Clearance Markdown Calculator

How it works

Stock that sells at a steady weekly rate clears in units on hand ÷ weekly rate weeks. The sales lift is how much faster the item sells once marked down, as a percent of the current rate. The calculator multiplies the current rate by (1 + lift) and divides the units on hand by the result.

The lift is an assumption you enter, not something the calculator predicts. How much a given markdown speeds sales depends on the item, the season and the customers. The clearing time is inversely proportional to 1 + lift, so going from a 50% to a 100% lift cuts it by a quarter.

Every remaining unit is assumed to sell at the marked-down price, so the cash recovered is units × current price × (1 − markdown). Subtracting what the units cost shows the margin the markdown keeps, and the deepest markdown that still covers cost is the one where the marked-down price equals the unit cost.

Formula

weeks at current price = units ÷ weekly rate
rate at markdown       = weekly rate × (1 + lift % ÷ 100)
weeks at markdown      = units ÷ rate at markdown
marked-down price      = current price × (1 − markdown % ÷ 100)
cash recovered         = units × marked-down price
margin kept            = cash recovered − units × unit cost
break-even markdown %  = (1 − unit cost ÷ current price) × 100

Example

A store has 240 units left that sell 12 a week at $40, so clearing at full price would take 20 weeks. At 30% off ($28.00) it assumes a 50% sales lift, to 18 a week, which clears the stock in 13.3 weeks, or 14 whole weeks.

Sold at $28.00, the 240 units bring in $6,720 instead of $9,600. They cost $18 each, $4,320 in all, so the markdown keeps $2,400 of margin, 35.71% of the cash recovered. Any markdown up to 55% still covers the cost.

Assumptions and limitations

• The sales lift is your assumption. The calculator does not estimate it, and actual sales at a markdown can be faster or slower.
• Sales are assumed to run at a constant weekly rate until the stock is gone. A rate that falls as the clearance goes on, for example as sizes or colors sell out, lengthens the clearing time and is not modelled.
• Every remaining unit sells at the one markdown. Staged markdowns (for example 30% then 50%), shrinkage, returns and holding costs are not included.
• The marked-down price is not rounded to the cent or to a price ending, so cash figures can differ by a few cents from a till total.
• Results are for informational and educational purposes and are not financial, tax or accounting advice.

Frequently asked questions