What is Stock Turnover in Retail? Explained

Stock Turnover is the rate at which a retailer's inventory is sold and replaced over a specific period. It is a key performance indicator that measures how efficiently a retailer manages its inventory. The stock turnover ratio is calculated by dividing the cost of goods sold (COGS) by the average inventory during a particular period. A higher stock turnover indicates that inventory is selling quickly, which is generally favorable as it minimizes holding costs and ensures that the retailer keeps up with customer demand. Retailers often aim to optimize stock turnover to maintain healthy cash flow and maximize profitability.