Gross margin is the share of net sales remaining after subtracting cost of goods sold, usually expressed as a percentage.
How it works in retail
Gross profit is the currency amount: net sales less cost of goods sold. Gross margin percentage is gross profit divided by net sales, multiplied by 100.
A retail example
A product sells for $100 with $60 of cost of goods sold. Gross profit is $40 and gross margin is 40%.
What to keep in mind
Gross margin differs from markup, which uses cost as the denominator. Gross profit still needs to cover operating expenses and other costs before net profit is determined.
Sources & further reading
Examples are illustrative. Terminology and measurement conventions can vary by business and market.