Inventory glossary

What is Inventory turns per year?

Inventory turns per year is the number of times a store sells and replaces its average inventory over a twelve month period.

This number tells you if your money is moving or sitting on a shelf. High turns usually mean you are buying close to what you need and cash comes back fast. Low turns mean cash is tied up in stock that is not selling, even if the business looks fine on paper.

Use it to compare product lines or suppliers over time, not as a single pass or fail score. A candle line that turns 8 times a year is healthier than one that turns 2, assuming both are priced and margined similarly. Track it per category or per SKU, since one slow line can hide behind fast sellers in a blended total.

Formula

Inventory turns per year = Cost of goods sold for the year / Average inventory value

Example

A candle store has a cost of goods sold of 60,000 dollars for the year. Average inventory value, taken from beginning and ending inventory, is 10,000 dollars. Inventory turns per year = 60,000 / 10,000 = 6. The store sells through its average stock 6 times a year, or roughly every two months.

Common mistakes

  • Using sales revenue instead of cost of goods sold, which inflates the ratio.
  • Using only one point in time for average inventory instead of an average across the period, which hides seasonal swings.
  • Treating turns as good or bad without comparing against your own category history or similar products.

Inventory turns per year and SteadyShelf

SteadyShelf's per-variant sales forecasts help you spot which SKUs are dragging your turns down before you reorder more of them.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Inventory turnover · Days inventory outstanding · Sell-through rate · Average inventory · Dead stock

Full inventory glossary

FAQ

What counts as a good number of inventory turns per year?

There is no universal good number. It depends on your product type, margin and how fast your category moves. Compare your own turns over time and against similar products in your store, rather than against an outside benchmark.

Is inventory turns per year the same as inventory turnover?

Yes, inventory turns per year and inventory turnover usually mean the same thing. Both measure how many times inventory is sold and replaced in a year using cost of goods sold divided by average inventory.

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