The document is a request from Katie Brems to Tammy Key for an open-to-buy budget of $2,968,917 for men's dress shirts for fall/winter 2015. This would increase the department's inventory by 2.58% based on economic trends showing increased consumer demand and spending. The budget would be allocated across four classes - with the most affordable class receiving a 4% increase as last year's best seller, and the highest-priced class receiving a 1% decrease as last year's lowest seller. Projected sales are $5.7 million, with the requested budget accounting for 47.32% of sales.
1. DATE: April 30, 2015
TO: Tammy Key, DMM Men’s Dress Shirts
FROM: Katie Brems
SUBJECT: Buying Plans for August 2015 to January 2016 (Fall/Winter 2015)
I am writing to request the amount of $2,968,917 ($6,198,737 retail) for Department 315’s open-to-buy budget
for fall/winter 2015. With these funds, our open-to-buy units will increase 2.58% from 251,291 units last year
to 275,775 units this year. I believe increasing our budget by this much will be beneficial for Department 315
because economic experts say that the increasing economy has led to the lowest unemployment rate in the last
7 years causing more demand for work wear such as men’s dress shirts (Fox Business, 2015). Also, fashion
trends for men such as layering, collars, and dressed down suiting will be popular so it is crucial that the
department have enough inventory to satisfy these economic and fashion trends (Thompson, 2014). Refer to
the graph provided to see the open-to-buy unit month allocation for this year and last year.
Our Open-to-Buy budget will be allocated to the four classes as follows: Class 10 will increase 4% amounting
to $1,146,739 ($2,414,572 retail) because it was last year’s best seller and is also our most affordable price
point. Class 20 will receive a 1% decrease at $446,747 ($924,909 retail) since it sold the least amount of units
last year and contains highest price point of all classes. Economic experts say that consumer spending is
expected to increase within the next year from 2.3% to 2.7% (Berman, 2014). Because of this, Class 30 will
receive a 1% increase at $661,184 ($1,418,745 retail). Finally, because of its fashion-forward status and
tailored styling, Class 40 will be allocated $714,247 ($1,440,510 retail), a 3% increase. Regarding particular
styles, spreads will receive more funding than button downs and solids will receive more than fancies overall.
Refer to the graph allocation of open-to-buy dollars by class and allocation of open-to-buy dollars by style.
A planned net sales of $5,703,300 is our target goal for this upcoming season. Our budget at $2,698,917
($6,198,736 retail) accounts for 47.32% of our projected sales. The turnover ratio with this plan is calculated
to be 3.01. Our target turnover of 4.0 wasnot met primarily due to a promotional calendar shift of two big sales
from last year to this year; this change created an overstock of merchandise in the latter half of the season and
too little inventory in the beginning of the season lowering our turnover overall. Not meeting our turnover goal
is not an issue because with our increased allocation of merchandise in each class, consumers will spend more
when they come into the store with the upcoming trends to make up for not meeting our turnover goal. In
addition, during the month of December our planned turnover ratio is calculated to be higher than our target
turnover at 4.37 to help make up for this loss.
This plan gives us a cumulative markup of 51.85% which is less than 0.2% to the planned 52%. Our gross
margin in dollars is $2,604,838 which averages out to $434,140 per month. With our planned net sales at
$5,703,300, our gross margin equates to 45.67% of sales leaving the department with nearly half their net sales
to pay for operating expenses and gain profit. Our average monthly gross margin return on investment is
47.77%, so Department 315 earns 47.77%, nearly half, of what is invested in our inventory each month.
These sales goals and margin expectations cannot be guaranteed with less than the open-to-buy request of
$2,968,917 at cost. I hope that you will consider these reasons mentioned when allocating Department 315’s
open-to-buy budget for the 2015 fall season.
2. Work Cited
Berman, Dan. (2014). 5 economic trends for 2015: SIFMA. Retrieved on April 13, 2015 from
https://www.thinkadvisor.com/2014/12/18/5-key-economic-trends-for-2015-sifma.
Fox Business. (March 30, 2015). Business economists boost 2015-2016 outlook for US economy, cite job
growth, consumer spending. Retrieved on April 18, 2015 from
http://www.foxbusiness.com/markets/2015/03/30/business-economists-boost-2015-2016-outlook-for-us-
economy-cite-job-growth/
Thompson, Ryan. (2014). Men’s 2015 fashion trend: dressing-down suiting. Retrieved on April 18, 2015
from http://www.fashionbeans.com/2014/mens-fashion-trend-2015-dressed-down-suiting/
