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.
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.
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RETAIL MATH FORMULAS BY CATEGORY
The Sales Equation
The sales equation for retail & ecommerce businesses
Learn More: The Sales Equation
Sales = Traffic x Conversion x ATV
ATV
Average Transaction Value aka. AOV (Average Order Value)
Learn More: ATV
ATV = Total Sales ÷ No. of Transactions
IPC
Items per Customer aka. UPT (Units per Transaction)
Learn More: UPT
IPC = Total Quantity Sold ÷ No. of Transactions
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Conversion
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
Traffic
Measures the number of customers who entered the store
Traffic = Total number of visits to the store
SPSF
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
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Gross Margin
Gross Margin aka. Gross Profit %
Learn More: Gross Margin
Gross Margin (%) = (Sales - Cost) ÷ Sales x 100
Markdown
Percentage of reduction on the original price
Learn More: Markdowns
Markdown (%) = (Original Price - Sale Price) ÷ Original Price x 100
Markup
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
GMROI
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
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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
DSI
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
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
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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