Question

Use Segment Information to Refine Sales Forecast To forecast sales growth for FY2018 for a publicly traded company in the retail sector, we begin with the following historical sales information. $ millions 2017 2016 2015 2014 2013 Net sales. ................ $46,021 $39,865 $37,536 $36,012 $34,553 Require a. Determine the sales-growth rate (in percentage) for 2014 to 2017. What trend do we observe? b. If we were to use the four-year average sales growth to forecast 2018 sales, what rate would we use? c. The annual report reveals that 2016 included a 53rd week (as is common for retailers, every four years) and that the company acquired a smaller company during that year. Sales for the newly ac- quired company were included in the consolidated income statement from the date of acquisition, which amounted to $5,235 million. Use this information to refine the sales-growth rate. (Hint: Consider multiplying sales for a 53-week year by 52/53 to get an apples-to-apples comparison with numbers from 52-week years.)

Answer 1

(a)	Particulars	2017	2016	2015	2014	2013
	Net Sales	$46,021	$39,865	$37,536	$36,012	$34,553
	Sale growth Calculation	(46021-39865)/39865*100	(39865-37536)/37536*100	(37536-36012)/36012*100	(36012-34553)/34553*100	-
	Sale growth %	15.44%	6.20%	4.23%	4.22%
(b)	Average Rate to be used should be Computed annual growth rate(CAGR)
	34,553 * (1+g)^4 = 46021
	7.43%
(c )	Revised calculations	2017	2016	2015	2014	2013
	Net Sales	$46,021	$33,977	$37,536	$36,012	$34,553
	Sale growth Calculation	(46021-33977)/33977*100	(33977-37536)/37536*100	(37536-36012)/36012*100	(36012-34553)/34553*100	-
	Sale growth %	35.45%	-9.48%	4.23%	4.22%
		# 33,977
		(39865-5235)*52/53