retail math - retail success summit...

7/22/2011

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Retail MathRetail MathImportant Calculations,

What They Mean, and

How You Can Use Them to

Boost Sales and Profits

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Items per Sale

number items / number of transactions

127 items / 39 transactions = 3.2 items per sale

Low items per sales probably indicates thatthe employee isn’t consistently adding on.

Employee Equations


Average Sale

total dollars sold / total number of transactions

$1083 / 39 transactions = $27.76 avg. sale

Low average sale usually means- • the employees isn’t adding on • OR is not selling higher priced goods, • OR both!

Employee Equations

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Sales Volume Per Hour

total sales / total hours worked

$1083 / 7.75 hours = $139.74 per hour

• Low SVPH along with low items per sale and low average sales means poor selling skills.

• Low SVPH with HIGH items per sale and average sale means not enough time spent selling!

Employee Equations


Sales Per Sq. Foot

total sales / selling sq. footage

$632,546 / 1281= $493.79 per sq. ft.

• Measure of efficiency/productivity• Compare departments, vendors• Can be used with linear feet

Sales Calculations

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Average Stock

Sum Beginning of Month Stock ÷Number of Months

$1,432,794 ÷ 12 = $119,400

• Usually, a year calculation• At retail $ or at cost $

Inventory Calculations

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Inventory Turnover


Sales ÷ Average Stock

$300,00 ÷ $100,000 = 3.0

• Velocity of merchandise• Cash flow• Too high – out of stocks


National Averages by Industry

For Sole Proprietorship

Businesses

Annual Inventory

Turnover

Lumber & Building Materials 7.7

Paint, Glass & Wallpaper 4.5

Hardware Stores 3.0

Retail Nurseries & Garden Supply 5.1

General Merchandise Stores 6.5

Auto Parts & Accessories 4.7

Apparel & Personal Accessories 3.2

Furniture & Home Furnishings 5.0

Liquor Stores 6.4

Antiques & Used Merchandise 1.7

Sporting Goods 4.4

Gift, Novelty & Souvenir Shops 2.9

Other Retail Stores 3.7

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Cost of Goods Sold


Beginning Inventory + Purchases - Ending Inventory

$320,347 + $90,853 – $310,295 = $100,905

• Purchases includes freight• Can evaluate by dept, by vendor


Gross Margin


Sales – Cost of Goods Sold

$32,826 – $14,739 = $18,087

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Initial Markup


Profit% + MD% + % Expense ÷100 + MD%

8% + 15% + 37% = 52.2%100% + 15%


Gross Margin

Return on Inventory(GMROI)


$ Gross Margin ÷ Average Inventory @ Cost

$240,000 ÷ $100,000 = 2.45

• For every $1.00 you invest, you get back $2.45• Compare departments, vendors

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Current Ratio

Financial Calculations

Current Assets ÷ Current Liabilities

$472,002 ÷ $385,638 = $1.22


Quick Ratio

Financial Calculations

Current Assets - Inventory ÷ Current Liabilities

$472,002 – 52,185 ÷ $405,638 = $1.03

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Action Items!Action Items!

retail math - retail success summit...

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