How to calculate a markdown
The markdown formula
Markdown percentage = (original price − new price) ÷ original price. Multiply by 100 to state it as a percentage. Running it the other way, new price = original price × (1 − markdown percentage), and reduction per unit = original price × markdown percentage.
Total markdown dollars multiply that per-unit reduction by the units you actually sold at the reduced price — not by the units you own. That distinction is why a deep markdown on slow stock can look cheap on paper and still cost the season, once the units finally move.
Markdown calculator
Enter the original price, then either the markdown percentage or the sale price. Unit cost and units are optional — add them to see margin and markdown dollars.
- New retail price
- $34.30
- Reduction per unit
- $14.70
- Markdown percentage
- 30.0%
- Gross margin at the new price
- 47.5%
- Initial margin at full price
- 63.3%
- Gross profit given up per unit
- 47.4%
- Markdown dollars on these units
- $1,764.00
- Net sales from these units
- $4,116.00
- Markdown % of net sales
- 42.9%
- Gross profit per unit now
- $16.30
Markdown percentage is measured against the original ticket price. "Markdown % of net sales" is the figure most retailers report period to period, and it uses realized sales as the denominator, so it can exceed the markdown depth when discounts are deep.
Calculating a markdown by hand
- 1
Start from the original ticket price
Use the price the item was actually offered at, not a list price you never charged. Every markdown percentage on this page is measured against that ticket.
- 2
Find the reduction
Subtract the new price from the original price. On a $49.00 ticket cut to $34.30, the reduction is $14.70 per unit.
- 3
Divide by the original price
$14.70 ÷ $49.00 = 0.30, so the markdown is 30%. Dividing by the new price is the usual error and overstates the cut.
- 4
Multiply by the units that sold at that price
$14.70 × 120 units = $1,764 of markdown dollars. Units still on hand contribute nothing until they sell at that price.
- 5
Check what it did to margin
Margin at the new price = (new price − unit cost) ÷ new price. At an $18.00 cost, a $34.30 price leaves 47.5% instead of the 63.3% you started with.
| Calculation | Inputs | Arithmetic | Result |
|---|---|---|---|
| Percent to price | $49.00 ticket, 30% off | 49.00 × (1 − 0.30) | $34.30 |
| Price to percent | $80.00 down to $60.00 | (80.00 − 60.00) ÷ 80.00 | 25.0% |
| Reduction per unit | $49.00 ticket, 30% off | 49.00 × 0.30 | $14.70 |
| Total markdown dollars | 120 units sold at $34.30 | 14.70 × 120 | $1,764.00 |
| Original from sale price | $34.30 at 30% off | 34.30 ÷ 0.70 | $49.00 |
| Two markdowns combined | 20% then 25% | 1 − (0.80 × 0.75) | 40.0% |
| Markdown % of net sales | $1,764 markdown, $4,116 net sales | 1,764 ÷ 4,116 | 42.9% |
| Margin at the new price | $34.30 price, $18.00 cost | (34.30 − 18.00) ÷ 34.30 | 47.5% |
Three different markdown percentages
Most confusion about markdown math comes from mixing these up. They answer different questions and have different denominators, so they rarely produce the same number.
| Measure | Formula | Use it for |
|---|---|---|
| Markdown % of the ticket | (original − new) ÷ original | Setting or checking a single price break |
| Markdown % of net sales | markdown dollars ÷ net sales | Period reporting and markdown reserves |
| Cumulative markdown % | 1 − ((1 − d₁) × (1 − d₂) × …) | Comparing multi-stage schedules on one basis |
A merchant quoting '40% off' and a finance report quoting '22% markdown' can both be right — one is depth on the ticket, the other is markdown dollars over net sales.
What a markdown actually costs
The reduction comes entirely out of gross profit, so the share of profit given up is always larger than the percentage taken off the price. At a $49.00 ticket and an $18.00 cost:
| Depth | Price | Gross profit | Margin | Profit given up |
|---|---|---|---|---|
| 0% | $49.00 | $31.00 | 63.3% | 0% |
| 15% | $41.65 | $23.65 | 56.8% | 24% |
| 25% | $36.75 | $18.75 | 51.0% | 40% |
| 30% | $34.30 | $16.30 | 47.5% | 47% |
| 40% | $29.40 | $11.40 | 38.8% | 63% |
| 50% | $24.50 | $6.50 | 26.5% | 79% |
| 60% | $19.60 | $1.60 | 8.2% | 95% |
Read the last column before agreeing to a depth. A 40% markdown gives up 63% of the profit on every unit that sells at it.
When one markdown is not the question
This page calculates a single price break. A season is a sequence: a first markdown, a second, a clearance, and an exit date, each selling a different share of what remains. The answer you need then is not the new price but the maintained margin, ending stock, and cash you finish with — which depends on how fast each price sells, not just how deep it is.
Keep planning
- Plan a full markdown schedule
Up to six dated breaks, editable sell-through per price period, and a sensitivity range on every output.
- Every retail markdown formula
Successive markdowns, average unit retail, markdown dollars, maintained margin — each with a worked example.
- What is a markdown in retail?
The vocabulary: markdown versus promotion versus clearance, and why markdowns are planned rather than failures.
- Markdown vs markup
Markup is measured against cost, markdown against retail — which is why the percentages never match.
- Maintained margin calculator
Enter units sold at each depth to see what a finished season actually earned.
- When to mark down
The sell-through and weeks-of-supply triggers that decide timing, which usually matters more than depth.
Answers
Markdown calculation questions
One markdown is arithmetic. A season is a decision.
The planner takes units on hand, cost, ticket price, a season end date, and up to six markdown breaks, then returns maintained margin, expected ending stock, and cash recovered as a range rather than one false-precision figure.