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Initial Markup (IMU) Calculator for Retail Pricing

Calculate the initial markup percentage (IMU) a retailer needs to cover operating expenses, profit and planned markdowns, the maintained markup that results, and the opening retail price for any item cost.

Planned net sales

Planned operating expenses

Planned operating profit

Planned reductions

Cost of one item to price

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How it works

IMU % = (operating expenses + profit + reductions) ÷ (net sales + reductions) × 100 · Maintained markup % = (expenses + profit) ÷ net sales × 100 · Markup on cost = IMU ÷ (1 − IMU) · Opening retail = item cost ÷ (1 − IMU)

Initial markup is the markup on retail a buyer must put on goods when they first hit the floor so that, after markdowns, discounts and shrinkage, the margin that is actually maintained still covers operating expenses and the profit goal. It is the standard retail-math planning formula used in merchandise and open-to-buy plans. Because reductions are added to both the top and bottom of the fraction, the IMU is always higher than the maintained markup whenever you expect markdowns. Retail markup percentages are on selling price, not on cost.

Worked example

A store planning $500,000 of net sales with $150,000 of expenses, a $40,000 profit goal and $60,000 of markdowns, discounts and shrinkage needs IMU = (150,000 + 40,000 + 60,000) ÷ (500,000 + 60,000) = 44.64%. After reductions it maintains 38.00%. An item costing $24 should open at $24 ÷ (1 − 0.4464) = $43.35, an 80.65% markup on cost.

Sources: Toolio — Retail math formulas (IMU, MMU) · Study.com — Initial and maintained retail markup

Frequently asked questions

What is the initial markup formula?

IMU % = (expenses + profit + reductions) ÷ (net sales + reductions). Reductions are markdowns, discounts and shrinkage. With 150,000 + 40,000 + 60,000 over 560,000 the IMU is 44.6%.

What is the difference between initial and maintained markup?

Initial markup is the markup at the first (original) retail price. Maintained markup is what is left after markdowns, discounts and shrinkage — the markup actually achieved on net sales, equal to gross margin before cash discounts and workroom costs.

How do I price an item from the IMU?

Divide the item cost by (1 − IMU as a decimal). A $24 item at a 44.64% IMU retails at $24 ÷ 0.5536 = $43.35.

Why include shrinkage and markdowns in the IMU?

Because those goods were bought at full cost but sold for less (or not at all). Building them into the opening price protects the margin you need at the end of the season.

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Calculate open-to-buy — the merchandise dollars a retail buyer still has left to order this period after planned sales, markdowns and stock targets.

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Planning estimate only. Real results depend on your actual costs, prices, taxes and market — check the figures with your accountant or adviser before making business decisions.