This document contains a table of contents for the book "Winning Formulas in Retail" by Prakash Menon and Andrew Cavanagh. The book contains over 100 retail formulas organized into sections on price and margin formulas, whole business formulas, productivity formulas, financial formulas, supply chain and logistics formulas, and store operations formulas. It also includes brief biographies of the authors, Prakash Menon and Andrew Cavanagh. Menon is a globally renowned retail expert and author of multiple books while Cavanagh's background is not provided. The book provides formulas to help retailers with calculations related to pricing, margins, business performance, productivity, finances, supply chain management, and store operations.

1. WINNING
FORMULAS
IN RETAIL.....................................................................
PRAKASH MENON ANDREW CAVANAGH
&
108 Retail Formulas for Retail Mastery

2. ........................................................................................................................
TABLE OF CONTENTS
PRICE AND MARGIN FORMULAS .....................................................................9
1. Calculation of Percentages .............................................................................. 10
2. Percentage Change on Previous Period or Budget Figures....................... 11
3. Remove Tax component from Retail Price.................................................... 12
4. The Cost Complement....................................................................................... 13
5. Target Cost Price using Cost Complement................................................... 14
6. Buyer Retail Price Using Cost Complement....................................................15
7. Mark Up % ..............................................................................................................16
8. First Margin %........................................................................................................17
9. Converting Mark Up % and First Margin %......................................................18
10. Final Margin........................................................................................................ 19
11. Discount %............................................................................................................ 20
12. Markdown %........................................................................................................ 21
13. Shrinkage %......................................................................................................... 22
14. Markdown % Estimate Based on Projected Sales Performance.............. 23
15. Conversion of Discount % to Markdown ...................................................... 24
16. Calculation of First Margin Given Final Margin and Markdown
Targets.................................................................................................................. 25
17. Calculation of impact on Final Margin to Changes in First Margin or
Reductions........................................................................................................... 26
18. Increase in Unit Sales Required to Maintain Final Margins when
Discounting........................................................................................................ 27
WHOLE BUSINESS FORMULAS ...................................................................... 29
19. Average Margin Using the Contribution to Margin (CTM) Method.............30
20. Initial Open to Buy (OTB).....................................................................................32
21. Available OTB.........................................................................................................34
22. Business Break Even............................................................................................35
23. Proft Calculation Using Break Even Figures....................................................36
TABLE OF CONTENTS

3. ................................................................................................................................................................................................................................................
TABLE OF CONTENTS
24. Calculating the Impact of Additional Expenses to the Business.............. 37
25. Business Gross Proft......................................................................................... 38
26. Pareto Analysis....................................................................................................38
27. Net Proft After Tax ............................................................................................ 40
28. Return on Sales....................................................................................................41
29. Asset Management Measure #1 – Asset Turnover.....................................42
30. Asset Management Measure #2 – Return on Assets ................................43
31. Earnings Before Interest, Tax, Depreciation and Amortisation
(EBITDA).................................................................................................................44
32. Earnings Before Interest and Tax (EBIT)........................................................45
33. Stock Type %’s.................................................................................................... 46
34. Stock Newness %............................................................................................... 47
35. Slow Moving and Obsolete (SLOB) Stock %................................................. 48
36. Aged Inventory %.................................................................................................49
PRODUCTIVITY FORMULAS ....................................................................... 51
37. Average Stock on Hand.....................................................................................52
38. Stockturn..............................................................................................................54
39. Sales to Stock Ratio...........................................................................................55
40. Stock Intensity.....................................................................................................56
41. Gross Margin Return on Inventory (GMROI).................................................57
42. Historical Weeks Cover......................................................................................58
43. Forward Weeks Cover........................................................................................59
44. Sell Through Rate................................................................................................60
45. % Sold at Full or Planned Price.........................................................................62
46. Sales per M2 or Ft2.............................................................................................63
47. Gross Margin Return on Floor-space (GMROF)............................................64
48. Promotional Productivity Measure #1 – Return on
Promotion (ROP).................................................................................................65
49. Promotional Productivity Measure #2 – Gross Margin Return on
Promotion (GMROP)...........................................................................................66
50. Return on Marketing Investment (ROMI).......................................................67
51. Incremental Sales Increase ............................................................................68
52. Return per Linear Metre or Foot of Shelf Space..........................................69
53. Transaction Analysis.........................................................................................70
54. Product Life Cycle (PLC) %...............................................................................71
FINANCIAL FORMULAS ............................................................................. 73
55. Working Capital Ratio........................................................................................74
56. Operating Expense Ratio..................................................................................75
57. Capital Expense Ratio.......................................................................................76
58. Return on Investment (ROI) ............................................................................77
59. Return on Capital Employed (ROCE) .............................................................78
60. Current Ratio.......................................................................................................79
61. Quick Ratio...........................................................................................................80
62. Inventory to Trade A/C Payable Ratio............................................................81
63. Sales to A/C Receivable Ratio..........................................................................82
64. Sales to Fixed Assets Ratio..............................................................................83
65. Share of Sales.....................................................................................................84
66. Inventory Days....................................................................................................85
67. Market Share %...................................................................................................86
68. Net Worth or Owner’s Equity............................................................................87
69. Gearing or Leverage Ratio................................................................................88
70. Debt to Equity Ratio (D/E Ratio)......................................................................89
71. Return on Net Worth (Return on Equity, ROE)..............................................90
72. The Strategic Proft Model................................................................................ 91
SUPPLY CHAIN AND LOGISTICS FORMULAS ................................................ 95
73. Delivery In Full On Time (DIFOT)......................................................................96
74. Capacity Utilisation Rate.................................................................................. 97
75. Order Fulflment Time....................................................................................... 98
76. Product Lead Time............................................................................................ 99
77. Initial Order Quantifcation................................................................................100
78. Replenishment Order Quantifcation...............................................................101
TABLE OF CONTENTS

4. ........................................................................................................................
79. Supply Chain Cost %..........................................................................................102
80. Distribution Centre Cost %...............................................................................103
81. Distribution Centre Units Processed per Hour.............................................104
82. Distribution Centre Cost per Unit....................................................................105
83. Order Accuracy %...............................................................................................106
84. Out of Stock %.....................................................................................................107
85. Cost of Goods Sold............................................................................................108
86. Cost of Doing Business.....................................................................................109
87. Cost to Serve...................................................................................................... 110
88. Product Breakeven Pricing...............................................................................111
89. Allocation Calculations – Ongoing Items.................................................... 112
90. Allocation Calculations – Indent lines.......................................................... 113
STORE OPERATIONS FORMULAE ................................................................ 115
91. Conversion Rate (Traffc to Sales)................................................................ 116
92. Units Per Transaction (UPT)........................................................................... 117
93. Average Unit Value............................................................................................ 118
94. Average Basket Size......................................................................................... 119
95. Customer Retention Rate............................................................................... 120
96. Customer Lifetime Value................................................................................ 121
97. Staff Turnover Rate......................................................................................... 122
98. Sales Per Hour.................................................................................................. 123
99. Full Time Equivalent Employee calculation................................................ 124
100. Sales per FTEE.................................................................................................125
101. Service Intensity...............................................................................................126
102. Gross Margin Return on Labour (GMROL).................................................127
103. Selling Salaries %.............................................................................................128
104. Store Assets Calculation................................................................................129
105. Store Contribution Calculation......................................................................130
106. Return on Store Assets (ROSA)....................................................................131
107. Occupancy Cost % ..........................................................................................132
108. Loyalty Program % .........................................................................................133
TABLE OF CONTENTS

5. PRICE
AND MARGIN
FORMULAS
+
......................................................

6. No. 1+
........................................................................................................................
CALCULATION OF PERCENTAGES
Retail businesses express many of their measures and performance results as
percentages. The word ‘percentage’ literally means ‘Part of 100’. Using
percentages allows us to compare aspects of our business performance against a
common base figure.
For retail that base is nearly always our sales figures. So expenses will be
expressed as a percentage of sales, margins likewise. Profit will also be shown not
only in $ figures but as a percentage. The base may be a number of other elements,
such as price, for example.
FORMULAS
element % = element $ ÷ base (or sales) $
This basic formula can also be reconfgured to calculate the individual elements
element $ = base $ x element %, and
base (or sales) $ = element $÷ element %
WORKED EXAMPLES
A retailer has sales turnover of $1,200,000. Their selling salaries are $144,000. What is their
selling salaries %?
The retailer also has a franchise fee of 3.75% that they have to pay.
How much will that amount to?
An item costs $15.00 and the cost price represents 48% of the total price.
How much is the total price?
$144,000 ÷ $1,200,000 = 12.0%
$1,200,000 x 3.75% = $45,000
$15.00 ÷ 48% = $31.25
10 11PRICE AND MARGIN FORMULAS PRICE AND MARGIN FORMULAS
No. 2+
........................................................................................................................
PERCENTAGE CHANGE ON PREVIOUS PERIOD OR BUDGET FIGURES
One of the most common retail comparisons that are made is to compare current
performance against a previous period or against a budget, forecast or target
figure. This allows the retailer to monitor how they are performing against last year,
last month or the budget.
This figure is then expressed as a percentage.
FORMULAS
(Current Period $ - Comparison Amount $)
÷ (Comparison Amount $)
expressed as a percentage.
SHORTCUT FORMULAS
(Current Period $ ÷ Comparison Amount $) – 1,
WORKED EXAMPLES
A retailer has had sales of $450,630 against last year sales for the same period of $415,687 and
a budget figure of $460,500.
What were the percentage variations against last year and the budget?
($450,630 - $415,687) ÷ $415,687 = $34,943 ÷ $415,687
($450,630 - $460,500) ÷ $460,500 = $9,870 ÷ $460,500
% change on Last Year = = + 8.41 %
% change on Budget = = - 2.14 %
USING THE SHORTCUT
% Change on Last Year = = 8.41 %
% Change on Budget = = -2.14 %
($450,630 ÷ $415,687) -1 = 1.0840608 -1 = 0.0840608
($450,630 ÷ $460,500) – 1 = 0.978567 – 1 = - 0.021433

7. No. 3+
........................................................................................................................
REMOVE TAX COMPONENT FROM RETAIL PRICE
This formula is used to take the tax amount (Goods and Services Tax, Value Added
Tax etc.) out of a retail price. It allows the retailer to calculate the amount of the
sale they get to keep in order to pay for the product and pay expenses and is an
essential step in calculating margins. It is sometimes called the 'Buyer Retail Price'
as it is the amount of the retail price with which the Buyers get to work..
FORMULAS
WORKED EXAMPLES
12 13PRICE AND MARGIN FORMULAS PRICE AND MARGIN FORMULAS
No. 4+
........................................................................................................................
THE COST COMPLEMENT
The cost complement is that part of the retail price less GST or VAT (if applicable)
minus the First Margin amount. It is usually expressed as a % amount and is very
useful when calculating anticipated Buyer Retail prices, and hence final Retail Sell
Prices. It is the % of the Buyer Retail amount that the cost represents; hence it is
the cost % that complements the First Margin %. It is sometimes referred to as
either the reciprocal or inverse of the margin, although mathematically neither of
these terms is correct.
First Margin is defined as the Margin achieved on the initial retail pricing of an item.
This will be examined later in this book.
The Cost Complement calculation flows from the basic formula:
(This formula applies to both currency amounts and % amounts)
Cost + First Margin = Buyer Retail Price
Retail Price ÷ (1 + Tax %)
For example, if the GST is 7.5%, the formula would be:
Retail Price ÷ 1.075
If it is 12.5%, it would be:
Retail Price ÷ 1.125
A T-Shirt retails at $20.00, and the VAT was 20%, the net amount for
the retailer would be:
A tennis racquet sells for $99.95 and the GST is 10%, the net amount
would be:
To add the GST or VAT amount to a Buyer Retail figure, the formula is:
So in the above example:
$20 ÷ 1.2 = $16.67
$99.95 ÷ 1.1 = $90.86
Buyer Retail Price x (1 + Tax %) = Retail Sell Price
$90.86 x 1.10 = $99.95
FORMULAS
Cost + First Margin = Buyer Retail Price
WORKED EXAMPLES
A jewellery retailer has a margin of 75%.
The cost complement would be:
so the cost represents 25% of the Buyer Retail price.
An electrical goods retailer has a margin of 12%.
The cost complement would be:
so the cost represents 88% of the Buyer Retail price.
100% - 75% = 25%,
100% - 12% = 88%,
For example, if the margin% is 65%, then the cost complement is:
100% - 65% = 35%

8. 131
Return on Store Assets, or ROSA, is the relationship between Store Contribution
and Average Store Assets. This highlights how much return retailers are getting on
the money that is tied up in the store. For store management, it highlights the
need to monitor sales, expenses, average investment in inventory and debtors and
average investment in fixed assets.
No. 106+
FORMULA
WORKED EXAMPLES
RETURN ON STORE ASSETS (ROSA)
No. 105+
........................................................................................................................
STORE CONTRIBUTION CALCULATION
FORMULAS
WORKED EXAMPLES
130
Store Contribution = (Total Gross Profit $
+ Sundry Income $) – Total Store Expenses $
........................................................................................................................
Store Contribution is the amount of wealth created by the store. In a large, multi-
store operation, it is vital to keep track of how much each store is contributing to
the overall improvement in value of the business and address any stores that are
making unsatisfactory contributions.
ROSA = Store Contribution ÷ Average Store Assets
A store has the following Profit and Loss Statement for the year
- Markdowns and Shrinkage @ cost
Sales
- Cost of Goods Sold
$ 9,565,425
Gross Profit
Store Income
- Total Store Costs
Store Contribution
+ Sundry Income
$ 4,974,020
$ 565,545
$ 4,025,860
$ 125,850
$ 4,151,710
$ 3,386,475
$ 765,235
Taking the figures from our previous two formulas, we can see that Store Contribution was
$765,235 and Average Store Assets were $3,805,785.
ROSA = $765, 235 ÷ $3,805,785 = 20.1%
STORE OPERATIONS FORMULASSTORE OPERATIONS FORMULAS

9. 133
Many retailers now have a Loyalty Program of some sort. The major benefits of
having such a program are:
a. To reward regular customers, thus engendering a greater sense of loyalty,
b. Greater transparency of the transactions of Loyalty Program customers,
increasing your ability to target marketing more specifically, and
c. Better use of limited marketing spending through more targeted marketing.
It is imperative that retailers are aware of how important their Loyalty
Program customers are to their business. One of the easiest ways to do
this is to calculate the percentage of your total sales that are attributed to
these customers.
No. 108+
FORMULA
WORKED EXAMPLES
LOYALTY PROGRAM %
No. 107+
........................................................................................................................
OCCUPANCY COST %
FORMULAS
WORKED EXAMPLES
132
Occupancy Cost % = Total Occupancy Costs
÷ Total Sales
........................................................................................................................
The three largest categories of expenditure for any retailer are related to people,
inventory and space. Occupancy Cost % looks at all the space related costs and
expresses them as a percentage of total sales.
Occupancy costs include (but are not be limited to) rent, heating/cooling, lighting,
gas, water, cleaning and security.
Loyalty Program % =
Sales $ from Loyalty Program Members ÷ Total Sales
A retailer has achieved total sales of $9,565,425. The total Occupancy Costs for the year were
$2,135,790.
Occupancy Cost % = $2,135,790 ÷ $9,565,425 = 22.3%
Our example retailer has sales of $9,565,425. Of those sales, $6,868,425 worth was made to
Loyalty Program members.
Loyalty Program % = $6,868,425 ÷ $9,565,425 = 71.8%
STORE OPERATIONS FORMULASSTORE OPERATIONS FORMULAS

10. PRAKASH ‘PK’ MENON
ANDREW CAVANAGH
AUTHOR BIOGRAPHIES
Prakash ‘PK’ Menon is a globally renowned Retail,
Supply Chain & Logistics & Leadership authority. A
regular contributor to several UAE and international
retail publications, PK is also the author of three other
books - Driven - accelerate your career with smart
transitioning; Supply Chain is Sexy - Harnessing the
Retail Revolution; and Fail Smart - The Undeniable
Link Between Failure and Success. As Executive
Director of Thought Leaders Middle East, PK’s passion
and expertise is to help retailers transform their
organisations into global powerhouses and add
signifcant dollars to their proft lines.
Andrew Cavanagh brings more than 20 year’s retail
buying, merchandise planning and IT experience with
Myer and Coles Myer and more than 6 year’s national
and international teaching experience at the
Australian Centre for Retail Studies to the table. Today
he focuses on his true passion, which is to develop the
skills and competencies of Buyers and Planners
around the world as an international facilitator.
MORE BOOKS IN THE RETAIL MASTERY SERIES:
OTHER BOOKS BY PK MENON:
Fail Smart (TM)
PK's book on Failure
Intelligence. About the
undeniable link between
Failure and Success.
Supply Chain is Sexy
Transform your supply
chain fromweak link to
core strength with PK
Menon
Driven...whatever it takes!
A memoir highlighting PK
Menon's journey - an
inspiring combination of
humble beginnings to an
even more humble yet
awe-inspiring present.
PUMP UP YOUR ROI
From Good to Great Buying in Retail
A guide to managing your retail business by measuring what matters.
GOOD BUYER GREAT NEGOTIATOR
Fact-Based Negotiation in Retail
A guide to the art and skills of negotiating for retailers.
ROCKETING RETAIL PROFITS
With Excellence in Merchandise Planning
A guide to optimising inventory and retail profits.
POWER UP YOUR RETAIL
Powerful Financial Excellence for Retail Store Managers
A guide to driving outstanding retail store profits in the 21st century.
CHECKMATE IN RETAIL
Dynamic Strategy for Retailers in a Volatile Retail Environment
A retail buyer's guide to driving outstanding profitability using effective
merchandise strategy.

11. www.thoughtleadersme.com
www.pkmenon.com
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