Ue TR ton
B-G isa specialty department store chain head-
quartered in Dallas. The stores are upscale and
generally cater to upper-middle-class and well-
to-do customers. They are generally located
in the more affluent suburbs and downtown
central business districts throughout the United
States. By offering high-quality merchandise
and a high level of service, they are able to
promote and maintain customer loyalty. In ad-
dition, B-G has its own charge card and a very
liberal return policy. Jim Morris is a buyer for
mens sportswear. His merchandise manager
has asked him to prepare a six-month merchan-
dise budget plan for his department covering
the months March through August.
Last year, sales for sportswear during the
same six-month period were $1 million. Due to
increased advertising, inflation, and a general
increase in demand for sportswear, a 19 per-
cent increase in sales is expected for this year.
Also, Jim anticipates an additional 10 percent
increase in the percentage of sales in March due
to an increase in demand. The demand increase,
due to forecasted unseasonably warm weather
in March, will be offset by decreases in April
and May of equal amounts, so total sales will be
unchanged. Sportswear has traditionally main-
tained a high level of profitability, with a gross
margin of 48 percent.
The following are the monthly sales per-
centages for the last three years:
The expected GMROI is 350 percent, and
the forecasted ending stock level is 100,000.
Total annual reductions average about 14
ere
percent of total net sales. The breakdown of this
figure is 60 percent for markdowns, 35 percent
for employee discounts, and 5 percent for
shortages. The distribution of reductions is as
follows:
Urifortunately, the historical record of stock/
sales ratios was temporarily misplaced during
a recent office move. However, Jim has access
to the National Retail Federation’s (NRF’s)
guidelines on this type of store and depart-
ment. B-G has a slightly higher than average
inventory turnover; therefore the NRF figures
must be adjusted,
NAF 250 1.80 1.55 2.56
STUDENT INSTRUCTIONS
Your assignment is to assist Jim in the
preparation of a merchandise budget plan.
First, fill out the merchandise budget form
for six months. You can use either the form
accompanying this case or the spreadsheet
at the Online Learning Center. Then, on a
separate sheet of paper, type and double
space a brief but specific explanation of how
you derived the following:
1. Adjustments to percentage distribution
of sales by month.
2. Adjustments to stock/sales ratios.
‘This case was written by Michael Levy and Britt Hackman,
Babson College.