Since the 1930s, retailers have used the 4-5-4 fiscal calendar to streamline and improve their forecasts. This somewhat unique planning method could help modern retailers and direct-to-consumer brands.
Ending the year on the same day of the week simplifies comparisons between periods, making strategic decision-making easier.
Here’s how.
Schedule 4-5-4
The 4-5-4 retail calendar is a planning framework that divides the year into four-week, five-week, and four-week months in a repeating pattern, ensuring that each fiscal month begins and ends on the same day of the week. This design aligns sales data over similar time periods.
In the United States, the National Retail Federation maintains a 4-5-4 retail schedule for its members.
![Screenshot of the NRF 4-5-4 2024 to 2026 schedule. Screenshot of the NRF 4-5-4 2024 to 2026 schedule.](https://www.practicalecommerce.com/wp-content/uploads/2024/03/032324-nrf-three-year-calendar-570x442.png)
The NRF’s 4-5-4 retail calendar for 2024 to 2026 divides the year into consistent three-month quarters, in which months have four, five and four weeks, respectively. Click on the image to enlarge.
4-5-4 Advantages
The 4-5-4 calendar structures the fiscal year into consistent and comparable periods.
The ability to compare date ranges, especially weeks, facilitates smoother planning and estimates of consumer demand.
I spent almost 10 years as the Director of Marketing and E-Commerce for an omnichannel retailer. We were so reliant on a 4-5-4 schedule that I was surprised recently when the respected owner of an e-commerce business told me he had never heard of it.
Planning. For purchasing and marketing departments, the 4-5-4 calendar is a roadmap through the ups and downs inherent in retail.
The calendar recognizes predictable fluctuations in consumer purchases, optimizing, if you will, for critical high-traffic periods, such as major holidays and seasonal changes.
Imagine planning for the Christmas shopping season, which includes Black Friday. On the Gregorian calendar, Black Friday occurs between November 23 and 29 depending on the year.
This variability makes it difficult to accurately compare year-over-year sales for November, as the number of post-Black Friday shopping days in that month can differ.
Enter the 4-5-4 calendar, which groups weeks in a consistent pattern, in which each fiscal month begins and ends on the same day of the week each year. With this setup, Black Friday falls in the last week of November with exactly one shopping day after. In the Gregorian calendar, the number of shopping days after Black Friday varies from one to three.
![Screenshot of NRF's November 4-5-4 calendar showing Black Friday placement. Screenshot of NRF's November 4-5-4 calendar showing Black Friday placement.](https://www.practicalecommerce.com/wp-content/uploads/2024/03/032324-black-friday-570x194.png)
With the 4-5-4 schedule, Black Friday occurs in the last week of November and is followed by exactly one shopping day that month, simplifying annual performance comparisons. Image: NRF.
This 4-5-4 consistency allows for direct apples-to-apples comparisons of the critical holiday shopping period from year to year. Merchants can accurately measure the impact of promotions on Black Friday and subsequent shopping days through the end of November without the distortions caused by the floating Thanksgiving Day date. Easter presents similar challenges.
Sourcing and marketing teams can forecast demand, plan inventory, and define marketing strategies more precisely.
Analysis. Adopting the 4-5-4 schedule introduces a useful level of standardization for the analytical rigor required in retail and e-commerce.
This standardization simplifies the performance of quarterly and annual analyzes in most cases. However, there is a problem. Since a year is a little longer than 52 weeks, the 4-5-4 calendar has a “leap year” where a 53rd week is added. So the comparison fails every five or six years. However, it is much more standardized than the Gregorian alternative.
Ultimately, merchants can compare performance metrics like sales, website traffic, and inventory turnover without changing the number of days purchased.
Challenges 4-5-4
The 4-5-4 schedule presents challenges in training, technology and financial responsibilities.
- Training and education. The 4-5-4 system requires training explaining what it is, how it works and how to use it. Accountants will probably figure this out faster than marketers.
- Technological integration. Transitioning to a 4-5-4 fiscal calendar may require substantial adjustments to retail management software, analytics tools and back-office systems – although this change presents an opportunity to audit current technologies.
- Financial responsibilities. A 4-5-4 methodology can affect obligations that align with the Gregorian calendar, such as tax reporting and compliance. Businesses must plan how their financial reporting will interface with tax and other requirements, possibly requiring adjustments to accounting practices or additional reconciliation steps. Tax professionals experienced in non-standard tax periods can provide crucial information.
Best option?
Budgeting tools like the 4-5-4 retail calendar have been around for years. If planning and comparisons are no problem for your business, focus elsewhere. If not, changing your calendar might be just what you need.