Initial Markup (IMU)

Initial Markup (IMU) is the percentage difference between the cost of a product and its original retail selling price, expressed as a percentage of retail:

IMU% = (Retail Price − Cost) ÷ Retail Price × 100

For example: a style that costs $40 and retails at $100 has an IMU of 60%.

IMU represents the planned gross margin before any markdowns, shrinkage, or operating costs are applied. It is the theoretical maximum margin per unit — what the brand would earn if every unit sold at the original retail price.

IMU in the Merchandise Financial Plan

IMU targets are set at the category or department level in the Merchandise Financial Plan. They function as minimum margin thresholds: styles with IMU below the category threshold are either re-priced, renegotiated with vendors, or excluded from the assortment.

Setting IMU targets before buying decisions are made ensures that the cost and pricing structure of the assortment supports the financial plan. A brand that discovers after the buy that a category's IMU is below plan has limited options — renegotiating costs, raising prices, or accepting a margin shortfall.

IMU vs Maintained Markup

IMU and Maintained Markup (MMU) are related but measure different things:

| | Initial Markup (IMU) | Maintained Markup (MMU) | |---|---|---| | What it measures | Planned margin at original retail price | Actual realized margin after markdowns | | When measured | At time of purchase/pricing | End of season | | Affected by | Cost + pricing decisions | IMU + markdown rate + shrinkage |

IMU is the target. MMU is the result. The gap between them is explained by markdown rate, shrinkage, and any price adjustments made during the season.

Why IMU matters for buy decisions

Every buying decision is implicitly an IMU decision. When a buyer accepts a cost increase from a vendor, they are either reducing IMU (and, ultimately, maintained markup) or raising the retail price — which affects demand.

Brands that plan IMU at the category level before vendor negotiations begin have a clear floor for cost acceptance. Brands that negotiate costs without a defined IMU target may only discover the margin impact after the buy is locked.