Investors mulling retail stocks have well-established metrics to look at, among them inventory turnover (cost of sales divided by inventory), same-store-sales growth (the change in sales for stores open at least one year) and sales per square foot.

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Inventory turnover is one of the classic measures of retailing success: The higher the number, the better, since that means the retailer is getting more mileage out of the assets it has tied up on its shelves.

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Taking this a step further, you can determine the number of days it takes to completely turn over inventory by dividing the number of days in a period by the inventory turnover ratio.

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Costco Wholesale Corp. operates membership warehouses based on the concept that offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover.

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The inventory turnover ratio should be particularly interesting to pay attention to when the majority of retailers report quarterly results in February.

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The demand for fast-paced inventory turnover keeps many stores from undertaking a comprehensive plan to maximize the value of returns, opting instead to get back something while making way for new merchandise.

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