What is Inventory Turnover in Retail? Explained

Inventory turnover in retail is a crucial financial metric that measures how many times a company's inventory is sold and replaced within a specific period, usually a year. It is calculated by dividing the cost of goods sold (COGS) by the average inventory during the same period. A high inventory turnover ratio indicates that a retailer is efficiently managing its inventory, selling products quickly, and restocking effectively. Conversely, a lower ratio may suggest overstocking or slow-moving inventory, highlighting potential areas for improvement in inventory management strategies.