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RETAIL MATH FORMULAS

Vinod Joshi Lecturer of Strategy

Acid-Test Ratio

Acid-Test Ratio = Current Assets - Inventory Current Liabilities


Average Inventory

Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) 2


Basic Retailing Formula

Retail Price =Cost of Goods + Markup Markup= Retail Price - Cost of Goods Cost of Goods =Retail Price - Markup

Break-Even Analysis

Break-Even ($) = Fixed Costs Gross Margin Percentage


Contribution Margin

Contribution Margin = Total Sales - Variable Costs


Cost of Goods Sold

COGS = Beginning Inventory + Purchases - Ending Inventory


Gross Margin

Gross Margin = Total Sales - Cost of Goods

Gross Margin Return on Investment

GMROI = Gross Margin $ Average Inventory Cost


Initial Markup

Initial Markup % = (Expenses + Reductions + Profit) (Net Sales + Reductions)


Inventory Turnover(Stock Turn)

Turnover = Net Sales Average Retail Stock


Maintained Markup

MM $ = (Original Retail - Reductions) - Cost of Goods Sold MM % = Maintained Markup $ Net Sales Amount

Margin %

Margin % = (Retail Price - Cost) Retail Price


Markup

Markup $ = Retail Price - Cost Markup % = Markup Amount Retail Price


Net Sales

Net Sales = Gross Sales - Returns and Allowances


Open to Buy

OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory - Planned Beginning

Percentage Increase/Decrease

% Increase/Decrease = Difference Between Two Figures Previous Figure Quick Ratio Quick Ratio = Current Assets - Inventory Current Liabilities Reductions Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

Sales per Square Foot

Sales per Square Foot = Total Net Sales Square Feet of Selling Space
Sell-Through Rate

Sell-Through % = Units Sold Units Received


Stock to Sales Ratio

Stock-to-Sales = Beginning of Month Stock Sales for the Month

Same-Store Sales
A statistic used in retail industry analysis that compares the sales of stores that have been open for at least one year. Same-store sales compare revenues earned by a retail chain's established outlets over a certain time period, such as a fiscal quarter or on a seasonal basis, for the current period and the same period in the past (usually the same period of the previous year.) Same-store sales allow investors to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Same-store sales are also called "S.S.S.," "comps," "comparable store sales," "identical store sales" or

Same-store sales figures are expressed as a percentage. For example, retail chain ABC may report same-store sales growth of 4.5% for the current fiscal quarter over last year's. Same-store analysis is important because although new stores may represent growth for a retail chain, a saturation point - where future sales growth is determined by same store sales growth - may eventually occur. Same-store sales are typically published by retail companies on a monthly basis. The figures help analysts differentiate between revenue growth that comes from any new outlets and growth that is a result of improved management and operations at the existing outlets.

Like-For-Like Sales
A comparison of this year's sales to last year's sales in a particular company, taking into consideration only those activities that were in effect during both time periods. Like-for-like sales is a method of valuation that attempts to exclude any effects of expansion, acquisition or any other event that artificially enlarge a company's sales. Companies may disclose like-for-like sales for various time periods, such as quarterly and yearly.

Like-for-like sales help companies and investors

determine the sales performance over a certain period of time when compared to the same period of time one year earlier, such as comparing the second quarter of 2012 to the second quarter of 2011. Like-for-like sales are typically represented as a percentage of growth or a dip in sales. For example, company ABC may report a 3.1% rise in like-for-like sales for the first quarter (this year over last year). Critics of like-for-like sales figures cite the lack of an industry standard for determining the measurement, which means that it is challenging for investors to compare like-for-like sales between two or more retailers. In addition, critics maintain that like-for-like sales are not indicative of the strength of the wider

'Door Crasher'
A low-priced item of limited quantity typically offered on

special, early-opening hours to attract buyers into a retail store. Door crashers are a sales and marketing tactic to bring customer into the stores in hopes that they buy other items as well. It is also a way to drive customers to their stores as opposed to competitors'.
Door crashers are often placed on sale during large

shopping days, such as Black Friday and after Christmas. Retailers only offer limited quantities of the door crashers in hopes that more consumers will arrive than there are available door crashers. By doing so, the store hopes that once the consumer is already there, they will purchase a similar item with a higher price tag.