Wall street’s fixation with same-store sales began more than two decades ago.
Without standardization, are comps an exercise in faith, science or a false idol?
On the first Thursday of the month, hordes of retail executives rise at dawn to complete a ritual they likely feel compelled to do: releasing the latest month’s same-store sales figures.
For Wall Street, digesting monthly same-store sales reports has become an obsession, one that is molding the way retailers manage their companies.
Most retailers hate chasing comps. And complicating the metric’s usefulness is that there are no single set of standards to measure same-store sales.
But this compulsion over comps is not going away because it is driven by the fact that same-store sales are the earliest indicator of retail chains’ momentum, or lack thereof. Same-store sales are released a week to two weeks before government-issued retail and consumer consumption reports, all of which feature data from the prior month. Especially during the pivotal holiday and back-to-school months, analysts can’t restrain themselves from eating up this data.
Same-store sales, or comps, measure the percentage change in sales for a month over the comparable period a year ago, usually at stores that have been open at least a year. The prevailing opinion is that younger stores haven’t reached their full potential.
Because comps are not judged under one standard or calculated in a so-called “black-and-white” way, analysts say releasing other, accounting-based monthly metrics would be helpful for a better monthly snapshot of a retailer’s health. But the chance of retailers providing more data, of course, is rather slim.
“There’s very little else to judge companies on [during the quarter], so analysts use same-store sales as a measuring stick,” said Walter Loeb, of Loeb Associates, a New York-based retail consultancy.
For many analysts, their unease over the attention Wall Street lavishes on comp reports stems partially from the fact that calculating comps is not standardized. Bob Buchanan, senior analyst at A.G. Edwards & Sons Co., said it best: “There’s tremendous variation in terms of when a store is included in same-store sales.”
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