is taking longer to collect cash from customers compared to paying its suppliers, potentially leading to working capital challenges.
During the latest observation period, the cash conversion cycle was 77.54 days, indicating a moderate efficiency in managing working capital. On average, over the periods analyzed, the cash conversion cycle was approximately 40 days, which demonstrates that RH has maintained a reasonable balance in converting its investments into cash flows.
It is important for RH to continue monitoring and managing its cash conversion cycle effectively to ensure optimal working capital utilization and sustainable financial performance. By enhancing inventory management, streamlining accounts receivable processes, and negotiating favorable payment terms with suppliers, RH can further optimize its cash conversion cycle and improve its overall financial health.