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Cost of goods sold may have been higher than expected or sales prices may have been lower than expected. Remember the Gross margin is sales less cost of goods sold. Say $100-$50=$50 gross margin (50%). If they only sell for $90 instead of $100 the margin would be $90-$50=$40. Or if costs were higher you might have ended up with $100-$60=$40. Either one would reduce the gross margin.

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