The 52/53 Week Fiscal Year

The fiscal year-end also doesn’t necessarily fall on the same date each year. Some companies choose to end their fiscal year on the same day of the week (for example, the Friday closest to the end of January). Companies that have weekday business hours may thus be able to take inventory and close the books over the weekend. Companies choosing this method report on what is known as a 52-53 week fiscal year-end since there will always be either 52 or 53 full weeks in each fiscal year. The 53 weeks will occur about once every seven years. Analysts must be aware in such cases if the year or quarter contains an extra week when making comparisons. It is also important to consider whether the extra days occur during a period affected by seasonality in operations.

Consider the quarterly sales trend for specialty coffee retailer Starbucks:

At first glance, sales growth appears to have declined sharply in the fourth quarter. However, a review of the 10K reveals that the fourth quarter of 2004 contained an extra week that investors will want to adjust for. In the case of Starbucks, there is probably no particular seasonal effect during the October quarter that would prohibit making a simple linear adjustment for the extra week. If the 14-week quarter sales are multiplied by 13/14 to create a 13-week sales estimate, we get the following:

On this more comparable basis, rather than marking a sudden decline the fourth quarter growth rate was slightly better than the four-quarter average.