retail price is 5x COGS

Rule of thumb is that retail price is 5x COGS, or put another way, COGS is only 20% of the retail price.

You have gross revenue minus COGS, which gives you 80% net revenue.

Then you have overhead and administration, which is 50% of your net revenue. This means your gross earnings, or EBITDA, are 40% of your gross revenue.

Then you have interest, taxes, depreciation, and amortization. This is 50% of your gross earnings. Now your net earnings are 20% of your gross revenue.

So while retail = 5x COGS sounds huge, it only produces a 20% net earnings for the business.

In reality, these figures will be different. However the average earnings for publicly traded companies is about 12%, so even the rule-of-thumb calculations underestimate the actual costs.

This sign isn’t telling you the shoes have a high profit margin.

Just the opposite - this sign is telling you the shoes are relatively inexpensive according to industry standards for production costs as compared to net revenue per unit.