Financial Analysis II, Fall Semester 2013

Name:

MARKETING 4443: RETAIL BUYING AND MERCHANDISE CONTROL FINANCIAL ANALYSIS II: MERCHANDISE BUDGET EXERCISE, DEADLINE SEPTEMBER 20, 2013 PART I: COMPILING DATA FROM PUBLICALLY REPORTED SOURCES (40% A: R!"#$%!& F$'#'($#%) (24% , *F$'#'($#% A'#%+)$) S,--#&+.: Attach the single page from the Financial Analysis I (with all corrections made and do!"le# chec$ these following areas:% (&p to 2' additional points of the '0 re(!ired on Financial Analyisis I are a)aila"le if they were ded!cted from the first spreadsheet% 1% Sales and sales per store (sales di)ided "y the n!m"er of stores "ased on the most c!rrent year*s 10#+ filings% ,e s!re these sales per store are those for the specific format of interest: (Ad-!st for .direct sales, e#sales, catalog sales/ reported in the 10#+ and a-!st if necessary % S#%!): /2,004,111,000 S#%!) 2!& )"3&!: /21,440,000 (244 )"3&!)5I )!! "6$) 73$'7 839' even with 2&3:!("$3') (3-$'7 $' ;3& ;$)(#% +!#& 2012 2% 0ross margin (1 and 2 : (2,334,551 6 1,347,338 92,334,358 :%3'8' :352 G&3)) -#&7$' (/ #'8 % !)"$-#"!): 3% ;ear#end in)entory (at cost per store for calc!lation of ratios of target t!rno)er, for .,asic Stoc$/ calc!lation% I'<!'"3&+: 11=>?04 I'<!'"3&+ 2!& )"3&!:

<dit this file and t!rn in as accompanying notes to fo!r wor$sheets (Septem"er 11, 2013

B: @,#&"!&%+ S#%!) #'8 P3&"$3' 3; S"3&! S#%!) $' M!&(6#'8$)! L$'!: (11% 1% In the 10#+, locate the (!arterly sales (for each (!arter, 2s , for the chain (to determine sales within season % Search for .season/ or .month/ within 10#+% Apply the appropriate (Spring9Fall percentages to the total sales for a merchandise line for preparation of the merchandise "!dget% Insert these into the second page of the <=cel >or$"oo$% It will calc!late the appropriate percentages% ?omplete the ta"le "elow with this information% (3 points @!arter @1(Fe"r!ary 6 April : @2 (Cay 6 D!ly @3 (A!g!st 6Ecto"er : @4 (No)em"er 6Dan!ary : 2% Sales Aercent Aercent per season S2&$'7: @1B@2 F#%%: @3 B@4

Sales of a store format and merchandise line% <ach st!dent sho!ld identify the sales of a partic!lar prod!ct line sold thro!gh a specific store format of the retailer% ;o!r "!dget sho!ld show two ad-!stments to o)erall sales per store% First, if there*s a specific format yo!*re choosing within a m!ltiple format retailer, s!ch as the 0AA, yo! sho!ld identify the proportion of sales within this di)ision, or e=cl!de direct sales from a retailer (42 % Second yo! sho!ld attempt to estimate the sales within a partic!lar line within that di)ision% (42

&s!ally, general or limited line retailers disclose the proportion of their sales within merchandise lines% In some 10#+s (+ohl*s it*s possi"le to c!t F paste this information directly into a doc!ment, as was done "elow% Ghis is either a "rief section from 10#+ filing ("elow showing the share of sales in yo!r selected line or single attached page from ?ens!s of Hetail Grade Cerchandise Iines data for yo!r specific store type% 200? >omen*s Cen*s Jome ?hildren*s Accessories 32%52 13%52 13%42 13%02 8%22 2004 32%'2 13%'2 13%'2 13%42 8%02 2003 32%12 18%02 13%42 13%'2 3%72

Footwear 3%22 3%12 3%32 If the store yo!*)e chosen does not pro)ide a ta"le s!ch as shown a"o)e, go to the <conomic ?ens!s page "elow and select the Arod!ct Iine Spreadsheet and go to yo!r partic!lar stolres (Arod!ct Iines AKF from the Hetail Grade section L44#4'M, <?02#44SI#IS % Ghe entire downloaded file is on the st!dent dri)e for this class and accessi"le from ,lac$"oard% Arint a single page that yo! feel is most appropriate for yo!r selected retailer% Kisc!ss yo!r retailer*s

Financial Analysis II, Fall Semester 2013

Name:

doc!mentation and how it compares to ?ens!s of Hetail Grade*s Arod!ct Iines data% Is yo!r retailer a"o)e or "elow the a)erage proportion of sales for the store typeN (3 points

<dit this file and t!rn in as accompanying notes to fo!r wor$sheets (Septem"er 11, 2013

PART II: THE MERCHANDISE BUDGETS (10% Ghe <=cel wor$"oo$ performs many of the calc!lation necessary to complete this reportOand it is nearly complete if yo!r information is acc!rate e=cept for fi)e important areasO(1 a pro-ection for total sales in the "!dget, (2 assigning monthly sales percentages, (3 total mar$down F, initial mar$!p, (4 allocation of these mar$downs "y month, and last (' e=amining planned p!rchases and ma$ing the commitments to )endors% In the <=cel wor$"oo$, ."l!e/ cells re(!ire yo!r inp!t, yellow cells are there to permit yo! to self#chec$ yo!r wor$ for errors% Ghese "!dgets "rea$ total sales for the chain down to the sales of a specific merchandise line for an a)erage store% A% Alanned Gotal Sales for the Si= Conth ,!dget ('2 Ghe <=cel wor$"oo$ incl!des a .Are)io!s year sales/ row, with a total (cell J5 in "oth "!dget sheets % ?onsidering the prior year*s conditions, enter a )al!e into cell J7 that yo! feel is a conser)ati)e pro-ection of the a)erage store wo!ld ha)e for total sales, considering the past year*s performance% ,% Allocating Sales to Specific Conths (102
Aercent of year Aercent of season Aercent sales 1st @!arter 21%32 4'%'2 Carch 14%'2 4'%'2 April 15%'2 2nd @!arter 2'%'2 '4%'2 D!ne 22%02 '4%'2 D!ly 14%'2

Fe"r!ary 14%'2

Cay 13%02

Gotals 100%02

&sing the (!arterly sales as g!idelines, allocate monthly percentage sales (1002:si= month "!dgets matching the percent of season )al!es % An initial set of Pstarting points* sho!ld come from yo!r retailers type in the <=cel spreadsheet .Conthly Hetail Sales%/ <nter these )al!es (?opy, Aaste Special, Qal!es into yo!r spreadsheet, and ad-!st to e=actly match the percent of season )al!e, "!t $eep all the months consistent in terms of magnit!deOif Cay is the "iggest month in the Spring, $eep it as the "iggest month for yo!r retailer*s "!dget% ?% <stimating Hed!ctions, and Initial Car$!p (102 Ghere will "e no mention of the percent mar$downs in an ann!al report% Ghey m!st "e estimated% ;o!r <=cel wor$"oo$ contains NHF mar$downs as a percent of each month*s sales to create a row of the dollar amo!nt mar$down% First, e=amine yo!r estimated a)erage seasonal sales for yo!r merchandise line for an a)erage store and estimate an amo!nt for total red!ctions (or mar$downs to yo!r line will "e for the season (this sho!ld "e within 102 of the NHF row total % <nter this )al!e first into the spreadsheet% Note what happens to the initial mar$!p calc!lations% Ghe form!la to determine this is "elow, and "ased on a pro-ected gross margin from yo!r financial s!mmary% <dit this form!la and disc!ss how yo! estimated the red!ction dollar amo!nt% (0ross margin (1 B Hed!ctions (1 9(Sales (1 B Hed!ctions (1 <dit the a"o)e form!lat to reconcile yo!r reported red!ction with the gross margins on the Financial S!mmaryN

Financial Analysis II, Fall Semester 2013

Name:

K% Allocating Car$downs to Indi)id!al Conths (102 ,rea$ down the mar$down (red!ctions for each of the si= months ("y percentages totaling 100 within the season, and apply the percentages thro!gho!t the selling season% Again, the total for the selling season sho!ld "e within 102 of the NHF row total, and each month*s pro-ected mar$downs, as a percent of total mar$downs, sho!ld "e close to those dollar amo!nts from the NHF% (Car$down allowance are negotiated with the s!pplier, with the s!pplier pic$ing !p the ma-ority of these disco!nts % <% ?alc!lating Alanned A!rchases and ?ommitments to S!ppliers (102 Ghe spreadsheet calc!late planned p!rchases as a .positi)e )al!e,/ so this row in the spreadsheet s!"tracts smaller )al!es from larger )al!es% <EC in)entories are those )al!e where the in)entories ha)e to "e in the stores% Ghe spreadsheet s!"tracts sales and mar$downs (red!ctions from <EC o"ligations to determine the planned p!rchases% ;o!r -o" is to ma$e the commitments to )endors, and !tiliRe any .Epen to "!y/ "alances, which is the remaining p!rchases to "e made% Identify <EC dollar amo!nt for D!ly9Dan!ary "!dgets, "e s!re these )al!es are consistent with those on Fall9Spring "!dgets, respecti)ely% <nter .commitments to )endors/ for each month in to the nearest 1100 amo!nt to minimiRe open#to#"!y amo!nts% F% &nderstanding the ,asic Stoc$ Cethod (1' pts ;o!r historical t!rno)er meas!re sho!ld pro)ide a g!ide to what yo!r line*s in)entory needs to "e, and that*s the thin$ing "ehind the ,asic Stoc$ Cethod% Ghe spreadsheet shows a .G!rno)er for the Season/ (which is the ann!al in)entory t!rno)er di)ided "y 2 and ,asic Stoc$% Ghe .,asic Stoc$/ approach is a constant dollar amo!nt of in)entory which gets added to the forecast sales for each month and !sed as the "eginning of the month, ,EC (and <EC in)entories% (It won*t wor$ where there are more than 12 in)entory t!rns per year% ,e s!re that the t!rno)er for the season selects in)entory t!rno)er from the most c!rrent year% ,EC in)entory : (Forecast monthly sales B mar$downs B .,asic stoc$/ Hepeat the following fo!r steps !sing the data from yo!r retailer in the ,asic Stoc$ Cethod the two selling seasons: 1% ?alc!late .A)erage Conthly Sales/ !sing the forecast sales and red!ctions for the si= month period, di)ide this forecast "y 5% (3 points 2% ?alc!late .A)erage In)entory/ !sing yo!r target in)entory t!rno)er for the period (Ann!al in)entory t!rno)er92 for a si= month season , di)ide Lsales B red!ctionsM for the si= month period "y the target in)entory t!rno)er for the period% (3 points 3% ,asic stoc$ : A)erage in)entory 6 A)erage sales % (3 points 4% ,EC in)entories :,asic stoc$ B Alanned sales (for each of the si= months (5 points Cost te=t"oo$s pro)ide .Stoc$ to Sales/ ratios where the "!dget is completed "y m!ltiplying planned sales for the month "y the ratios% Ghese are shown in the spreadsheets and are calc!lated from the ,EC in)entory and the planned sales% Hetailers that ha)e planned their sales and $now their target t!rno)er le)el wo!ld not start the process "y !sing stoc$#to#sales ratios, as they are li$ely to )ary considera"ly within each season, and wo!ld e=aggerate any )ariation necessary in the planned sales%