RETAIL MATH FORMULAS
Vinod Joshi Lecturer of Strategy
Acid-Test Ratio
Acid-Test Ratio = Current Assets - Inventory Current Liabilities
Average Inventory
Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) 2
Basic Retailing Formula
Retail Price =Cost of Goods + Markup Markup= Retail Price - Cost of Goods Cost of Goods =Retail Price - Markup
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 Sold MM % = Maintained Markup $ Net Sales Amount
Margin %
Margin % = (Retail Price - Cost) Retail Price
Markup
Markup $ = Retail Price - Cost Markup % = 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
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
Stock to Sales Ratio
Stock-to-Sales = Beginning of Month Stock Sales for the Month
Same-Store Sales
A statistic used in retail industry analysis that compares the sales of stores that have been open for at least one year. Same-store sales compare revenues earned by a retail chain's established outlets over a certain time period, such as a fiscal quarter or on a seasonal basis, for the current period and the same period in the past (usually the same period of the previous year.) Same-store sales allow investors to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Same-store sales are also called "S.S.S.," "comps," "comparable store sales," "identical store sales" or
Same-store sales figures are expressed as a percentage. For example, retail chain ABC may report same-store sales growth of 4.5% for the current fiscal quarter over last year's. Same-store analysis is important because although new stores may represent growth for a retail chain, a saturation point - where future sales growth is determined by same store sales growth - may eventually occur. Same-store sales are typically published by retail companies on a monthly basis. The figures help analysts differentiate between revenue growth that comes from any new outlets and growth that is a result of improved management and operations at the existing outlets.
Like-For-Like Sales
A comparison of this year's sales to last year's sales in a particular company, taking into consideration only those activities that were in effect during both time periods. Like-for-like sales is a method of valuation that attempts to exclude any effects of expansion, acquisition or any other event that artificially enlarge a company's sales. Companies may disclose like-for-like sales for various time periods, such as quarterly and yearly.
Like-for-like sales help companies and investors
determine the sales performance over a certain period of time when compared to the same period of time one year earlier, such as comparing the second quarter of 2012 to the second quarter of 2011. Like-for-like sales are typically represented as a percentage of growth or a dip in sales. For example, company ABC may report a 3.1% rise in like-for-like sales for the first quarter (this year over last year). Critics of like-for-like sales figures cite the lack of an industry standard for determining the measurement, which means that it is challenging for investors to compare like-for-like sales between two or more retailers. In addition, critics maintain that like-for-like sales are not indicative of the strength of the wider
'Door Crasher'
A low-priced item of limited quantity typically offered on
special, early-opening hours to attract buyers into a retail store. Door crashers are a sales and marketing tactic to bring customer into the stores in hopes that they buy other items as well. It is also a way to drive customers to their stores as opposed to competitors'.
Door crashers are often placed on sale during large
shopping days, such as Black Friday and after Christmas. Retailers only offer limited quantities of the door crashers in hopes that more consumers will arrive than there are available door crashers. By doing so, the store hopes that once the consumer is already there, they will purchase a similar item with a higher price tag.
