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. Each retail math formula is explained in more details with examples in the article linked to it.


Practice using different retail math formulas on simulated store data and scenarios. Practice creating a full financial budget, an OTB budget and performing a P&L analysis.​


The Sales Equation

The sales equation for retail & ecommerce businesses

Learn More: The Sales Equation

Sales = Traffic x Conversion x ATV


Average Transaction Value aka. AOV (Average Order Value)

Learn More: ATV

ATV = Total Sales ÷ No. of Transactions


Items per Customer aka. UPT (Units per Transaction)

Learn More: UPT

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

Learn More: Conversion

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

Learn More: SPSF

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. 

Learn More: Same Store Sales

LFL (%) = (TY - LY) ÷ LY x 100


Gross Margin

Gross Margin aka. Gross Profit %

Learn More: Gross Margin

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


Percentage of reduction on the original price

Learn More: Markdowns

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


The amount added to the cost price to set the sale price

Learn More: Markup

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.

Learn More: OTB

Opening Stocks + Intakes (Purchases) - Sales = Closing Stocks


Gross Margin Return on Investment

Learn More: GMROI

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

Sell Thru

Sell Through Rate 

Learn More: 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).

Learn More: Aging Inventory

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).

Learn More: Inventory Turnover

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.

Learn More: DSI

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)

Learn More: Shrinkage

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.

Learn More: Forward Stock Cover

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

NP % = (Net Income ÷ Revenue ) x 100