What is a 4-5-4 calendar?
A 4-5-4 calendar functions differently than the Gregorian calendar, the international standard in government and most businesses, which begins on January 1st and ends on December 31st. The 4-5-4 calendar starts on the first Sunday in February, and the year ends in January of the following year.
In the 1930s, retailers discovered that Saturdays and Sundays were becoming a more significant percentage of sales, but the number of weekends in a month varied from year to year. Ideally, a calendar would have the same number of weekends every month, but as the dates and days vary, retailers developed a system to make tracking sales more straightforward and accurate.
How does the 4-5-4 calendar work?
The 4-5-4 calendar compares sales between years by dividing the year into months based on a 4-week – 5-week – 4-week format. The calendar lines up holidays and ensures the same number of Saturdays and Sundays are comparable monthly. It also establishes sales release dates, historically on the first Thursday following the month’s end.
What is the purpose of the 4-5-4 calendar?
Sales periods can get confusing and challenging to report using a standard Gregorian calendar (Jan-Dec). Retailers decided to split the calendar into 52 weeks that always begin on the same day of the week. They also decided to include the end-of-year holiday shopping season in the fourth quarter (Q4) by extending it to the end of January of the following year. The retail calendar always begins on the first Sunday of February. The reason for starting the fiscal year one month later is because December is the busiest shopping month. More gifts are bought in December than in any other month. Subsequently, January experiences the largest number of returns of the year. Retailers want to account for all the holiday returns, allowing them to avoid beginning the year by factoring in a giant loss on returned merchandise.
Creating consistency for retail sales reporting
The 4-5-4 calendar system helped companies create consistency in their sales seasons. If the Q4 sales period ended on the last day of the year, initiating end-of-quarter financial processes in the middle of a holiday season would be difficult. The following periods’ sales forecasts would be inaccurate and lack important information from the end of the previous sales period. Expense reports and sales forecasts could also be affected.
The 4-5-4 calendar includes 52 weeks (52 weeks x 7 days per week = 364 days) instead of 365, so one day is lost each year. In some cases, like a leap year, there may be more than one day left, which becomes a 53-week year. Each quarter alternates in length, with the first having four weeks and the next having five, then four, and so on. This pattern continues throughout the year.
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Revolutionizing retail accounting practices
With the new calendar implemented, holidays line up, and employers run their businesses more efficiently. The 4-5-4 calendar is more retail-friendly, meaning sales records are more consistent and predictable. This method also makes scheduling more manageable and helps stores calculate the business metrics for sales and projections.
This system is the basis of the National Retail Federation (NRF) calendar, the standard in retail operations since the 1940s. The NRF provides a guide for employers to view what a 4-5-4 calendar looks like for any given year.
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What is a 53-week year?
The layout of the 4-5-4 calendar (52 weeks x 7 days = 364 days) results in one remaining day each year. These add up over approximately five or six years, after which a 53rd week will be added. A leap year is another instance when adding a 53rd week to the end of the calendar is necessary. This additional week is for sales reporting purposes only and does not occur every year. The most recent examples of 53-week years occurred in 2006, 2012, 2017 and 2023.
How a 4-5-4 calendar affects scheduling
The retail calendar begins each week on Sunday, and payroll is input by Wednesday so staff can be paid at the end of each week. This method helps employees get paid on time and makes accounting more manageable for the payroll department.
Employees can request days off in advance using the 4-5-4 calendar. When following a calendar by the weekday (such as a Wednesday) instead of a date (such as the 7th), scheduling becomes more predictable and easier to manage. Every week can be expected to have the same flow, making automated processes easier.
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4-5-4 calendar FAQs
Do I have to follow a 4-5-4 calendar in my retail business?
Retail businesses are not required to follow the 4-5-4 calendar system. This is simply the NRF standard and a beneficial tool for running a successful retail business. Businesses are free to choose their own practices. Some stores still keep records using pencil and paper, for example.
Does the 4-5-4 calendar change my annual reporting and inventory requirements?
The fiscal calendar strengthens annual reports because of the consistency it provides over the quarters. The 4-5-4 calendar helps with merchandising, as retailers can better control inventory levels. Tracking store inventory and taking the monthly inventory using the retail calendar can be accomplished more accurately.
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While different from the standard Gregorian calendar, the 4-5-4 calendar is ideal for retailers as it allows them to address staffing schedules, control inventory and keep track of merchandising. Although it does take some getting used to, once adopted, the 4-5-4 calendar system can be advantageous to any retail business, large or small.
