What merchandise financial planning is
Merchandise financial planning (MFP) is how a retailer sets financial targets for its merchandise and then manages the business against them. The plan states how much each department or category should sell, at what gross margin, with how much inventory, and therefore how much product has to arrive and when. It is usually built for a season, broken down by month or week, and set at the upper levels of the product hierarchy (division, department, class), often split by channel and region.
MFP is a financial plan, not a product plan. It works in money, usually at retail value with cost alongside, rather than in styles and units. The assortment plan decides which products fill that money, and allocation and replenishment decide where the units go. MFP sets the envelope those decisions work inside.
A merchandise financial plan holds these measures for each period and each level of the hierarchy:
- Sales: planned sales at retail, often with units and average unit retail.
- Gross margin: in dollars and as a rate of sales.
- Markdowns and other reductions: permanent and promotional markdowns, employee discounts and shrink.
- Inventory: beginning-of-period (BOP) and end-of-period (EOP) stock, at retail and at cost.
- Receipts: the inventory that has to arrive for the plan to work.
- Turn and cover: inventory turnover, weeks of supply and often GMROI (gross margin return on inventory investment).
Two directions of planning meet in MFP. Top-down planning starts from company targets set by finance and leadership and spreads them across divisions and departments. Bottom-up planning starts from the merchants and planners closest to the product, who build each category from its history, trends and buying intentions. Much of the planning cycle is the work of reconciling the two until the totals agree.
How planners run MFP today
MFP follows a calendar. Before the season, often six to twelve months ahead, the plan is built. Last year’s actuals are the starting point, adjusted for growth targets, store openings and closings, channel shifts and known events. Leadership sets the top-down targets, merchants and planners build the bottom-up view, and the two are reconciled in a series of reviews until the plan is signed off as the plan of record.
In season, the work becomes a weekly cycle. Planners load the week’s actuals, compare them with the plan and re-forecast the rest of the season. Where sales run ahead, they look for more receipts. Where sales lag, they cut or delay receipts and bring markdowns forward so that inventory does not pile up. The re-forecast goes to a weekly business review with merchandising, finance and buying.
Much of this still runs in spreadsheets, sometimes beside a dedicated planning system. Spreadsheets are flexible, but they bring familiar problems: versions drift between teams, links between workbooks break, a change in one department takes hours to reach the totals, and nobody can easily say why a number changed or who changed it. The month-end close is often where variances surface, so a margin miss gets explained weeks after the decisions that caused it.
The arithmetic that holds a plan together
The measures in a merchandise financial plan are tied together by a stock-flow identity: what you start with, plus what arrives, minus what leaves, is what you end with. Rearranged, it gives the receipts the plan needs.
Planned receipts = planned sales + planned markdowns + planned EOP inventory − planned BOP inventory
All the values are at retail. Many teams use total reductions (markdowns plus employee discounts plus shrink) in place of markdowns alone. Two more measures come from the same numbers: inventory turnover, which is sales divided by average inventory, and weeks of supply, which is stock divided by the planned weekly sales rate. The retail planning glossary has short definitions of each measure.
| Measure | Plan |
|---|---|
| Planned sales | $400,000 |
| Planned gross margin | 52% of sales, or $208,000 |
| Planned markdowns | $40,000 |
| Planned BOP inventory | $900,000 |
| Planned EOP inventory | $860,000 |
| Planned receipts | $400,000 + $40,000 + $860,000 − $900,000 = $400,000 |
| Average inventory | ($900,000 + $860,000) ÷ 2 = $880,000 |
| Turn for the month | $400,000 ÷ $880,000 = 0.45 |
A turn of 0.45 a month is about 5.5 a year if every month looked like this one. If the next month’s plan is $100,000 of sales a week, the planned ending stock of $860,000 is 8.6 weeks of supply.
The point of the arithmetic is that every measure moves the others. Suppose sales come in at $360,000, 10% behind plan, while receipts and markdowns land as planned. Ending inventory is then $900,000 + $400,000 − $360,000 − $40,000 = $900,000, which is $40,000 above plan. Cover rises, and next month’s receipts must fall by $40,000 to get back on plan, or markdowns must rise. A weekly re-forecast exists to catch that chain while there is still time to change the receipts.
The WSSI: the plan week by week
In the UK and in many fashion businesses, the in-season plan is kept in a WSSI, short for weekly sales, stock and intake. It has one row per week, with opening stock, sales, markdowns, intake (receipts) and closing stock, each shown as plan, actual and re-forecast. Closing stock is opening stock plus intake minus sales minus markdowns, and it becomes the next week’s opening stock. Most WSSIs also show forward cover: how many weeks the closing stock would last at the planned sales rate.
| Week | Opening stock | Intake | Sales | Markdowns | Closing stock |
|---|---|---|---|---|---|
| 1 | 900 | 90 | 100 | 10 | 880 |
| 2 | 880 | 110 | 100 | 10 | 880 |
| 3 | 880 | 100 | 95 | 10 | 875 |
| 4 | 875 | 100 | 105 | 10 | 860 |
| Month | 900 | 400 | 400 | 40 | 860 |
Because the WSSI shows the plan one week at a time, it shows a problem while there is still time to act on it. A run of weeks where actual sales trail plan and closing stock climbs is the signal to pull intake back or move a markdown forward. Read at the department level, it is also the bridge between the season plan and open to buy, which is calculated from the same columns.
MFP and OTB: how they connect
MFP and open to buy (OTB) use the same numbers for different jobs. The merchandise financial plan says what the business intends to sell, earn and hold. Open to buy turns that plan into a budget for buying: the receipts the plan needs, minus what is already on order. MFP is the plan of record, and OTB is the spending control built from it. When the plan is re-forecast, OTB moves with it.
That is why a stale plan does damage beyond the planning team. If the plan still shows last month’s sales trend, OTB still shows last month’s budget, and buyers commit receipts against it. The open to buy page works through the OTB formula with an example.
How the OODARIS MFP Planner agent runs it
In OODARIS, merchandise financial planning is part of MFP & OTB, one of the ten capabilities the Agentic OS covers across plan, buy, flow and sell. OODARIS uses agentic AI for retail planning: specialist agents watch the business, explain what moved and propose a change with its evidence. The MFP Planner is the specialist for this decision.
- WatchesActuals against plan for sales, margin, receipts and inventory turns.
- ProposesA re-projected plan version, with each variance explained.
- Approved byMerchandise planning, with merchandise finance.
- Writes backThe approved plan version, to your planning system.
It builds driver-based plans from the demand forecast, runs scenarios for margin, receipts and inventory turns, reconciles top-down targets with bottom-up plans, and records every override and the reason given. It works with financial planning systems, merchandise planning tools, and your data warehouse and BI.
The difference from the month-end cycle is timing. With OODARIS, the plan re-projects as actuals land. A variance arrives with its cause by store cluster and the decision that would close it. Once approved, the plan is the plan of record that open-to-buy is built from, and the re-projected open-to-buy and merchandise financial plan are written back as plan updates.
Two other agents work in the same crew. The Demand Intelligence Agent proposes updated demand curves by style, store and week, with what moved them, and its approved forecast is used by the plan, buy and allocation agents. The Market Insights Analyst prepares a weekly market read for each category, with competitor moves flagged, which merchandise planning reviews before it changes a plan.
By default, the person who owns the decision approves each change before anything is written back. Teams can also keep OODARIS read-only, or let it act on its own inside limits the decision’s owner sets; how it works describes the four levels.
Merchandise financial planning and open-to-buy run in production at ALDO Group. OODARIS replaced a legacy planning system and more than 20 spreadsheets there, and planners now do everything in one app, where OODARIS explains what moved and proposes the fix. ALDO Group’s story has the detail.
Our merchandise financial planning used to live in spreadsheets and month-end. Now MFP and the AI run in the same loop. Targets re-project as actuals land, and the legacy planning system was retired in July 2026.
Frequently asked questions
What is the difference between MFP and OTB?
Merchandise financial planning (MFP) sets the targets for sales, margin, inventory and receipts. Open to buy (OTB) is the budget left to buy within that plan: planned receipts minus what is already on order. MFP decides how much the business should own; OTB controls how much buyers can still commit.
What does a merchandise financial plan include?
Planned sales, gross margin, markdowns and other reductions, beginning and ending inventory, receipts, and measures such as turn, weeks of supply and GMROI. Each is set by period (month or week) and by level of the product hierarchy, usually at retail with cost alongside.
What is a WSSI in retail?
A WSSI (weekly sales, stock and intake) is the week-by-week view of the merchandise plan. Each row shows opening stock, sales, markdowns, intake and closing stock, as plan, actual and re-forecast, so planners can see a gap between plan and actuals while there is still time to change intake or markdowns.
How often should a merchandise financial plan be re-forecast?
The season plan is usually set once and revisited at set points, but the in-season re-forecast is typically weekly. A monthly re-forecast tends to find a problem after the receipts that caused it have already landed.
What is the difference between top-down and bottom-up planning?
Top-down planning spreads company targets from finance and leadership down the hierarchy. Bottom-up planning builds each category from its history and the merchants’ intentions. MFP reconciles the two until the totals agree.
Does the MFP Planner change the plan on its own?
Not by default. It proposes a re-projected plan version with each variance explained, and merchandise planning approves it, with merchandise finance, before the approved version is written back to your planning system. Every override is recorded with the reason given.