GMROI calculator.
Gross margin ÷ average inventory cost. Tells you which products earn the most per euro you have tied up in stock. Better than turnover OR margin alone.
For the period
Use a year of data. Defaults assume an apparel SKU group.
GMROI
How this calculator works (the same formula nouz uses)
GMROI — gross margin return on inventory investment — tells you how many euros of gross margin you earn for every euro you have tied up in stock. It's the buyer's best single number because it combines the two things that matter, margin and speed, into one figure.
Gross margin = revenue − COGSGMROI = gross margin ÷ average inventory at costAverage inventory = (beginning stock + ending stock) ÷ 2, both at cost
A GMROI of 2,4 means every €1 of inventory returned €2,40 of gross margin over the period. Anything above €1 means the stock earned more margin than the cash it consumed to hold — before overheads. Because it is expressed in euros of margin per euro invested, GMROI lets you compare a slow, high-margin line directly against a fast, thin-margin one, something neither turnover nor margin can do on its own.
A worked example
Using the defaults for a year: €120.000 revenue, €60.000 COGS, and €25.000 average inventory at cost. Gross margin = €120.000 − €60.000 = €60.000. GMROI = €60.000 ÷ €25.000 = 2,4. For context the calculator also shows the two ingredients: inventory turnover of €60.000 ÷ €25.000 = 2,4 turns and a gross margin of €60.000 ÷ €120.000 = 50%. Notice how neither alone tells the story — 2,4 turns looks slow and a 50% margin looks fine; GMROI blends them into a single verdict. Now imagine trimming average inventory to €18.000 by reordering more tightly on the same sales: GMROI climbs to €60.000 ÷ €18.000 ≈ 3,3, straight into the healthy band, without changing your prices at all.
What a healthy number looks like
Rules of thumb for independent retail:
| GMROI | Verdict |
|---|---|
| Under 1,5 | Losing money once holding costs are counted |
| 1,5 - 2,5 | Survival range |
| 2,5 - 4 | Healthy — where most well-run shops live |
| Over 4 | Exceptional — tight assortment, fast turnover |
The 2,4 in the worked example sits right at the top of the survival band — not a crisis, but a signal there's margin or speed to be won. Always keep GMROI above 1: below it, the stock literally returns less margin than the cash it consumes.
Common mistakes
- Judging the whole store by one blended GMROI. The point of the number is to rank categories and suppliers, not to sit at the top line.
- Using retail values for inventory. Average inventory must be at cost, or the ratio is inflated.
- Ignoring holding costs. A GMROI just above 1 isn't really break-even once rent, insurance, and write-offs are counted.
- Chasing margin only. A high-margin line that never moves can post a worse GMROI than a thinner-margin bestseller.
When to use it — and what's next
Use it at buying time and at range reviews: rank your categories, suppliers, and SKU groups by GMROI, cut the bottom, and back the top. Most retailers find 30-40% of their assortment delivers 70-80% of their GMROI — yet keep reordering the laggards because they "look normal." To see the two halves of GMROI on their own, use the inventory turnover calculator and the profit margin calculator. And to turn these buying decisions into daily profit you can actually watch, there's nouz for retail.
Common questions
Why is GMROI better than inventory turnover or margin on its own?
Turnover alone misses margin, so fast-moving low-margin junk looks good, while margin alone misses speed, so high-margin slow-movers look good. GMROI combines them into one figure: how many euros of gross margin you earn for every euro of inventory you keep on the shelf.
How is GMROI calculated, and what is average inventory?
GMROI equals gross margin divided by average inventory at cost, where gross margin is revenue minus COGS. Average inventory is beginning stock plus ending stock, divided by two, both measured at cost rather than retail. A GMROI of 2,4 means every euro of stock returned 2,40 euros of gross margin.
Can you show a worked example?
With the defaults of 120,000 euros revenue, 60,000 euros COGS, and 25,000 euros average inventory at cost, gross margin is 60,000 euros. GMROI is 60,000 divided by 25,000, which equals 2,4. That reflects 2,4 turns and a 50% margin blended together, neither of which tells the full story alone.
What is a good GMROI?
Under 1,5 means you are losing money once holding costs like backroom rent, insurance, financing, and write-offs are counted. 1,5 to 2,5 is the survival range, 2,5 to 4 is healthy where most well-run independent retailers live, and over 4 is exceptional, common for boutiques with tight assortment and fast turnover.
What does a GMROI below 1 mean?
Below 1 the stock returns less gross margin than the cash tied up in it, so it is consuming money rather than making it. Even a figure just above 1 is not truly break-even, because holding costs such as rent, insurance, and markdowns are not yet counted. Keep GMROI comfortably above 1.
How do I use GMROI to make buying decisions?
Calculate it per category, per supplier, and per SKU group, then rank them: cut the bottom decile from your next order and back the top. Most retailers find 30 to 40 percent of their assortment delivers 70 to 80 percent of their GMROI, yet keep reordering the laggards because they look normal.