⚠ Inventory Turning SlowerLow threat

Home Depot (HD) — threat to the moat

Home Depot's inventory turnover slipped from 4.7 to 4.4 times in a year, the price of stocking deeper to deliver faster.

Home Depot's inventory turnover fell to 4.4 times in fiscal 2025 from 4.71. Part of the fall is the distributors it bought, which carry deep stocks of roofing, wallboard and pool supplies, and part is the cost of promising next-day delivery.

Inventory change in operating cash flow ($M, cash used)+4,137FY2023-743FY2024-1,498FY2025Home Depot Form 10-K fiscal 2025 cash flow statement; sign shown in labels
From releasing cash to absorbing it.

The cash consequence is real. The change in merchandise inventories used $1,498 million of operating cash in fiscal 2025 and $743 million in fiscal 20242. Operating cash flow fell from $19,810 million to $16,325 million3.

Slower turnover is also a risk in a price fall. The 10-K warns about rapid and significant changes in commodity prices such as lumber4; a retailer holding more stock carries more of that risk on its shelves.

Inventory also carries shrink, the loss of goods to theft and damage. The 10-K says a 10% increase in the shrink rate used in its estimate would have increased cost of sales by about $79 million in fiscal 20255. More stock on the shelves means more exposure to that loss as well as to price swings.

This matters as a warning rather than a crisis. The number that would make it serious is turnover below 4 times, which would mean speed is costing the company working capital faster than it earns sales.

References
  1. ReportedHome Depot's inventory turnover fell to 4.4 times in fiscal 2025 from 4.7.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1A risk factors and Item 7A market risk: housing, interest rates, commodities and shrink. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  2. ReportedThe change in merchandise inventories used $1,498 million of operating cash in fiscal 2025 and $743 million in fiscal 2024.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - financial statements and notes: earnings, cash flow, balance sheet, debt and acquisitions. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  3. ReportedOperating cash flow fell from $19,810 million to $16,325 million.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - financial statements and notes: earnings, cash flow, balance sheet, debt and acquisitions. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  4. ReportedThe 10-K warns about rapid and significant changes in commodity prices such as lumber; a retailer holding more stock carries more of that risk on its shelves.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1A risk factors and Item 7A market risk: housing, interest rates, commodities and shrink. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  5. ReportedThe 10-K says a 10% increase in the shrink rate used in its estimate would have increased cost of sales by about $79 million in fiscal 2025.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1A risk factors and Item 7A market risk: housing, interest rates, commodities and shrink. — Fiscal 2025 · publ. 18 March 2026 · source ↗
Sources
Generated September 26, 2026