CASE STUDY 4.1 RETAIL M ETHOD OF INVENTORY

The buyer for the sneaker department for a major shoe retailer has been analyzing their classification performance for casual sneakers and athletic-oriented sneakers. The casual sneaker business, in sales, for the past two years has been increasing and therefore, has received more of the departmental open-to-buy and inventory dollar share. Within the last quarter, sales in casual sneakers have begun to slow down and the athletic sneaker classification is experiencing an increase in sales. Therefore, the buyer needs to analyze each of the business trends for the two classifications in order to determine if a shift is necessary between the classifications for the upcoming fall season. The total sneaker department for the spring season had the following retail inventory results:

-MU% on opening inventory = 58.0% (for both classifications)

-Opening inventory = $2,000,000

-Gross margin = 35.8%.

The seasonal results at retail for the season are as follows:

	Casual Sneakers		Athletic Sneakers
	Cost	Retail	Cost	Retail
Opening inventory		$1,250,000		$750,000
New purchases and freight	$780,000	$1,950,000	$516,000	$1,200,000
Sales		$900,000		$600,000
Markdowns		$378,000		$320,000
Returns to vendor		$3,600		$2,400
Transfers to outlet stores		$2,400		$1,600

As the buyer determined the gross margin achieved by each classification, the buyer needed to compare the results against the planned 35.8% gross margin.

Question: Which department should receive more of the planned budget for the upcoming fall season?