Retail Merchandising & Inventory Lab

Inventory Turnover & GMROI Lab

Calculate Gross Margin Return on Investment (GMROI), inventory turns, DSI days, and retail shrinkage drag.

Merchandising Model Loss Decomposition Inventory Theory FAQ

Retail Presets

Load calibrated retail models.

Step 1: Merchandising Sales & Stock Levels

Sales, Margins & Inventory Investment

1. Sales & Margin Markup

$
%
Markup over wholesale product cost.

2. Inventory Working Capital

$
Average balance sheet stock at landed cost.

3. Shrinkage & Stockout Rates

%
Theft, damage, spoilage & cashier errors.
%
Missed unfulfilled customer demand.
GMROI
$0.00
Elite (>$3.00)
Inventory Turns
0.00x / Yr
Days of Inventory (DSI)
0.0 Days
Shrinkage Loss
$0
Stockout Lost Margin
$0

Step 2: Margin & Loss Impact

Gross Profit, Shrinkage & Stockout Decomposition

Audits realized gross profit alongside friction losses from retail shrink and uncaptured out-of-stock demand.

Financial Metric Line Annual Amount ($) % of Annual Sales

Retail Merchandising Guide

Understanding GMROI & stock velocity

Gross Margin Return on Investment (GMROI) is the master metric of retail inventory productivity, synthesizing pricing margin with inventory turnover.

  • The Balance: High margin with slow turn (luxury) or low margin with rapid turn (grocery) can both produce profitable GMROIs.
  • Carrying Cost Drag: Inventory sitting on shelves over 90 days accumulates carrying charges, markdowns, and obsolescence risks.
  • The Shrinkage Drain: Every dollar lost to shrinkage directly wipes out net gross margin dollar-for-dollar.

Calculate economic order sizes in the Inventory EOQ Lab.

Merchandising Equations

Essential retail inventory formulas

COGS = Annual Sales × (1 − Gross Margin %)

Inventory Turnover = COGS ÷ Average Inventory at Cost

Days Sales of Inventory (DSI) = 365 ÷ Inventory Turnover

GMROI = Gross Margin ($) ÷ Average Inventory at Cost ($)

Shrinkage Loss ($) = Annual Sales × Shrink Rate %

Buffer supplier lead time in the Safety Stock Lab.

FAQ

Inventory turnover and GMROI questions

What is GMROI and how is it interpreted?

Gross Margin Return on Investment (GMROI) = Gross Margin ($) ÷ Average Inventory at Cost ($). It measures how many dollars of gross profit a business generates for every $1 invested in inventory. A GMROI > 3.0 is considered elite.

What is the mathematical relationship between GMROI and Inventory Turnover?

GMROI = Gross Margin % × (Sales ÷ Average Inventory at Cost). When calculated on cost, GMROI equals Margin / Inventory Cost, combining pricing power with stock velocity.

What is Days Sales of Inventory (DSI)?

DSI = (Average Inventory ÷ COGS) × 365 = 365 ÷ Inventory Turnover. It shows the average number of days required to turn inventory into completed sales.

How does retail shrinkage impact profitability?

Shrinkage (from shoplifting, employee theft, spoilage, and administrative errors) reduces gross margin directly dollar-for-dollar, depressing effective GMROI and free cash flow.

Can I export GMROI schedules and shrinkage metrics to CSV?

Yes. You can export complete sales revenue, COGS, inventory turns, DSI days, GMROI ratios, and shrinkage breakdowns as a UTF-8 CSV spreadsheet with formula injection defense or print an executive brief.

Is this tool certified retail consultancy or supply chain audit advice?

No. This tool provides educational retail merchandising and inventory analytics models for business training without commercial merchandising management or supply chain auditing guarantees.

Continue Exploring Retail & Inventory Tools

Explore our Retail & Inventory Hub, calculate safety stock in the Safety Stock Lab, optimize reorder points in the EOQ Lab, or track working capital in the Cash Conversion Cycle Simulator.