Key Retail Benchmarks

Whether you are a retailer, or you work with retailers, The Retail Owners Institute makes it easy for you to get a quick financial health assessment of any retail business. 

The ROI's Retail Benchmarks

From all the ratios available, The ROI has selected 6 Key Retail Ratios for retailers to regularly monitor and manage:

• Pre-Tax Profit

• Gross Margin

• Inventory Turnover

• Debt-to-Worth Ratio

• Current Ratio

• GMROI

Choose any one of the 55 retail segments and 4 restaurant segments listed on this page, and click the link. 

Once on that "Retail Segment" page, see Retail Benchmark Trend Charts for the past 5 years. Available only from The ROI.

"How and when can these benchmark numbers be used?"

For perspective 

Calculate these ratios for your own business – see the "Cheat Sheet" for formulas, or save time with the KEY RATIOS Calculator. Then see how you compare to your retail industry segment.

For goal setting 

Use these benchmarks when you are setting your own target ratios for the next year.

For financing 

Seeking a bank loan for your business? The bankers will look at these industry benchmarks as they assess your store's performance. 

For understanding 

The credit departments of your vendors and landlords will examine your ratios to assess your credit worthiness.

For saving time 

Use The ROI's KEY RATIOS Calculator to quickly calculate your own ratios.   

Have questions?

Get answers at The ROI's Retail Benchmarks Resource Center. Free to everyone to use

See the how-to article: Go Figure! How to Calculate Your Key Ratios - in 12 Seconds Each!

Watch and listen to the recorded webinar: The Retail OWNER'S DASHBOARD

Very quickly, you can see how and why to monitor the true "vital signs" of your business. 

 




About the Retail Segments

The segments featured at The ROI reflect the definitions and designations of the North American Industrial Classification System (NAICS).

The top of each Retail Segment Page on The ROI site includes the NAICS code and the NAICS definition for that industry segment.
 

About the Key Retail Ratios

The ROI has selected six key ratios (from the abundance of ratios available) that are particularly important for retailers to regularly monitor and manage. See The ROI's Benchmarks Resource Center to learn more about these key ratios for retailers.

The ROI's exclusive Retail Benchmark Trend Charts show the median value reported by Risk Management Association's Annual Statement Studies for each of these key ratios each year.

Remember, there also is a Top Quartile – and Bottom Quartile – of results for every segment. See your local library for those details.

Want to get these results even faster? Use The ROI's free KEY RATIOs Calculator. 

The ROI's Quick Reference "Cheat Sheet" 

The Formulas • Where to Find the Numbers • What Each Ratio Tells You

 

  
 

How to Calculate
Your Key Financial Ratios

Where to Find the Information

What the Ratios Tell

Current Ratio =
Current Assets divided by Current Liabilities

Your balance sheet

Tests for solvency or ability to meet current debt obligations. Measures how well you can cover current liabilities with liquid assets.

 (Higher is better; 2.0 is average.)

Quick Ratio =
Cash + Accounts Receivable divided by Current Liabilities

Your balance sheet

Tests the degree of solvency most strictly, using only the most liquid current assets. 

(Higher is better; 0.5 is average.)

Debt-to-Worth Ratio =
Total Liabilities divided by Total Owner's Equity

Your balance sheet

Compares what the company "owes" creditors to what it "owns." Measures the financial strength of the business.

(Lower is better; 1.0 is average.)

Inventory Turnover =
COGS (Cost of Goods Sold) divided by Average Inventory @Cost

COGS are recorded on your income statement; Inventory is found on your balance sheet.

Measures how often, at present rate of sales, your entire inventory is completely sold and replaced during a given year. Measures inventory "velocity." 

(Higher is better; average depends on industry.)

Gross Margin % =
Gross Profit $ divided by Net Sales

Your income statement (P&L)

Indicates percentage of sales dollars remaining after costs related to purchasing merchandise are recognized.

Profit Before Taxes % =
Profit Before Taxes divided by Net Sales

Your income statement (P&L)

Indicates percentage of sales dollars remaining after all costs (except taxes) are recognized.

(Higher is better; average depends on industry.)

Return on Assets (ROA) =
Profit Before Taxes divided by Net Assets

Your income statement and balance sheet

Indicates pretax return on assets; measures productivity of assets. 

(Higher is better; average depends on industry.)

Gross Margin Return on Inventory (GMROI) =
Gross Margin $ divided by Average Inventory @Cost

Gross Margin - your income statement
Inventory @ Cost - your balance sheet.

Measures the gross margin returned for each dollar invested in inventory. (Higher is better; average depends on industry.)
   
     

©Copyright, The Retail Owners Institute® • www.RetailOwner.com • All rights reserved.

 

As you examine the trends in any retail segment, here are some pro tips for you.

An upward trend is usually a good sign - with one exception. That is the Debt-to-Worth ratio, where lower is financially stronger, as it indicates less debt.

There really are no right or wrong ratios. However, examining the trends over time can provide early warnings of potential trouble spots.

Connecting the dots of the cause-effect connections can be very revealing. For more on that, see How to Use The ROI's Benchmark Numbers Like a Pro

 

 

 



Reminders

  1. The segments featured at The ROI reflect the definitions and designations of the North American Industrial Classification System (NAICS). The top of each Retail Segment Page on The ROI site includes the NAICS code and the NAICS definition for that industry segment.

  2. The ROI's exclusive Retail Benchmark Trend Charts show the median value reported by Risk Management Association's Annual Statement Studies for each of these key ratios each year.

  3. Retailers may need to examine the benchmark numbers in more than one segment to get perspective on their own store's performance, particularly if their store does not exactly fit the NAICS category.

Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"