Retail Math Formulas – A Basic Overview
March 25, 2010 by Nicole Reyhle
Filed under All Posts, Pricing, Retail Math
Love math? Hope so! If you are working in retail at any level, math will definitely be a part of your responsibilities. From counting inventory to managing your open to buy, numbers will be a big part of your day. Below is a break down of the basic math formulas retailers should know in order to run their business’ effectively.
Cost of Goods + Retail Markup = Retail Price
Retail Price – Cost of Goods = Markup
Retail Price – Markup = Cost of Goods
Beginning Inventory (in $ or Sku Count) + Purchases – Endoing Inventory = Goods Sold (in $ or Sku Count)
Total Sales – Cost of Goods = Gross Margin
Gross Margin $ / Average Inventory Cost = Gross Margin Return On Investment
Net Sales / Average Retail Inventory (Sku Count) = Inventory Turnover
Gross Sales – Returns & Allowances = Net Sales
Projected Sales + Projected Markdowns + Planned End of Month Inventory – Planned Beginning of Month Inventory = Open to Buy (OTB)
Units Sold / Units Received = Sell Through %
Beginning of Month Stock / Total Month Sales = Stock to Sales Ratio
