Home Depot: Mum’s the Word on Same-Store Sales
By George Anderson
Industry analysts and others are questioning Home Depot’s recent announcement that it would no longer report same-store sales performance.
Many wonder if the move signals a significant weakening in the chain’s business or if it simply is tired of looking bad in a side-by-side comparison with the company’s chief rival, Lowe’s.
Goldman Sachs analyst Matthew Fassler said he was troubled by the home improvement retailer’s decision, especially coming off a weaker than expected quarter.
“We dislike any decision to reduce transparency, particularly one executed in a quarter when the measure in question most likely shows poorly,” he told CNNMoney.com. “We can only surmise that [the decision] reflects a reality that this measure does – and will – reflect poorly on the firm vs. competitors.”
George Whalin, CEO of Retail Management Consultants, was even more blunt about Home Depot’s decision. “This is a terrible way to do business,” he said. “This is a publicly traded company with thousands of investors. Same-store sales are a key measure of evaluating how a retailer is doing. It’s dishonest and irresponsible for Home Depot to withhold this information from its stockholders. It gives the perception that the company has something to hide from the financial community.”
Others were equally puzzled by the DIY chain’s decision.
Ken Perkins, retail analyst and president of research firm Retail Metrics, said, “It’s curious that of all the metrics that they could have withheld, they chose this one. Same-store sales are a good measure of a company’s organic growth. They show how well or nor a company is doing because new stores tend to be big sales generators.”
Marshall Cohen of the NPD Group said he can understand why the retailer is moving away from same-store sales as a gauge for company performance.
“Home Depot is trying to transform itself into a bigger and better retailer and grow sales,” he said. “It’s challenged by a lot of obstacles along the way, and I can understand that the company doesn’t want to be pre-judged on its sales numbers while it makes those changes.”
Many, however, are of a different opinion.
“There a small portion of retailers who maybe think that same-store sales aren’t important to use to evaluate them,” Retail Management Consultants’ Whalin. “I say it does give a sense about how the business is really doing. It’s every bit as important as the profit number.”
“If a retailer’s same-store sales are growing along with its profits, it means it’s a successful company,” he added.
Moderator’s Comment: How important or not are same-store sales in evaluating the performance of a retail business?
Are there other metrics that you believe provide a clearer picture of retail performance? –
George Anderson – Moderator