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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“…ISO 9001 certification as used in King and Lenox (2002)), is that the annual inventory of listed companies is available for open access (e.g., Compustat), allowing researchers to objectively carry out a longitudinal comparison of lean performance (e.g., Gaur et al, 2005; Chen et al, 2005, 2007).”
Background
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“Inventory turnover is the ratio of a firm’s cost of goods sold to the average inventory level (Gaur et al. 2005).”
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“The results also hold when we estimate the models in Table 2 using maximum likelihood following Gaur et al. (2005a).”
Method
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Alan, Y., Gao, G. P., & Gaur, V. (2014) · SSRN Electronic Journal · doi:10.2139/ssrn.1971774 · Cited by 2
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Self-citation
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Background
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“Cost Savings: First, there is risk of holding excess inventory that tends to increase costs in storage, insurance, and some may become obsolete as was pointed out by number of authors including Gaur, Fisher and Raman (2005).”
Background
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“Gaur et al. (2005) argue that retail firms can benefit from high inventory turnover.”
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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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