Six Month Merchandise Plan1

Six Month Merchandise Plan

• One of the most difficult tasks facing the retail merchandiser is determining what to carry. Careful planning is necessary if the retailer is to carry the ‘right’ stock in the ‘right’ quantities. Thus planning is of great importance in merchandising goods to achieve a profit. To a great; extent, the success or failure of the merchandising division is dependent on the degree and quality of the planning that takes place.

Planning Sales

Actual planning begins with sales.

Sales are planned on net basis (gross sales – customer returns).

Retailer must be aware of factors affecting the customers ability and motivation to buy.

Shifts in customer demand occur for a vareity of reasons.

Planning Sales

1. Obtain sales from last year for each month of the plan.

2. Determine projected sales volume for each month in the plan. Consider factors –competition, review past sales history and current trends.

3. Figure % increase or decrease of planned sales over last year’s sales.

Planning Sales

• % Sales increase or decrease =

this year planned sales – last year actual sales

------------------------------------------------------- x 100

last year actual sales

Planning Stocks

• The buyer determines the amt of stock needed at the beginning of each month(BOM) in order to to meet the planned sales figures.

• Retailer use a variety of methods to plan stock in order to provide a balanced inventory in relation to estimated sales.1. The basic stock method 2. Stock – sales ratio method

The Basic Stock Method

• Basic stock is defined as the the minimum stock that should be maintained.

• The BOM stock be sufficient to cover the sales for that month and allow for a reserve of the basic stock.

• There should be a basic inventory on hand that remains constant regardless of the rate of sale. The stock to be carried at the beginning of the month is determined by adding value of basic stock to planned sales


• BOM Stock = Planned sales + Basic stock• Basic Stock = Average Stock – Average Monthly

Sales• Average stock = Planned sales for the season

--------------------------------------Stock turn for season

Average Monthly Sales = Planned sales for the season--------------------------------------- No of months in the season


Example

• A dept has a planned stock turnover of 4 and planned sales of 160000 for a six month season. Plan BOM stock for April if planned sales for April are $20000?

Solutiona) Average stock for season = sales for the season

----------------------- = 160000/4 = $ 40000

stock turn for the season

b) Average monthly sales = sales for season

--------------------------- = 160000/6 = $ 26667

no of months in the season

c) Basic stock = Average stock – Average monthly sales= 40000 – 26667

= 13333

d) BOM stock = sales for the month + basic stock = 20000 + 13333

= $33333

Stock-Sales Ratio

• BOM stock = Planned Monthly Sales x Stock-Sales Ratio

• Stock-Sales Ratio = BOM Stock

------------------------

Net sales for the month

Stock-Sales Ratio

Examples• Determine the stock-sales ratio when BOM stock at

retail is $50000 and retail sales for the month are $35000?

• The girls dept had planned sales of $60000 for the month of April. Past records indicate a stock- sales ratio of 5.4. What should be planned BOM stock for month of April?

SIX MONTH MERCHANDISE PLAN Plan Actual

% initial markup

% reductionsDepartment Name________________ % maintained markup

% alteration expensesDepartment Number _______________ % cash discount

% gross marginMerchandise Manager _______________ % operating expenses

% net profitBuyer___________________________ season turnover

average stockPeriod___________________________ basic stock

SPRING FEB MARCH APRIL MAY JUNE JULY SEASONFALL AUG SEP OCT NOV DEC JAN TOTALS

SALES Last yearPlanPlan % of seasonRevised PlanActual

EOM STOCK Last yearPlanRevised Actual

MARKDOWNS Last yearPlanRevisedActual% of Plan MD

BOM STOCK Last yearPlanRevisedActual

Planned Purchases Last yearat Retail Plan

RevisedActual

Planned Purchases Last yearat Cost Plan

RevisedActual


• First fill all information given in the sum 8.5-1• Planned sales - $650000• Reductions 22% of sales = 22% x 650000 = 143000• Seasons turnover =1.9• Operating expenses 34.0%• Profit desired 7.5%• Alteration costs 0.5%• Cash discounts 1.6%


% initial markup

% reductions 22.00%Department Name________________ % maintained markup

% alteration expenses 0.50%Department Number _______________ % cash discount 1.60%

% gross marginMerchandise Manager _______________ % operating expenses 34.00%

% net profitBuyer___________________________ season turnover 1.9



SALES Last yearPlan 650000Plan % of seasonRevised PlanActual


MARKDOWNS Last yearPlanRevisedActual% of Plan MD



RevisedActual


RevisedActual


• Write the % of planned sales % in the sales column - ‘planed $ of season’ row

• Feb 15.5 March 17.5• April 19.0 May 18.0• June 15.5 July 14.5• Write the % of planned reductions in the markdown column

–’%of plan MD’- row• Feb 15 March 12• April 19 May 16• June 18 July 20


% initial markup







SALES Last yearPlan 650000Plan % of season 15.5 17.5 19 18 15.5 14.5Revised PlanActual


MARKDOWNS Last yearPlanRevisedActual% of Plan MD 15 12 19 16 18 20



RevisedActual


RevisedActual


• Distribute monthly planned sales.= % of seasons sales x Net sales

Feb = 15.5% x 650000 = 100750 March = 17.5% x 650000 = 113750 April = 19.0% x 650000 = 123500 May = 18.0% x 650000 = 117000 June = 15.5% x 650000 = 100750 July = 14.5% x 650000 = 94250

-----------------Planned sales 650000

Six Month Merchandise Plan• Distribute monthly planned reductions.

= % of reductions x Net sales=22% x 650000 = 143000

Feb = 15% x 143000 = 21450 March = 12% x 143000 = 17160 April = 19% x 143000 = 27170 May = 16% x 143000 = 22880 June = 18% x 143000 = 25740 July = 20% x 143000 = 28600

-----------------Planned reductions 143000


% initial markup







SALES Last yearPlan 100750 113750 123500 117000 100750 94250 650000Plan % of season 15.5 17.5 19 18 15.5 14.5Revised PlanActual


MARKDOWNS Last yearPlan 21450 17160 27170 22880 25740 28600 143000RevisedActual% of Plan MD 15 12 19 16 18 20



RevisedActual


RevisedActual

Six Month Merchandise Plan• Determine BOM stock figures:

a) Basic stock = Average Inventory – Average Monthly Sales

= Planned sales - planned sales------------------ -------------------stock turnover no of months

= 650000 - 650000------------- ---------- 1.9 6

= 342105.26 – 108333.33= 233771.93= 233772

Six Month Merchandise Planb) BOM stock = Planned monthly sales +

Basic stock

Feb = 100750 + 233772 = 334522 March = 113750 + 233772 = 347522 April = 123500 + 233772 = 357272 May = 117000 + 233772 = 350772 June = 100750 + 233772 = 334522 July = 94250 + 233772 = 328022

-----------------Total Planned BOM 2052632


% initial markup 51.15%



% gross margin 41.50%Merchandise Manager _______________ % operating expenses 34.00%

% net profit 7.50%Buyer___________________________ season turnover 1.9

average stockPeriod___________________________ basic stock 233772





BOM STOCK Last yearPlan 334522 347522 357272 350772 334522 328022 2052632RevisedActual


RevisedActual


RevisedActual

Six Month Merchandise Plan• End of month EOM = Beginning inventory of next

month

July EOM inv = calculate average BOM

-----------------------

no of months

OR

average inv = Sales = 650000 = 342105

--------- ---------

Turnover 1.9










EOM STOCK Last yearPlan 347522 357272 350772 334522 328022 342105*Revised Actual




RevisedActual


RevisedActual


• Monthly planned purchase at retail= Sales + EOM stock + Markdown – BOM stock

Feb = 100750 + 347522 + 21450 – 334522 = 135200March = 113750 + 357272 + 17160 - 347522 = 140660April = 123500 + 350772 + 27170 – 357272 = 144170May = 117000 + 334522 + 22880 - 350772 = 123630June = 100750 + 328022 + 25740 - 334522 = 119990July = 94250 + 342105 + 28600 - 328022 = 136933

-------------Total Planned Purchase at Retail 800583













Planned Purchases Last yearat Retail Plan 135200 140660 144170 123630 119990 136933 800583

RevisedActual


RevisedActual

Six Month Merchandise Plan• Planned Purchase at Cost =

Gross Margin% = Profit % + Expense %= 7.5 % + 34.0 %= 41.5 %

Cost % = (100 % - 41.5%) = 58.5%• Planned Purchase at Cost = Planned purchase at

retail x (58.5%)Feb = 135200 x 58.5% = 79092March = 140660 x 58.5% = 82286April = 144170 x 58.5% = 84339May = 123630 x 58.5% = 72324June = 119990 x 58.5% = 70194July = 136933 x 58.5% = 80106

-------------Total Purchase at Cost = 468341













Planned Purchases Last yearat Retail Plan 135200 140660 144170 123630 119990 136933 800583

RevisedActual

Planned Purchases Last yearat Cost Plan 79092 82286 84339 72324 70194 80106 468341

RevisedActual

Documents

Six Month Merchandise Plan1