RETAIL MATH FORMULAS/ LINGO

Average Inventory

Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2

Basic Retailing Formula

Cost of Goods + Markup = Retail PriceRetail Price - Cost of Goods = MarkupRetail Price - Markup = Cost of Goods

Break-Even Analysis

Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage

Contribution Margin

Contribution Margin = Total Sales - Variable Costs

Cost of Goods Sold

COGS = Beginning Inventory + Purchases - Ending Inventory

Gross Margin

Gross Margin = Total Sales - Cost of Goods

Gross Margin Return on Investment

GMROI = Gross Margin $ ÷ Average Inventory Cost

Initial Markup

Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)

Inventory Turnover (Stock Turn)

Turnover = Net Sales ÷ Average Retail Stock

Maintained Markup

MM $ = (Original Retail - Reductions) - Cost of Goods SoldMM % = Maintained Markup $ ÷ Net Sales Amount

Margin %

Margin % = (Retail Price - Cost) ÷ Retail Price

Markup

Markup $ = Retail Price - CostMarkup % = Markup Amount ÷ Retail Price

Net Sales

Net Sales = Gross Sales - Returns and Allowances

Open to Buy

OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory - Planned Beginning of Month Inventory

Percentage Increase/Decrease

% Increase/Decrease = Difference Between Two Figures ÷ Previous Figure

Quick Ratio

Quick Ratio = Current Assets - Inventory ÷ Current Liabilities

Reductions

Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

Sales per Square Foot

Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space

Sell-Through Rate

Sell-Through % = Units Sold ÷ Units Received

Sell through (or sell-thru) is a very useful metric for vendors to use in evaluating item performance because it provides a composite measure of sales and inventory. But like many business measures there is more than one method of calculating sell through.

The most common calculation is: Sell Thru % = Units Sold / (Units on-Hand + Units Sold). Sell thru is typically evaluated on a daily basis for fast moving products or weekly for slower moving or replenishment based products. A higher value is better indicating your sales velocity is good and your inventory is appropriately forecasted. If sell thru is

low this indicates either poor sales or too much inventory. In most cases sell-thru for an item is compared in recent periods like current week and last week, as well as in aggregate across several months or even a year.

When evaluating sell-through it is also useful to group together products which have been selling for a similar period of time and/or which are sold into the similar store types. For example comparing sell-thru for a product with 5 weeks of selling activity against a product with 20 weeks of selling activity most likely will not produce a useful comparison. In the same way comparing sell-thru for a product in a group of stores in a highly affluent area is not likely to compare favorably to a group of stores with a low income level.

Most retail buyers have a set sell-through percentage they use to judge vendors based on product category or department. It is important for vendors to discuss the sell-thru expectations with the buyer in order to align with those objectives.

Sell through % = units sold / (units sold + on hand inventory)

 Sell-through is a percentage of units sold during a period (for example 1 month).

It is calculated by dividing the number of units sold by the beginning on-hand inventory (for that same time period).

Example:

During the month of August you sell 100 shirts. You received 300 shirts in receipts. You end August with 900 units shirts of stock (End of Month Stock).  What was your Beginning On-Hand units of shirts and what was your Sell-through?

Beginning of Month stock (BOM) = EOM 900 units - Receipts 300 units + Sales 100 units = 700 units

Sell-through = Sales 100 units / Beginning Inventory (BOM) 700 = 14.3% Sell-through in August.

BOM means Beginning of MonthEOM means End of Month 

Stock to Sales Ratio

Stock-to-Sales = Beginning of Month Stock ÷ Sales for the MonthRetail Math Calculators

Calculator: Markup & Markdown Calculator: Sales Increase Startup Costs Calculator

Tracking Sales Beat Yesterday Book Measure Sales Performance Retail Store Operations

New posts to the Retailing forums: Dead stock POS is the heart and soul for Retailers Business name idea - jewellery

Related Articles Retail Markup Markdown Calculator How Retail Firms can Increase Their Sales Through Inventory Control Merchandising Business Income Statement Same Store Sales June 2009: Streaks End for Saks & Buckle, Tandy Bucks ... Retail Sales - Why retail sales are important to our economy