Retail Math Formulas Cheat Sheet
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RETAIL MATH FORMULAS
The Sales Equation
The sales equation for retail & ecommerce businesses
Sales = Traffic x Conversion x ATV
Average Transaction Value aka. AOV (Average Order Value)
ATV = Total Sales ÷ No. of Transactions
Items per Customer aka. UPT (Units per Transaction)
IPC = Total Quantity Sold ÷ No. of Transactions
Measures the number of customers who bought out of the total number of customers who visited the store
Conversion = No. of Transactions ÷ Traffic x 100
Measures the number of customers who entered the store
Traffic = Total number of visits to the store
Sales per Square Foot
SPSF = Sales ÷ Area in Square Feet
Like for Like Growth aka. Comps
Measures growth (%) of this year (TY) over last year (LY) for the same stores that traded for the same period.
LFL (%) = (TY - LY) ÷ LY x 100
Gross Margin aka. Gross Profit %
Gross Margin (%) = (Sales - Cost) ÷ Sales x 100
Percentage of reduction on the original price
Markdown (%) = (Original Price - Sale Price) ÷ Original Price x 100
The amount added to the cost price to set the sale price
Markup (%) = (Sale Price - Cost Price) ÷ Cost Price x 100
Open to Buy (OTB)
Open to Buy calculates how much inventory to purchase, in order to fulfill the planned sales budget and have enough stock cover.
Opening Stocks + Intakes (Purchases) - Sales = Closing Stocks
Gross Margin Return on Investment
GMROI = Gross Profit ($) ÷ Average Inventory Cost($)
Sell Through Rate
Sell Thru (%) = No. of units sold ÷ No. of units received x 100
Measures the % of inventory that has aged (depending on when you consider aging, e.g above 1 year) out of total inventory at hand(SOH).
Aging (%) = Aging Inventory at Cost ÷ Total Stock at Cost x 100
Inventory Turnover Ratio (IT) measures how many times a company has turned its inventory during a certain period (e.g 1 year).
IT= COGS ÷ Average Inventory at Cost
Days Sales in Inventory aka. Days Inventory measures how many days it takes the company to sell its inventory.
DSI= (Average Inventory at Cost ÷ COGS ) x 365
Shrinkage aka. Stock Loss can be calculated either at cost value or at retail value (Cost to Cost, Retail to Retail or Cost to Retail)
Shrinkage % = (Value of Lost Stock ÷ Total Sales for the period ) x 100
Forward Stock Cover
measures how long the current stock on hand will cover future forecasted sales periods.
Forward Stock Cover = SOH ÷ Average Forward COGS
Earnings Before Interest, Taxes, Depreciation & Amortization
EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization
Net Profit Margin
Percentage of Net profit out of total sales