Stock-to-Sales Ratio

The ratio is the working link between a sales plan and a stock plan. Once sales are phased by period, an opening-stock target for each period is planned sales times the ratio, and each period’s opening stock is the previous period’s closing stock — so the ratios, taken together with the phased sales, define the closing stock targets that the open-to-buy identity then solves receipts against. The ratio is normally planned to fall across a season: richer going into the peak, when the periods ahead are larger than the period in hand, and leaner toward the exit, when the season has to carry out clean. A ratio held flat across a season is the usual mechanical cause of an end-of-season overhang.

It is a period snapshot, which distinguishes it from the two cover measures it is often confused with. Weeks of supply divides stock by a recent weekly sales rate; forward cover divides stock by the forecast sales ahead. The stock-to-sales ratio divides opening stock by the sales of the same period, so it says how heavily a period was stocked relative to its own demand, not how long the stock will last. All three move together when the plan is right and diverge when it is not — which is why a reforecast reads them side by side.

In a reforecast the ratio does two jobs. Read against actuals, it is an early signal: when a period opens with the stock the plan intended but sells less than planned, the ratio rises, and it rises before the surplus has rolled into the next period’s opening stock. Applied to the revised sales, it is the multiplier that rebuilds each remaining period’s closing stock target so that stock falls with the sales rather than staying at a level planned for demand no longer expected. The planned ratio is usually carried forward, but it deserves a check each cycle, since a ratio set for a period seen from pre-season may be too rich for the same period seen from closer to the exit.