Retail Maths Formulas — The Complete Reference for Fashion Buyers & Merchandisers
Every formula a buyer, merchandiser, or brand founder needs — with worked examples, benchmarks, and live calculators.
Retail maths formulas are the calculations that drive every buying, merchandising, and planning decision in fashion retail — or retail math as it's known in the US. Whether you're calculating gross margin on a new range, evaluating GMROI by category, or building an open-to-buy budget for the season, mastering these retail maths formulas puts the numbers in your hands.
This reference covers every core retail maths formula: profitability (gross margin, markup, GMROI), inventory KPIs (stockturn, sell-through rate, weeks of supply), pricing and markdown calculations, OTB planning, sales performance metrics (ATV, UPT, conversion rate), and landed cost. Each includes a worked example, industry benchmarks, and a live calculator.
→ Jump straight to our gross margin calculator or stockturn calculator to run the numbers for your own range right now.
01 — Profitability
Retail Maths Formulas: Profitability
The foundational retail maths profit formulas — gross margin, markup, and GMROI sit at the top of every P&L and drive every pricing and buying decision.
Gross Margin %
GM% = (Retail − Cost) ÷ Retail × 100
How much of every sale you keep after paying for the product.
Markup %
Markup% = (Retail − Cost) ÷ Cost × 100
How much you've marked up the cost price to reach your retail price. Uses cost as the base — not the same as gross margin.
Retail Price from Margin
Retail = Cost ÷ (1 − GM%)
Work backwards from a target gross margin to find your retail price.
e.g. cost $28, target 60% → $28 ÷ 0.40 = $70
Gross Profit $
Gross Profit = Net Sales − COGS
Total revenue remaining after deducting cost of goods sold. The starting point for every P&L.
GMROI
GMROI = Gross Margin $ ÷ Avg Inventory (cost)
Dollars of gross margin earned for every dollar invested in inventory. The gold standard retail maths efficiency metric.
Maintained Margin
Maintained Margin = Initial Margin − MD% on Sales
The actual margin achieved after markdowns. Always lower than initial margin — this is what hits the P&L.
e.g. 62% initial − 18% MD on sales = 44% maintained
02 — Inventory
Retail Maths Formulas: Inventory Performance
Inventory retail maths tells you how efficiently your stock is working — whether you're holding too much, too little, or selling at the right pace.
Stockturn
Stockturn = Sales ÷ Average Stock
How many times your average stock level sells through per year.
Sell-Through Rate
ST% = Units Sold ÷ Units Bought × 100
What percentage of your stock has sold. Core retail maths buying KPI — drives reorder and markdown decisions.
Weeks of Supply (WOS)
WOS = Stock on Hand ÷ Avg Weekly Sales
How many weeks your current stock will last at the current rate of sale.
e.g. 240 units ÷ 30/wk = 8 weeks of supply
Stock Cover (Days)
Stock Cover = (SOH ÷ COGS) × 365
WOS expressed in days. Stock cover (days) = 365 ÷ Stockturn.
Average Inventory
Avg Inventory = (Opening + Closing) ÷ 2
The base figure used in stockturn and GMROI calculations. Use cost value for both.
COGS
COGS = Opening Stock + Purchases − Closing Stock
The cost value of everything sold in the period. Feeds into gross margin and stockturn calculations.
03 — Pricing
Retail Maths Formulas: Pricing & Markdowns
Pricing and markdown retail maths — setting the right price and managing the margin cost when prices come down.
Keystone Markup
Retail = Cost × 2
The traditional retail rule of doubling wholesale cost. Delivers exactly 50% gross margin.
Cost Price from Retail
Cost = Retail × (1 − GM%)
Find your maximum allowable cost from a fixed retail price and target margin.
e.g. $70 retail, 60% target → max cost = $28
Markdown Dollar
MD$ = Original Price − Sale Price
The dollar value of the price reduction. Tracked at style, category, and total level against a markdown budget.
Markdown %
MD% = MD$ ÷ Original Price × 100
Rate of markdown on original retail. Also: MD on Sales = MD$ ÷ Net Sales × 100.
New Retail After Markdown
New Price = Original × (1 − Discount%)
The sell price after a % discount.
30% off $100 → $100 × 0.70 = $70
Initial Markup (IMU%)
IMU% = (Retail − Cost) ÷ Retail × 100
The planned margin at time of buying — before any markdowns. Sets the ceiling for maintained margin.
04 — Planning
Retail Maths Formulas: Planning & OTB
The retail maths formulas that drive buying budgets, stock targets, and seasonal merchandise plans.
Open-to-Buy (OTB)
OTB = Planned Sales + Planned EOM Stock + Planned Markdowns − BOM Stock − On Order
The buying budget for the period — how much you can commit to purchasing after accounting for stock on hand and on order.
OTB at Cost = OTB at Retail × (1 − IMU%) · BOM = Beginning of Month · EOM = End of Month
Planned Sales
Planned Sales = LY Sales × (1 + % Change)
Setting sales targets from last year actuals, adjusted for trend or strategy.
LY $120k, +8% → $129,600 planned
BOM Stock (Stock-to-Sales Ratio)
BOM Stock = Planned Monthly Sales × SSR
Beginning-of-month stock target relative to planned sales. SSR of 2–3× is typical for apparel.
$30k planned sales × 2.5 SSR = $75k BOM stock
% Change on LY
% Change = (TY − LY) ÷ LY × 100
The core variance retail maths formula — compares this year to last year for any metric.
05 — Performance
Retail Maths Formulas: Sales Performance
Transaction-level retail maths — measuring how effectively you convert traffic and maximise basket value.
Average Selling Price (ASP)
ASP = Net Sales ÷ Units Sold
The average price actually paid per unit after discounts. Track vs original ticket to measure markdown erosion.
Average Cost Price (ACP)
ACP = Total COGS ÷ Units Sold
Average cost per unit across your range. ASP − ACP = gross profit per unit.
Units Per Transaction (UPT)
UPT = Units Sold ÷ Number of Transactions
Average basket size in units. Even a 0.2 improvement at volume creates significant revenue lift.
Average Transaction Value (ATV)
ATV = Net Sales ÷ Number of Transactions
Revenue per transaction. ATV = UPT × ASP — improving either lifts the other.
Conversion Rate
Conversion% = Transactions ÷ Traffic × 100
Percentage of visitors who complete a purchase. Applies to physical stores and e-commerce.
Sales per Square Metre
Sales/m² = Net Sales ÷ Selling Area (m²)
How hard your floor space is working. Directly impacts lease economics and layout decisions.
06 — Costing
Retail Maths Formulas: Costing & Landed Cost
The true cost of goods. Using FOB or ex-factory alone understates your real COGS by 15–40% — these retail maths costing formulas close that gap.
Landed Cost
Landed Cost = Ex-Factory + Freight + Duties + Insurance + Port Charges + Handling + DC Cost
The total cost of getting a garment from factory to your DC — every cost incurred before goods hit the floor.
e.g. Ex-factory $12.00 + Freight $1.80 + Duties $0.60 + Other $1.10 = Landed $15.50
CMT Cost
CMT = Fabric + Trims + Cut/Make/Trim
The base production cost before factory margin. Used when sourcing fabric directly.
FOB Cost
FOB = CMT + Factory Margin + Profit
Price at port of origin — the importer bears all costs from that point forward.
Import Duty
Duty$ = CIF Value × Duty Rate%
CIF = Cost + Insurance + Freight. AU apparel duties typically 0–10% — check current rates with the Australian Border Force tariff tool.
07 — Quick Reference
All Retail Maths Formulas at a Glance
Every retail maths formula on this page, in one table for quick reference.
| Formula | Calculation | Benchmark / Note |
|---|---|---|
| Gross Profit | Sales − COGS | Foundation of P&L |
| Gross Margin % | (Retail − Cost) ÷ Retail × 100 | Fashion target 55–65% |
| Markup % | (Sell − Cost) ÷ Cost × 100 | Based on cost, not sell price |
| Retail from Margin | Cost ÷ (1 − GM%) | Work back from margin goal |
| GMROI | GM$ ÷ Avg Inventory Cost | Target >3.0× |
| Maintained Margin | Initial Margin − MD% on Sales | Actual P&L margin |
| Stockturn | Sales ÷ Avg Stock | Fashion 4–6× p.a. |
| Sell-Through Rate | Units Sold ÷ Units Received × 100 | Target >80% |
| Weeks of Supply | SOH ÷ Avg Weekly Sales | Units or $ — stay consistent |
| Stock Cover (days) | SOH ÷ COGS × 365 | = 365 ÷ Stockturn |
| Keystone Retail | Cost × 2 | = 50% margin exactly |
| Markdown % | MD$ ÷ Original Price × 100 | MD on sales: MD$ ÷ Net Sales |
| Open-to-Buy | Pl.Sales + EOM − BOM − On Order + MD | Core planning formula |
| ASP | Net Sales ÷ Units Sold | Track vs original ticket |
| ATV | Net Sales ÷ Transactions | = UPT × ASP |
| UPT | Units Sold ÷ Transactions | Target >2.0 |
| Conversion Rate | Transactions ÷ Traffic × 100 | Physical ~20–30% |
| Sales per m² | Net Sales ÷ Selling Area | Space productivity KPI |
| Landed Cost | FOB + Freight + Duty + Handling | True COGS basis |
| Import Duty | CIF Value × Duty Rate% | AU apparel 0–10% |
Related tools & reading
Further reading: Shopify AU — GMROI explained · Australian Border Force tariff classification