Will Monthly Sales Reporting Be Missed?
With the new retail calendar year, a slew of retailers — including Target, Macy’s, Kohl’s and Nordstrom — have joined others in moving to stop reporting monthly sales.
Also bowing out of the practice is Stage Stores and Bon-Ton. TJX Cos., the parent of T.J. Maxx and Marshalls, will stop reporting beginning in April. J.C. Penney, Dillard’s and Saks stopped reporting last year.
That leaves the monthly retail sales recap to under 20 retailers, with the few majors — Costco, Victoria’s Secret parent Limited Brands, Walgreens and Ross Stores — mixed with stores such as Zumiez, The Buckle, PriceSmart, Rite Aid and Fred’s. The even-slimmer store base makes it nearly impossible to gain a decent read of sales trends that traditionally arrived on the first Thursday of each month.
In the nineties, over 100 retailers reported sales on a monthly basis with the number dropping to around 75 by the early part of the last decade. Liquidations and mergers accounted for some of the exits but many of the majors — including Home Depot, Lowe’s, Sears, Dollar General, CVS, Best Buy, Toys "R" Us, Starbucks, Barnes & Noble — moved away from the practice. Walmart discontinued reporting monthly sales in May 2009.
For retailers, ending such reporting obviously reduces any expenses or time spent delivering the brief reports but many public companies had argued the monthly number puts too much emphasis on short-term results.
"This decision is based on discussions with many of our investors and is consistent with the practice of the vast majority of our retail peers," said John Mulligan, Target’s EVP and CFO, when Target announced its shift last September. "We believe aligning our sales guidance and reporting with disclosure of our quarterly financial results will create a longer-term focus and provide greater understanding of our sales results in the context of our overall financial performance."
On the pro-monthly sales side, some have argued that monthly sales supplement government statistics to provide a better read on the health of retail and the economy. While a Wall Street backlash hasn’t been heard with the latest exodus of stores, the bigger argument has been that publicly-held stores owe regular updates to shareholders.
Macy’s has been in both camps. In 2007, after a tough year, the department store operator stopped reporting because the "confusing" calendar led to misleading results and monthly numbers overly-encouraged a short-term focus. By October 2008, Macy’s began reporting again to provide investors "as much information and transparency as possible." In November last year, it quietly announced plans to stop reporting "consistent with the practice of most other retailers."
- Costco, Limited Brands February sales beat forecasts – Reuters
- Discontinued Monthly Reporting – Retailing Today
- Teen Clothing Chains Nix Monthly Reports – RetailWire
- Wave Goodbye To Retail’s Monthly Same-Store Sales Reports – Seeking Alpha
- Analysis: Company report pace frustrates accounting experts – Reuters
Discussion Questions
Will the retail community ultimately regret the shift away from monthly sales reports? Is there any benefit for the few who report to keep reporting?
The stock market has proven itself to be way too volatile over the past few years; I think this is overall a stabilizing move.
Au contraire—the larger the time frame for reporting, the better for retailers. Of course, I assume they are tracking their internal sales numbers on at least a weekly basis.
There is no benefit to the retailer to reporting monthly sales. As much as we don’t want to believe it, this type of public reporting ultimately drives decision making short term. That is a big problem with retailers already and a significant problem with American business.
Internally, weekly, even daily reporting (depending on the business) makes sense, but I agree that quarterly makes far more sense for any public reporting of sales.
How relevant is same store sales as a measure, anyway? Online and mobile mess it all up, and while you could theoretically find some way to adjust—as Best Buy originally did when it was one of the first retailers to report online sales as rolled into store sales, assigned by zip code—the reality is, the hyper-focus on monthly misses the long term. I appreciate balancing the need to focus long term against the need for transparency, but heck, if I were a public company, even quarterly is an artificial construct that creates value-destroying (or at least value-distorting) behavior.
Retail companies with the means to do so record sales information by the minute on a departmental basis and daily on an item-by-item basis. This information could easily be posted live on the net with very little expense to the retailer.
In this economy there is not so much to celebrate when the numbers are closely scrutinized by ownership and the investors. So this decision to report to the public quarterly is more likely an effort to reduce the wear and tear on the proverbial public whipping post.
Whatever the reasons be for this to happen, this is good as it will put more focus on long-term performance. Even internally, retailers should not get too obsessed with short-term results. Short-term results are okay to monitor to watch out for extreme/unexpected events, but as a performance metric, too much action on short-term metrics will lead to long-term-suboptimal actions.
I am not a financially savvy person so…from my perspective, that of an average Joe, seeing numbers going up and down monthly, as they do in retail, that would make me uncomfortable. Yes, it’s time to move to broader reporting. Just sayin’….
Retailers will not regret not reporting monthly sales numbers. If Wall Street had their way, we would be seeing weekly sales numbers. Other industry segments do not report monthly numbers. European companies do not report monthly numbers and some only report numbers at the half.
In addition to saving the cost of preparing monthly numbers, a retailer does not tip their hand to competition. As the list of companies gets smaller, the sample value of reporting is more likely to be misleading.
“Will the retail community ultimately regret the shift away from monthly sales reports?”
Of course not…what’s to regret? The real question is “Will the financial community regret it?” The answer is that they might…a little…for a while, but really shouldn’t (for all the reasons mentioned). The reality is, once Walmart stopped, what was left was background noise.
I like it. Not only will it save retailers time and money, but reporting monthly only feeds the 24×7 news media we have and creates alarms where they may not really exist. I think it’s a stabalizing move.
With competing channels that each retailer operates, the quarterly external reporting is a good move. The stock market doesn’t require other announcements any more often, like earnings, etc. I don’t see any benefits to external monthly reporting.
This is an obvious and logical response to the over-reliance on short-term results to describe trends in consumer spending for retailers and for the government. The day will come soon that no one even asks about such meaningless data outside of the retailer’s own environment. We will continue to look at our results daily if not more. It just doesn’t need to be reported externally.
It is good for retailers to move away from monthly reporting and shift focus to more strategic initiatives. Monthly reporting has its benefits, but makes the vision too myopic and everyone in the organization is so focused on achieving the monthly target that strategic initiatives are often swept under the carpet.
I think this will specially help in more strategic retail/CPG collaboration. Category managers will have more room to experiment with promotions rather than repeating the same promotions year on year to meet the monthly sales goals.