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Keith Dunn: Chapter 8.4.4: Performance Analysis (Continued)
Posted On: 15-06-2009 09:39:16 AM

8.4.4 QUANTIFYING BASE LFL PERFORMANCE

Quantification of base performance isn’t scientific and must be carried out case by case and week by week. Many times you will just have to estimate what the performance distortion has been, although the calculations which follow are useful starting points.

BASE LFL SALES = PLAN LFL SALES X (1+ ‘NORMAL’ VARIANCE TO PLAN %)

The normal variance to plan is the average you have been achieving in non-exceptional weeks. The sales plan is used here since it should have been based on the base performance for the previous year and therefore represents the expected ‘normal’ performance for the current year. (If this is a bit confusing it will all become clear when we cover Department Planning.)

In some cases there are one off events such as the World Cup which deliver exceptional performance but which are planned. Where this is the case you can quantify the base sales with reference to last year as follows :

BASE LFL SALES = LY LFL SALES X (1+ ‘NORMAL’ VARIANCE TO LY %)

This won’t work, of course, if last year’s sales were themselves exceptional. If this was the case then you could either estimate last year’s base sales and use this figure in the calculation or simply estimate the base sales themselves This isn’t an exact science, remember

In most cases exceptional performance doesn’t affect the Margin on Sales % and you can calculate the base margin value, if you need to, as follows :

BASE MARGIN VALUE = BASE SALES EXC. TAX X ACTUAL MARGIN ON SALES %

8.4.5 QUANTIFYING BASE LFL PERFORMANCE: EXAMPLE

In this example performance in Weeks 3 and 6 has been affected by exceptional weather, while that in Week 5 has been affected by industrial action. The average performance above plan in the non-exceptional weeks has been 9% and to calculate the bases sales we simply apply this to the plan sales for the affected weeks. Over the 8 week period therefore while actual performance was £8,473 we will base our future sales plans on the Base Sales of £8,333

  TOTAL WK 1 WK 2 WK 3 WK 4 WK 5 WK 6 WK 7
NOTES       HOT   STRIKE SNOW  
LFL SALES PLAN 7,647 189 224 249 338 287 191 212
ACTUAL LFL SALES 8,473 208 242 373 375 287 158 229
ACTUAL VARIANCE TO PLAN 11% 10% 8% 50% 11% 0% (17%) 8%
BASE VARIANCE TO PLAN 9% 10% 8% 9% 11% 9% 9% 8%
BASE LFL SALES 8,333 208 242 271 375 313 208 229

 
 
 

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