Cited by 469Working Capital and Financial PerformanceSupply Chain and Inventory ManagementFinancial Analysis and Corporate Governance

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An Econometric Analysis of Inventory Turnover Performance in Retail Services

Gaur, Vishal, Fisher, Marshall L., Raman, Ananth·2005·Management Science

DOI 10.1287/mnsc.1040.0298

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Abstract

Inventory turnover varies widely across retailers and over time. This variation undermines the usefulness of inventory turnover in performance analysis, benchmarking, and working capital management. We develop an empirical model using financial data for 311 publicly listed retail firms for the years 1987–2000 to investigate the correlation of inventory turnover with gross margin, capital intensity, and sales surprise (the ratio of actual sales to expected sales for the year). The model explains 66.7% of the within-firm variation and 97.2% of the total variation (across and within firms) in inventory turnover. It yields an alternative metric of inventory productivity, adjusted inventory turnover, which empirically adjusts inventory turnover for changes in gross margin, capital intensity, and sales surprise, and can be applied in performance analysis and managerial decision making. We also compute time trends in inventory turnover and adjusted inventory turnover, and find that both have declined in retailing during the 1987–2000 period.

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Method
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“Also, Gaur et al. (2005) use firm-level data and conclude that inventory turnover has a downward sloping trend between 1987-2000 for US retailers.”
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Method
Examining demand and supply-chain antecedents of inventory dynamics: Evidence from automotive industry
Chiang, C., Qian, Z.-Z., Chuang, C.-H., Tang, X., & Chou, C.-C. (2023) · International Journal of Production Economics · doi:10.1016/j.ijpe.2023.108838 · Cited by 10
Inventory Turnover and Product Variety
Marvel, H., & Peck, J. (2008) · Journal law and economy · doi:10.1086/590396 · Cited by 10
The Value of Timing, Frequency, and Quantity: The Effects of Transshipments on Inventory Turnover and Order Fulfillment
Xiang, W., Gligor, D., Fan, X.-M., Qi, Y.-N., & Britto, R. (2024) · International Journal of Production Economics · doi:10.1016/j.ijpe.2024.109296 · Cited by 9
Managing liquidity along the supply chain: Supplier‐base concentration and corporate cash policy
Di, L., Jiang, W., Mao, J., & Zeng, Y. (2024) · European Financial Management · doi:10.1111/eufm.12479 · Cited by 14
Cross-border mergers and acquisitions: Impact on marketing capability and firm performance
Rahman, M., Lambkin, M., & Shams, S. R. (2021) · Journal of General Management · doi:10.1177/0306307020934673 · Cited by 9
“However, we used an additional sales-related variable as an output variable for the measurement of marketing capability, namely, inventory turnover, as an indication of the momentum of sales over time, as suggested by Gaur et al. (2005).”
Method
Extending the pursuit of flow (lean) management to encompass sales, general and administrative functions
Schonberger, R. (2020) · doi:10.1080/09537287.2019.1699971 · Cited by 9
A review and analysis of service level agreements and chargebacks in the retail industry
Chen, C. (2018) · International Journal of Logistics Management · doi:10.1108/ijlm-09-2016-0205 · Cited by 9
Management Accounting Information Properties and Operations Management
Dierynck, B., & Labro, E. (2018) · Foundations and Trends® in Technology Information and Operations Management · doi:10.1561/0200000051 · Cited by 9
Positioning decisions within strategic groups : The influences of strategic distance, diversification and media visibility
Duan, X., & Jin, Z.-M. (2014) · Management Decision · doi:10.1108/md-08-2013-0415 · Cited by 9
Identification of Key Factors in Integrating Aircraft and the Associated Supply Chains during Early Design Phases
Tang, Z., Pinon-Fischer, O. J., & Mavris, D. (2014) · doi:10.2514/6.2014-3271 · Cited by 9
Does Public Infrastructure Reduce Private InventoryPreprint
Lai, R. K. (2006) · SSRN Electronic Journal · doi:10.2139/ssrn.892267 · Cited by 9
Lean operations and firm resilience - contrasting effects of COVID-19 and economic recession
Çömez-Dolgan, N., Tanyeri, B., Mai, F., Zhao, X., & Devaraj, S. (2025) · Omega · doi:10.1016/j.omega.2025.103308 · Cited by 9
Impacts of decreasing subsidies for photovoltaic enterprises in China: a perspective from industrial chain segments
Cai, X.-L., Zhou, B., Cai, C.-C., Pu, T.-L., & Wang, Q. (2024) · Environment, Development and Sustainability · doi:10.1007/s10668-024-04553-1 · Cited by 8
“Total asset turnover ( TAT ), measured by the ratio of total revenue to average total assets, reflects the efficiency of whole resource utilization (Gaur et al., 2005; Zhang et al., 2016).”
The effects of sales surprise on inventory turnover: An empirical study
Yousaf, M., & Dehning, B. (2023) · Cogent Economics & Finance · doi:10.1080/23322039.2023.2258696 · Cited by 10
“Gaur et al. (2005) used 311 U.S. retail firms’ data for the years from 1985 to 2000.”
BackgroundMethodResultInfluential
Inventory as a Financial Instrument: Evidence from China's Metal Industries
Hsu, V., & Wu, J. (2023) · Management Sciences · doi:10.1287/mnsc.2023.4873 · Cited by 8
The simultaneous determination of cash conversion cycle components
Kolias, G. D., Arnis, N., & Karamanis, K. (2020) · Journal of Accounting and Management Information Systems · doi:10.2139/ssrn.3534531 · Cited by 8
“Gaur et al. (2005), Kolias et al. (2011) Rajagopalan (2013), Johnston (2011), Rumyantsev and Netessine (2007) and Lee et al.”
Background
Product Availability, Consumer Stockpiling, and Hurricane Events: Empirical Evidence From a Natural ExperimentPreprint
Pan, X., Dresner, M., Mantin, B., & Zhang, J. (2019) · SSRN Electronic Journal · doi:10.2139/ssrn.3309457 · Cited by 10
A Study of Inventory Control Systems by Jamaican SMEs in Retail and Manufacturing/Distribution Industries
Johnson, F., & Ruankaew, T. (2017) · doi:10.5539/ijbm.v12n8p1 · Cited by 8
“This supports similar findings by Gaur, Fisher, and Raman (2005) who stated that inventory turns in retail services have a high correlation with gross margin and capital intensity, as well as unexpected increases in sales, and should not be used as a performance analysis.”
BackgroundResultInfluential
Combining regression models and metaheuristics to optimize space allocation in the retail industry
Pinto, F., Soares, C., & Brazdil, P. (2015) · Intelligent Data Analysis · doi:10.3233/ida-150775 · Cited by 9

Authors: Gaur, V., Fisher, M. L., & Raman, A.
Affiliations: New York University (US)
University of Pennsylvania (US)
Harvard University (US)
ORCID: Gaur, Vishal
Fisher, Marshall L.
Venue: Management Science
Publisher: Institute for Operations Research and the Management Sciences (INFORMS)
Published: 2005-02
Volume: 51
Issue: 2
Pages: 181-194
ISSN: 0025-1909 (ISSN-L)
1526-5501
DOI: 10.1287/mnsc.1040.0298
OpenAlex: W2130158558
Cited by: 469
References: 0
Citations by year: 2026: 33 · 2025: 39 · 2024: 32 · 2023: 35 · 2022: 19 · 2021: 19 · 2020: 28 · 2019: 24 · 2018: 15 · 2017: 17 · 2016: 24 · 2015: 28 · 2014: 22 · 2013: 31 · 2012: 25
FWCI: 48.66
Type: journal article
Language: en
Open access: closed
Locations: Management Science (publishedVersion)
Topics: Social Sciences › Business, Management and Accounting › Accounting › Working Capital and Financial Performance
Social Sciences › Decision Sciences › Management Science and Operations Research › Supply Chain and Inventory Management
Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
Keywords: inventory turnover, retail trade, gross margin, capital intensity, working capital management, performance benchmarking

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An Econometric Analysis of Inventory Turnover Performance in Retail Services

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