Is 1.5 a good inventory turnover ratio?

For most retail businesses, an inventory turnover ratio of 1.5 is not good. It means you are selling through your average inventory only 1.5 times per year, which translates to roughly eight months to clear your average stock level. That is well below the healthy range for retail.

What Retail Benchmarks Actually Look Like

Most retail segments target significantly higher turns:

• General merchandise retailers typically aim for 5 to 10 turns per year.
• Apparel and fashion businesses commonly see 4 to 6 turns.
• Home furnishings and department stores tend to run 3 to 5 turns.
• Grocery and fast-moving consumer goods often reach 10 to 15 turns.

A ratio of 1.5 falls short even for the slower categories on that list.

What a 1.5 Ratio Usually Signals

In a retail context, turnover this low commonly points to overstocking, purchasing outpacing actual demand, or an assortment that does not match customer preferences. The practical consequence is cash tied up in slow-moving stock rather than available for operations, marketing, or new product lines. Holding costs, insurance, and obsolescence risk all climb in proportion to how long inventory sits.

There are industries where 1.5 is perfectly normal, including heavy machinery and certain industrial equipment, but those are not standard retail models.

If your ratio is around 1.5, benchmark it against your specific retail category, identify slow-moving SKUs, and review purchasing frequency against actual sell-through rates. For situations where a lender, insurer, or auditor needs a defensible picture of what that inventory is actually worth, a professional inventory appraisal prepared in accordance with USPAP gives you documentation grounded in current market evidence rather than just accounting figures. You may also find it useful to understand how the ABC method of inventory classification can help prioritize which stock deserves the closest attention.