Retail Math Formulas – A Basic Overview

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


  • Fonda Saidi
    January 17, 2013

    how can you differentiate retail trade from retail management?

    • Nicole Reyhle
      February 8, 2013

      Retail “trade” refers to the wholesale / behind the scenes business of the retail industry. Retail management refers to managing retail stores and the general business of retail. I hope this helps clarify.

  • fonda said
    January 17, 2013

    which are the main laws of retailer?

    • Nicole Reyhle
      February 8, 2013

      So many to even know where to start! We will begin researching this a bit more for a future blog or more in depth article in our magazine. Great question. Thank you!

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