Reporting monthly same-store sales could become a thing of the past.
Bebe Stores Inc. and Dress Barn Inc. on Thursday joined 8 apparel retailers — including Charming Shoppes, Guess, Gymboree, New York & Company and Talbots — that have discontinued reporting monthly comps over the past two years, in favor of reporting on a quarterly basis. Other retailers may follow.
Long a measure of the overall health of retail companies, Wall Street uses comparable same-store sales, or "comps," to compare sales of stores open for one year or more on a year-over-year basis. While advocates maintain that reporting monthly comps allow visibility into a company's current health, critics complain that reporting comps on a monthly basis tells little of a retailer's overall trends, disrupts operations and fluctuates stock price.
"I think we will see a big shift toward retailers reporting quarterly comps instead of monthly," predicted Eric Beder, specialty retail analyst at Brean Murray Carret & Co. "I use to be a big advocate of monthly comps, but now I think quarterly is the best way to go; there is too much noise associated with reporting monthly."
Beder and his peers say calendar shifts, promotional activity, inconsistent weather and changes in receipt flow can skew monthly comps results and create stock volatility that has little correlation to a company's actual vitality.
And since same-store sales are not subject to the rules of the Financial Accounting Standards Board, analysts say comps are not credible in comparing retailers even in the same sector.
"If investors don't understand how these components impact a company's monthly comp, they do not have a true meaning of the business and could be very surprised when quarterly earnings are reported," said Ann Poole, retail analyst at Nolenberger Capital Partners.
Same-store sales also ignore the role of direct-to-consumer and Internet sales, an increasingly significant portion of retailers' revenue, said Craig Johnson, president of consulting firm Consumer Growth Partners.
Dress Barn announced in February it would begin reporting same-store sales on a quarterly basis beginning with its quarter ending Oct. 27.
CL King analyst Mark Montagna said Dress Barn's change to quarterly comps should not surprise investors as it is in line with the company's overall strategy.
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