Gross margin

Also: gross profit margin

Gross margin is gross profit, sales less cost of goods sold, as a percentage of sales. In fashion it reflects the intake margin set at buying, the share of sales made at full price, markdowns, sourcing currency, freight and duties. Companies differ on what sits in cost of sales: some include occupancy or logistics, others report them below gross profit, so comparisons across companies need care.

// IN PRACTICE

Buyers plan an intake margin when they place the order; the reported gross margin is what remains after markdowns and stock losses. The gap between the two shows how much of the buy sold at the planned price.

// EXAMPLE

Gap's adjusted gross margin was 41.4% against 41.2%, a gain of 18bp, made of an 80bp rise in merchandise margin and 60bp of occupancy deleverage, both company-disclosed.

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