The full-price sell-through model
Fashion contribution is decided in the first six to eight weeks of a drop. The percentage of units that move at full price determines the entire economics. From there, the markdown waterfall — first markdown, second markdown, clearance, residual inventory — defines how much of the drop becomes margin and how much becomes a stranded inventory position.
The CFO model takes the merchandising forecast and translates it into a contribution and cash view at three levels: best case (90% full-price sell-through), base case (65%), and downside (45%). The downside is what the cash model must survive without external funding.
Returns are a contribution-margin line, not a logistics line
UK D2C fashion returns typically run between 25% and 40% depending on category. Outerwear is lower; dresses and tailoring are higher. Each return carries fulfilment cost, returns logistics, refurbishment if applicable, and a probability of resale at a reduced price. Returns belong in the contribution-margin maths from day one, not in an opex bucket discovered at year-end.