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Keith Dunn: Chapter 7.2.9 Calculated metrics (Continued)
Posted On: 30-03-2009 22:35:23 PM

7.2.9 WEEKS COVER

Weeks Cover is the ratio of stock to sales at the end of a single week and shows how many weeks the same level of sales could be maintained if there was no further intake. Weeks Cover is also a very useful measure of relative demand. and. Some retailers, especially those with a very fast stock turn such as grocers will use Days Cover.
Cover is calculated differently depending on whether you are using Units or Value, although the result will be the same.

UNIT WEEKS COVER = CLOSING STOCK UNITS ÷ SALES UNITS

VALUE WEEKS COVER = CLOSING STOCK VALUE ÷ (SALES VALUE + PROMOTIONAL COST + DISCOUNTS)

 EXAMPLE CALCULATION UNITS VALUE SALES 100 850 PROMOTIONAL COST 100 DISCOUNTS 50 CLOSING STOCK 1,000 10,000 WEEKS COVER (UNITS) 1,000 ÷ 100 10.0 WEEKS COVER (VALUE) 10,000 ÷ (850 + 100 + 50) 10.0

7.2.10 AVERAGE WEEKS COVER

The Average Weeks Cover for a period longer than a week (or day) is calculated using the total sales and the sum of the weekly closing stocks for the period. Average Weeks Cover is mostly used to show relative demand over the period concerned.

 EXAMPLE CALCULATION RESULT SUM OF CLOSING STOCK CLOSING STOCK WEEK 1 + CLOSING STOCK WEEK 2 ETC. 12,000 PERIOD SALES 2,500 AVERAGE WEEKS COVER 12,000 ÷ 2,500 4.8

7.2.11 STOCK TURN

Stock Turn measures the number of times throughout the year that stock is completely replaced in the outlets. It is a critical measure of business health since it reflects the speed at which the business turns its assets into cash.

It can be calculated in two ways. The result is the same.

STOCK TURN = 52 X (ANNUAL SALES ÷ SUM OF CLOSING STOCKS )

STOCK TURN = 52 ÷ AVERAGE WEEKS COVER

 EXAMPLE CALCULATION RESULT SUM OF CLOSING STOCK FOR YEAR CLOSING STOCK WEEK 1 + …. CLOSING STOCK WEEK 52 33,800 ANNUAL SALES 2,600 STOCK TURN (METHOD 1) 52 X (2,600 ÷ 33,800) 4.0 AVERAGE WEEKS COVER 33,800 ÷ 2,600 13.0 STOCK TURN (METHOD 2) 52 ÷ 13.0 4.0

Method 2 can be used to calculate the prevailing annual Stock Turn using the data for ANY period

7.2.12 FORWARD COVER

Forward Cover is used in conjunction with Weeks Cover to determine if the business is holding sufficient stock.

It can be calculated using units or value and shows :

• The number of weeks of future actual or forecast Sales Value, Markdown, Promotional Cost, Discounts and Stock Adjustments Value that can be covered by the Closing Stock Value at the end of a week.

• The number of weeks of future actual or forecast Sales Units and Stock Adjustments Units that can be covered by the Closing Stock Units at the end of a week.

 EXAMPLE WEEK 1 WEEK 2 WEEK 3 WEEK 4 SALES UNITS 200 200 250 300 CLOSING STOCK UNITS 750 550 100 280 FORWARD COVER WEEKS 3.0 2.0 ETC. The Closing Stock of 750 units will cover sales performance for 3 more weeks on the basis of the forecast performance for those weeks

Since the Forward Cover calculation looks at future performance which can be both actual or forecast it must always be calculated retrospectively and can change until all the future weeks it covers are actual performances. The Forward Cover of 3.0 in week 1 above will only be the ‘true’ figure, for example, if weeks 2 to 4 are the actual performances.

7.2.13 TERMINAL STOCK

Terminal stock is the value or unit stock remaining of a specific stock identity at the end of the corresponding season or merchandise half. It is usually represented either as a percentage of that season’s sales or as a percentage of the total closing stock in the ‘terminal week’

TERMINAL STOCK % = (IDENTITY CLOSING STOCK ÷ IDENTITY SALES) %

TERMINAL STOCK % = (IDENTITY CLOSING STOCK AT LAST WEEK OF SEASON ÷ TOTAL CLOSING STOCK AT LAST WEEK OF SEASON) %

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