GMROI explained

Last time we explained what GMROI is and why it is important. Now let’s take a look at the GMROI report for a store. We have left out the details. The first thing you want to look at is the totals for the store, usually the last line.

We are going to use this report even though the numbers might not be typical for the whole year of a retail store but let’s work with them.

The secret of having money in a retail store is Gross Profit dollars (#8) should be higher than Average Inventory (#9).

If you look at #7 this store has a 45.5% margin, very respectable in today’s retail market. Their problem is that the store has way too much inventory. Where is that inventory? Typically it hides in two places: