Shop Talk

Retailers, consumers and prices

A modest proposal regarding same-store sales reports

October 17, 2008

In recent years a number of retailers have stopped reporting monthly sales data, including Macy’s, CVS, and Family Dollar.
 
The reports are snapshots of the performance of individual retailers, but the pictures can be fuzzy, especially given the timing of holidays like Easter, Thanksgiving and Christmas.
 
And as a barometer for the greater consumer economy, the monthly reports are incomplete at best, given that electronics and home improvement retailers don’t report. Oh, and those Internet sales aren’t captured, either.
 
Richard Hastings, consumer strategist at Global Hunter Securities, has this take on monthly sales reports:
 
“Fewer retailers than ever are reporting monthly comparable store sales. The data set should not be used, in our opinion, to interpret the broader consumer economy. We expect the number of retailers participating in monthly sales reporting to continue to decline, eventually resulting in quarterly-only comparable store sales data for the entire industry by perhaps mid-2009.”
 
That might be nice for those looking at a steadier barometer for the consumer segment. But it does not look like it is going to happen.
 
“I don’t think there’s any big picture talk on that,” Scott Krugman, a spokesman for the National Retail Federation, the retail industry trade group, said. “In fact, I know there’s not.”
 
So the data should remain. Just remember that as a proxy for the entire economy, the monthly sales reports have flaws.

Comments

There are issues with comps as a measure of individual retailers’ performance, too.

The idea behind comps is to measure sales at “existing stores” and to net out sales from new stores. Generally, retailers calculate comps (or same-store sales) by taking the year-over-year % change in sales at stores open at least 1 year.

But the fact is that stores take several years (usually 3-5) to mature–and during those early years, they outperform the balance of the store base as awareness of the new stores steadily increases in the populations surrounding them. Once the reachable population is aware of astore, its growth rate falls to much lower levels.

So when retailers report comps, they’re really reporting sales for 2 out of 3 broad segments of their store base: mature stores (older than 5 years) and stores between 1 and 5 years old. Stores less than 1 year old are excluded.

It is not unusual for a retailer to report an increase in comps even as sales in its mature stores are declining. We agree that retailers should continue to report on at least a quarterly basis, but we advocate for more detailed reporting. Whole Foods is one of the few retailers that actually segments its store base by age and sets a strong example.

Here’s a link to a more detailed explanation, including some analysis of how Lowe’s, Walgreens’, Staples’, and other chains’ mature stores are performing.

http://www.retailnetgroup.com/Newsletter s/Files/RNGStrategyAlert-7.pdf

 

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