Retail Dogma

Retail Math Formulas Cheat Sheet

This is a cheat sheet for the most important retail math formulas used in retail & e-commerce businesses. Feel free to read online or download a free copy.

Take the online video course on retail math, and learn how the different metrics connect to each other, and see the applications on business cases. Complete the course and get a certificate of completion.

RETAIL MATH FORMULAS

The Sales Equation

The sales equation for retail & ecommerce businesses

Sales = Traffic x Conversion x ATV

ATV

Average Transaction Value aka. AOV (Average Order Value)

ATV = Total Sales ÷ No. of Transactions

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IPC

Items per Customer aka. UPT (Units per Transaction)

IPC = Total Quantity Sold ÷ No. of Transactions

Conversion

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

Traffic

Measures the number of customers who entered the store

Traffic = Total number of visits to the store

SPSF

Sales per Square Foot

SPSF = Sales ÷ Area in Square Feet

LFL Growth

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

Gross Margin aka. Gross Profit %

Gross Margin (%) = (Sales - Cost) ÷ Sales x 100

Markdown

Percentage of reduction on the original price

Markdown (%) = (Original Price - Sale Price) ÷ Original Price x 100

Markup

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

GMROI

Gross Margin Return on Investment

GMROI = Gross Profit ($) ÷ Average Inventory Cost($)

Sell Thru

Sell Through Rate 

Sell Thru (%) = No. of units sold ÷ No. of units received x 100

Aging Inventory

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

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

DSI

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

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

EBITDA

Earnings Before Interest, Taxes, Depreciation & Amortization

EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization

Net Profit Margin

Percentage of Net profit out of total sales

NP % = (Net Income ÷ Revenue ) x 100

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