Forecasting sales high

Click to enlarge.

Looking particularly at the JUNE forecast, originally we forecasted just under $4.3 million in sales. The actual numbers came in ($3,948,532 in sales), and as you can see we fell short of our forecast in June (which was originally $4,279,302). What impact does this have on the business? 




The first metric directly affected is inventory. If you sell less product than planned, you will have more stock leftover than planned. In this case we are starting July with over $100,000 in extra inventory. 



Without touching any other metric (just sales), we can also see that our gross margin rate will be lower. Less sales dollars means less gross margin dollars. With lower than forecasted sales, our margin is coming in at 9.92 percent vs 12 percent in the forecast for June. 


Markdowns are not directly affected by the sales metric (they are often determined by the inventory metric), but falling short of sales may prompt a revised (more aggressive) promotional plan – further eroding profit.