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