Starting your own retail business can come with a steep learning curve, even if you are a great buyer or great seller. One area to focus on from the start is best practices in inventory planning. After all, how you manage your inventory directly affects your profit potential.
When it comes to planning year-over-year, we recommend what is known in the retail world as a “4-5-4” calendar. This is a method for lining up comparable weekend and holiday periods when looking at sales year-over-year.
Here’s how it works:
Each quarter is divided into 13 weeks in blocks of 4 weeks, 5 weeks, and 4 weeks. So, when you compare sales year-to-year you’re looking at the equal periods of time. This is also useful for setting future goals over the same period.
Let’s look at the critical fall holiday season to see what a difference this retail calendar can make.
In 2022, Thanksgiving was on the last Thursday of the month, but this year it falls on the second to last Thursday of the month. If you looked at those weeks’ sales against each other on a fiscal calendar, they would not be comparable.
And if you set your sales goals for Thanksgiving weekend 2023 based on the third week of last year, it wouldn’t make a lot of sense because the 3rd week of November last year was the week before Thanksgiving!
In a 4-5-4 calendar, Thanksgiving falls in the fourth week of November in both 2022 and 2023, so you can easily determine your sales performance over each holiday weekend. This may be hard to visualize, but fortunately, there are downloadable 4-5-4 calendars available online.
Another important thing to note is that this calendaring system starts in February to include the entire holiday season — from Thanksgiving until after New Year’s — so this sales period is represented in one fiscal quarter.
Are there any drawbacks?
Because this calendar separates the year into four 13-week blocks, it only accounts for 364 days, so every seven years you have to tack on one extra week of revenue. Another potential complication is that you may see two sets of monthly payments (for rent, etc,) in one 4-5-4 calendar month, since it may stretch over two fiscal calendar months.
Finally, comparing month-to-month sales may not be as helpful as comparing year-over-year sales since some months have four weeks and others have five.
Conclusion
Overall, when it comes to sales tracking and goal setting, which is what we concentrate on at Blacks, there are enormous advantages in using a retail calendar system. (There is also a 4-4-5 calendar that some businesses use, which is based on the same idea of 13 week blocks).
You will need to set it up in your POS system if you want to pull reports based on the 4-5-4 calendar, but most systems make this easy to do since it is pretty standard in the retail industry. If you have any questions, ask your retail analyst.
