How to Read Working Capital in a Retailer's Annual Report

The short answer

Retail working capital does not behave like a household budget. A retailer can report negative working capital and still generate cash because it sells goods before suppliers are paid. The useful analysis is not "positive is good, negative is bad." It is a comparison of sales, inventory, receivables, payables, and the timing of the related cash movements.

This worked example uses Walmart Inc.'s fiscal 2025 Form 10-K for the year ended January 31, 2025. The figures are historical and educational. They show a method for reading a filing; they do not establish a current valuation or support a buy, sell, or hold decision.

Why this question matters

Working-capital changes can show up before a margin problem becomes obvious. Inventory can grow faster than sales, customer receivables can absorb cash, or supplier balances can temporarily support operations. A single balance-sheet snapshot misses that sequence.

Retailers also have accounting details that affect comparison. Walmart says its segments use a mix of retail-inventory, LIFO, FIFO, and weighted-average methods, and its cost of sales includes transportation and some warehousing costs. Those definitions matter when comparing Walmart with another retailer.

The analysis method

1. Start with the sales denominator. Record net sales and cost of sales for the same fiscal year. Use net sales for receivables and inventory intensity; use cost of sales for inventory and payable-day calculations when the filing's classification makes that sensible.
2. Compare the balances. Track inventory, receivables, accounts payable, and accrued liabilities at the current and prior year ends.
3. Normalize by activity. Calculate each balance as a percentage of sales or cost of sales. Days-based measures can help, but identify whether you used an average balance and which fiscal year length applies.
4. Read the cash-flow bridge. A balance change is not a cash-flow change with the same sign. An increase in inventory generally uses cash; an increase in accounts payable generally supplies cash.
5. Investigate the reason. Read inventory valuation, supplier terms, seasonality, acquisitions, currency, and channel disclosures before calling a movement operationally good or bad.

Filed worked example: Walmart fiscal 2025

Issuer and security: Walmart Inc., common stock
Document: Walmart fiscal 2025 Form 10-K
Reporting period: Fiscal year ended January 31, 2025
Currency and units: U.S. dollars in millions
Example purpose: Show how a large retailer can use supplier balances and inventory turnover while still carrying a working-capital deficit.

Walmart reported fiscal 2025 net sales of $674,538 million and cost of sales of $511,753 million. At January 31, 2025, inventories were $56,435 million, receivables were $9,975 million, accounts payable were $58,666 million, and accrued liabilities were $29,345 million. Current assets were $79,458 million and current liabilities were $96,584 million, producing a reported working-capital deficit of about $17.1 billion.

Three calculations that make the balance sheet useful

1. Compare balance growth with sales growth

Walmart's sales growth was 5.0%: ($674,538m - $642,637m) / $642,637m.

Inventory growth was 2.8%: ($56,435m - $54,892m) / $54,892m. Receivables growth was 13.4%: ($9,975m - $8,796m) / $8,796m.

The first read is fairly specific: inventory grew more slowly than sales, while receivables grew faster. That does not prove a collection problem; it tells us where to read next.

2. Normalize balances by sales

Inventory intensity fell slightly from 8.54% in 2024 to 8.36% in 2025: $56,435m / $674,538m versus $54,892m / $642,637m.

Receivables intensity moved the other way, from 1.37% to 1.48%: $9,975m / $674,538m versus $8,796m / $642,637m.

3. Estimate days with an explicit denominator

Using the average of the 2024 and 2025 year-end balances and a 365-day year:

• Inventory days: (($54,892m + $56,435m) / 2) / $511,753m x 365 = 39.7 days
• Receivable days: (($8,796m + $9,975m) / 2) / $674,538m x 365 = 5.1 days
• Payable days: (($56,812m + $58,666m) / 2) / $511,753m x 365 = 41.2 days

These are analytical estimates, not Walmart's own operating metrics. The receivables balance is small relative to sales, while inventory and supplier balances are the larger working-capital drivers.

How to interpret the result

The working-capital deficit is not automatically a warning sign for Walmart. The company reported $36,443 million of operating cash flow, and the cash-flow statement shows a $3,228 million source from accounts payable that more than offset the $2,755 million inventory use and $1,106 million receivables use in the listed working-capital lines.

That is the operating model showing through: inventory is purchased and sold at large scale, while supplier balances remain significant. The next question is whether the relationship is stable. A retailer can weaken its cash position if inventory builds, sales slow, suppliers shorten terms, or markdowns rise.

Where this method can fail

• Seasonality changes the snapshot. January 31 is one date in a retail cycle; year-end balances may not represent average inventory.
• Accounting methods differ. Walmart's LIFO, FIFO, and retail-inventory methods are not automatically comparable with another retailer's method.
• Payables are not free financing. Supplier terms can change, and a large payable balance may reflect pressure rather than bargaining strength.
• Receivables are not only credit sales. Walmart notes that net receivables include transactions with customers and other sources; read the detail before interpreting the balance.
• Cash-flow timing can reverse. The 2024 inventory line supplied $2,017 million of cash, while the 2025 line used $2,755 million.
• Negative working capital is not a quality score. Test the model against margins, supplier terms, inventory write-downs, and cash generation.

Verification checklist

• Align fiscal periods, sales, cost of sales, and balance-sheet dates.
• Compare inventory, receivables, payables, and accrued liabilities using both absolute and intensity measures.
• Reconcile balance changes to the operating cash-flow statement.
• Read inventory valuation, supplier-payment, seasonality, and acquisition disclosures.
• Test whether the cash pattern holds across more than one period.