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GMROI calculator for retail inventory

Measure how many dollars of gross margin a line earned for each dollar of average inventory held at cost over the same period. GMROI connects profit with the working capital needed to earn it.

Calculate GMROI

How much margin did the stock investment earn?

GMROI = gross margin earned ÷ average inventory at cost

GMROI
3.00

That is $3.00 of gross margin per $1 of average inventory at cost. GMROI compares gross margin earned with average inventory at cost over the same period.

See it alongside

Another example: Two lines can earn the same margin dollars while one ties up much more stock. Compare their roles before removing either. Read Range review →

Download CSV template

Illustrative figures. Change any input to test your own scenario; values stay in this browser page.

How to calculate it

GMROI = gross margin earned ÷ average inventory at cost

  1. Choose a period and calculate gross margin dollars earned in that period: sales less cost of goods sold.
  2. Find average inventory value at cost across that same period, using consistent stock snapshots where possible.
  3. Divide gross margin dollars by average inventory at cost. Compare like periods and similar category roles before drawing a conclusion.

Illustrative example

Equal margin, different stock investment

Two homewares lines each earn $12,000 gross margin in a year. Line A carries $4,000 average inventory at cost, giving GMROI 3.0. Line B carries $12,000, giving GMROI 1.0. Line A earns $3 margin per $1 tied up in stock; Line B earns $1.

Line B deserves a closer look, but the ratio alone does not say to delist it. Check its shopper role, availability, stock cover, supplier terms and whether reducing the buy would keep the line on shelf when needed.

Check before acting

  • Use gross margin dollars and inventory at cost, both from the same time period.
  • A high GMROI can reflect too little stock and missed sales. Review availability alongside the ratio.

Questions about this calculation

What does a GMROI of 3 mean?
The line earned $3 of gross margin for each $1 of average inventory held at cost during the chosen period.
Can I calculate GMROI in Excel or Google Sheets?
Yes. Divide gross margin dollars by average inventory at cost in a spreadsheet cell. The downloadable workbook and CSV template provide example columns and formulas you can extend for more products.
Is a higher GMROI always better?
It shows a stronger return on stock investment, but a very lean stock position can cause lost sales. Compare availability and the line's category role too.
Can I compare GMROI across categories?
Use care. Margin structures and stock turns vary widely. Comparisons within a similar format and period are usually more useful than one universal threshold.

Keep working with this number

For a list of products, download this calculator’s CSV template or use the Excel workbook. The workbook can be imported into Google Sheets.

For the underlying term, read the glossary explanation. Then compare it with sell-through calculator and weeks of cover calculator.

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