What does "stock turnover" refer to in retail performance metrics?

Stock turnover is a critical metric in retail that measures the rate at which inventory is sold and replaced over a specific period. This indicator helps retailers understand how efficiently they are managing their inventory. A high stock turnover rate signifies that products are selling quickly, suggesting effective inventory management and strong sales performance. Conversely, a low stock turnover rate might indicate overstocking or weak sales, which can lead to increased holding costs and potential markdowns.

This metric can be calculated using the formula: Stock Turnover = Cost of Goods Sold (COGS) / Average Inventory. It provides insight into how well a retailer is utilizing its stock to generate sales, enabling them to make informed decisions about restocking, pricing, and sales strategies.

In contrast, the other options do not accurately describe stock turnover. The total revenue generated from inventory sales refers more to sales figures than the speed of sales relative to inventory levels. The average duration that products remain in stock focuses on the time aspect rather than the rate of selling. The amount of unsold goods in a store relates to current inventory levels but does not convey the performance metric of turnover itself.