Profit margin is the percentage of profit a retailer earns from the sale of goods or services after deducting all associated costs. It is a crucial financial metric that measures the profitability of a retail business. Calculated by dividing the net profit by the total revenue and multiplying by 100, profit margin indicates how efficiently a retailer converts sales into profit.
A higher profit margin signifies better profitability and efficient management of costs, while a lower margin indicates lower profitability or increased expenses. Retailers strive to maintain healthy profit margins to cover operational costs, invest in growth, and generate returns for stakeholders.
Factors that can impact profit margins include pricing strategies, cost of goods sold, overhead expenses, competition, and market conditions.