In retail/wholesale should we return damage stock back to vendor or try to clear them in stores ?

Local purchases are usually easy to return to supplier for replacement at no extra cost specially if there is a credit line between supplier and client.

Import purchases are entirely different as it entails additional expenses for transport/shipping. This is the major factor in deciding which way to proceed unless it is under RMA and that it explicitly indicates free shipping for returned damaged items, unless of course if item is perishable.

it depends on several main point's

1- contract between the store and vendors

if this vendor contract has any returnable rate or not you can return this rate only and clear the rest 

2- time of this damage actually happen ( in case of end of year u must look up the amount of net purchasing first , because in retail markets you can get a rate of your net purchasing as other revenue when reaching an amount of purchasing in contract  

3- lead time of the order from this vendor and items nature

if this item will case any other problems for the store as rot or smell you can deal with vendor to clear them in store and Discount this amount from payment 

4- replacement terms ( if you have a replacement terms with this vendor - u can replace the items )

Return to supplier depends upon the contract between company and vendor. Stock control department has to inform vendor or buyer on regular basis about the damage stock before annual inventory starts. Goods Receiving department has to do proper check before accepting any deliveries from local suppliers or import goods. For imports discuss with the buyer for markdowns.

If vendor is local then you can go for replacement but if the vendor is foreign supplier then simply tell to your and debit his account. Because we can't miss our sale and customer. I did manay time the same.

Returning the damaged goods to the supplier is always better.  In case of local supplier it is very easy.  But in case of foreign supplier, please do a rough calculation of expenses and compare it with the expenses for discount sales. 

If the vendor is local so its better to return it to him, but if its overseas vendor its better to clear it in stors to avoid the extra expensis.