Initial markup (IMU) calculator

IMU is set once, at the buy, on the planned retail price. But almost nothing sells at that price for the full life of the unit — some units get marked down, some shrink out of inventory before they sell at all, and some go out the door on an employee or promotional discount. Every one of those reductions comes out of IMU before what's left becomes maintained margin, the number that actually shows up on the P&L.

A useful planning approximation: required IMU% ≈ target maintained margin% + planned markdown% of net sales + shrink% + discount%. If you want a 50% maintained margin and you're planning for 8% markdowns and 2% shrink, you need roughly 60% IMU on the buy — not 50%. Skipping this step is how a "healthy" IMU turns into a disappointing maintained margin at season close.

Keystone pricing — doubling unit cost to set retail — is a fast convention because it's easy to calculate and communicate: 2x cost is always 50% IMU on retail. But 50% IMU is only correct for your business if your target maintained margin plus your planned markdowns, shrink, and discounts add up to roughly 50%. A category with heavy promotional cadence or high shrink needs more than keystone to protect the same maintained margin; a category with light reductions can price below keystone and still land the target.

The practical discipline is to decide the markdown budget at the buy, when IMU is set — not at the break, when the first price cut happens. If planned markdowns aren't built into IMU up front, every point of markdown taken during the season is margin nobody budgeted for, and the "surprise" at season close is really just an unplanned reduction hitting an IMU that was never sized to absorb it.