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Keith Dunn: Chapter 7.2.3 Calculated metrics (Continued)
Posted On: 23-03-2009 21:00:25 PM

7.2.3 MARKDOWN

Markdown is the difference in the value of stock before and after a permanent price change. It is always reported in the week in which the price changes are actioned. Although a Markdown will decrease the value of the stock holding it is, by convention shown as a positive value. If there is a net increase in the value of stock due to price increases then a negative Markdown is reported.

MARKDOWN VALUE = (CURRENT SELLING PRICE NEW SELLING PRICE) X OPENING STOCK

EXAMPLE CALCULATION RESULT
CURRENT SELLING PRICE   20.0
NEW SELLING PRICE   15.0
PRICE CHANGE PER ITEM   5.0
OPENING STOCK UNITS   1,000
MARKDOWN VALUE 5.0 X 1,000 5,000


Where there is undelivered commitment of products which are being marked down this commitment is brought in to the business at the original selling price and an immediate markdown is taken at the time of intake.

7.2.4 MARKDOWN %

Markdown % shows the ratio of Markdown to Sales.

MARKDOWN % = MARKDOWN VALUE SALES VALUE

EXAMPLE CALCULATION RESULT
SALES VALUE 10,000
MARKDOWN VALUE 1,250
MARKDOWN % 12.5%


Markdown % is conventionally only reported for the merchandise half or season so that the full effects of the price changes on performance are taken into account.


7.2.5 DEPTH OF MARKDOWN %

Depth of Markdown % is the percentage reduction in the current selling price of the option that is made in a single markdown event.

EXAMPLE CALCULATION RESULT
CURRENT SELLING PRICE   £20
NEW SELLING PRICE   £16
PRICE REDUCTION   £4
DEPTH OF MARKDOWN % 4 ÷ 20 20%


7.2.6 AVERAGE DEPTH OF MARKDOWN %

The Average Depth of Markdown % is the average percentage reduction in the original selling price that is made over multiple markdown events.

The Average Depth of Markdown % is calculated by dividing the stock value immediately prior to the first event by the total markdown taken during all event.

EXAMPLE CALCULATION RESULT
OPENING STOCK VALUE   20,000
MARKDOWN VALUE FIRST EVENT   4,000
MARKDOWN VALUE SECOND EVENT   3,600
TOTAL MARKDOWN VALUE 4,000 + 3,600 7,600
AVERAGE DEPTH OF MARKDOWN % 7,600 ÷ 20,000 38.0%


7.2.7 PROMOTIONAL COST %

Promotional Cost % shows the promotional cost value as a percentage of the sales value that would have been achieved if all items sold during a promotional event, whether they were included in the promotion or not, has been sold at full price. At option level, or when measured for promoted lines only, the Promotional Cost % shows the true percentage discount that was given during the promotional event, as opposed to the headline discount that is offered to the customer.

PROMOTIONAL COST % = PROMOTIONAL COST VALUE (SALES VALUE + PROMOTIONAL COST VALUE + DISCOUNTS VALUE) %

EXAMPLE CALCULATION RESULT
SALES VALUE   850
PROMOTIONAL COST VALUE   100
DISCOUNTS VALUE   50
SALES VALUE BEFORE PROMOTIONAL COST AND DISCOUNTS 850 + 100 + 50 1,000
PROMOTIONAL COST % 100 ÷ (850 + 100 + 50) 10.0%


7.2.8 DISCOUNTS %

Discounts % shows the percentage reduction in the price that is given to the customers on top of any promotional benefit.

DISCOUNTS % = DISCOUNTS VALUE (SALES VALUE + DISCOUNTS VALUE) %

EXAMPLE CALCULATION RESULT
SALES VALUE   850
DISCOUNTS   50
SALES VALUE BEFORE DISCOUNTS 850 + 50 900
DISCOUNTS % 50 ÷ (850 + 50) 5.6%

 
 
 

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