Gross Margin

Gross Margin is a critical financial metric for retailers that indicates the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. It measures how much a company earns taking into consideration the costs that it incurs for producing its products or services.

 

To calculate Gross Margin, you can use the following formula:

 

For retailers, Gross Margin is important because it reflects the efficiency of their core operations and their ability to manage the costs associated with the goods they sell. A higher Gross Margin indicates that a retailer is able to sell merchandise at a higher markup, which can lead to better profitability. Understanding Gross Margin helps retailers make strategic decisions about pricing, promotions, product mix, and cost control.