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
 The Basic Stock Method
• 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
---------------------------------------
 The Basic Stock Method
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?
 Solution
a) 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
% reductions
Department Name________________ % maintained markup
% alteration expenses
Department Number _______________ % cash discount
% gross margin
Merchandise Manager _______________ % operating expenses
% net profit
Buyer___________________________ season turnover
average stock
Period___________________________ basic stock

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan
Plan % of season
Revised Plan
Actual
EOM STOCK Last year
Plan
Revised
Actual
MARKDOWNS Last year
Plan
Revised
Actual
% of Plan MD
BOM STOCK Last year
Plan
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 Six Month Merchandise Plan
• 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%
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin
Merchandise Manager _______________ % operating expenses 34.00%
% net profit
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 650000
Plan % of season
Revised Plan
Actual
EOM STOCK Last year
Plan
Revised
Actual
MARKDOWNS Last year
Plan
Revised
Actual
% of Plan MD
BOM STOCK Last year
Plan
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 Six Month Merchandise Plan
• 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
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin
Merchandise Manager _______________ % operating expenses 34.00%
% net profit
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 650000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan
Revised
Actual
MARKDOWNS Last year
Plan
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 Six Month Merchandise Plan
• 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
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin
Merchandise Manager _______________ % operating expenses 34.00%
% net profit
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 100750 113750 123500 117000 100750 94250 650000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan
Revised
Actual
MARKDOWNS Last year
Plan 21450 17160 27170 22880 25740 28600 143000
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 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 Plan
b) 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
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup 51.15%
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin 41.50%
Merchandise Manager _______________ % operating expenses 34.00%
% net profit 7.50%
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock 233772

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 100750 113750 123500 117000 100750 94250 65000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan
Revised
Actual
MARKDOWNS Last year
Plan 21450 17160 27170 22880 25740 28600 14300
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan 334522 347522 357272 350772 334522 328022 205263
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 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
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup 51.15%
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin 41.50%
Merchandise Manager _______________ % operating expenses 34.00%
% net profit 7.50%
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock 233772

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 100750 113750 123500 117000 100750 94250 650000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan 347522 357272 350772 334522 328022 342105*
Revised
Actual
MARKDOWNS Last year
Plan 21450 17160 27170 22880 25740 28600 143000
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan 334522 347522 357272 350772 334522 328022 2052632
Revised
Actual
Planned Purchases Last year
at Retail Plan
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 Six Month Merchandise Plan
• Monthly planned purchase at retail
= Sales + EOM stock + Markdown – BOM stock
Feb = 100750 + 347522 + 21450 – 334522 = 135200
March = 113750 + 357272 + 17160 - 347522 = 140660
April = 123500 + 350772 + 27170 – 357272 = 144170
May = 117000 + 334522 + 22880 - 350772 = 123630
June = 100750 + 328022 + 25740 - 334522 = 119990
July = 94250 + 342105 + 28600 - 328022 = 136933
-------------
Total Planned Purchase at Retail 800583
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup 51.15%
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin 41.50%
Merchandise Manager _______________ % operating expenses 34.00%
% net profit 7.50%
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock 233772

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 100750 113750 123500 117000 100750 94250 650000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan 347522 357272 350772 334522 328022 342105*
Revised
Actual
MARKDOWNS Last year
Plan 21450 17160 27170 22880 25740 28600 143000
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan 334522 347522 357272 350772 334522 328022 2052632
Revised
Actual
Planned Purchases Last year
at Retail Plan 135200 140660 144170 123630 119990 136933 800583
Revised
Actual
Planned Purchases Last year
at Cost Plan
Revised
Actual
 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% = 79092
March = 140660 x 58.5% = 82286
April = 144170 x 58.5% = 84339
May = 123630 x 58.5% = 72324
June = 119990 x 58.5% = 70194
July = 136933 x 58.5% = 80106
-------------
Total Purchase at Cost = 468341
SIX MONTH MERCHANDISE PLAN Plan Actual
% initial markup 51.15%
% reductions 22.00%
Department Name________________ % maintained markup
% alteration expenses 0.50%
Department Number _______________ % cash discount 1.60%
% gross margin 41.50%
Merchandise Manager _______________ % operating expenses 34.00%
% net profit 7.50%
Buyer___________________________ season turnover 1.9
average stock
Period___________________________ basic stock 233772

SPRING FEB MARCH APRIL MAY JUNE JULY SEASON

FALL AUG SEP OCT NOV DEC JAN TOTALS
SALES Last year
Plan 100750 113750 123500 117000 100750 94250 650000
Plan % of season 15.5 17.5 19 18 15.5 14.5
Revised Plan
Actual
EOM STOCK Last year
Plan 347522 357272 350772 334522 328022 342105*
Revised
Actual
MARKDOWNS Last year
Plan 21450 17160 27170 22880 25740 28600 143000
Revised
Actual
% of Plan MD 15 12 19 16 18 20
BOM STOCK Last year
Plan 334522 347522 357272 350772 334522 328022 2052632
Revised
Actual
Planned Purchases Last year
at Retail Plan 135200 140660 144170 123630 119990 136933 800583
Revised
Actual
Planned Purchases Last year
at Cost Plan 79092 82286 84339 72324 70194 80106 468341
Revised
Actual