How are 2020’s wacky comparisons affecting retailers now?

Discussion
Photo: RetailWire
Mar 19, 2021

The mantra for all the Willy Lomans of the world is to beat last year’s numbers, but the pandemic has distorted sales comparisons, making that tough. A few retailers on fourth-quarter investor calls are encouraging analysts to compare 2021’s figures to 2019’s for a more normalized perspective.

Kroger, for example, provided a wider range in issuing 2021 guidance due to the uncertainty surrounding food-at-home trends as COVID-19 vaccines rollout. Same-store sales in 2021 are expected to decline three percent to five percent against 2020, but expand nine to 11 percent on a two-year stack basis. Gary Millerchip, Kroger’s CFO, told analysts, “Evaluating our performance using a two-year period will more accurately measure our underlying momentum.”

Dick’s Sporting Goods provided guidance based on both 2020 and 2019 levels.

Lee Belitsky, Dick’s EVP and CFO, said, “Due to the uneven nature of 2020, we planned 2021 off a 2019 baseline and, for the same reason, believe it will be important to compare against both 2019 and 2020. Furthermore, given the continued uncertainty around when athlete activities will normalize in 2021 and what the new normal will be, we’ll be guiding to a wider range of possible outcomes that we typically do.”

Walmart predicted low single-digit U.S. comps for 2021 against 8.6 percent growth in 2020. Brett Biggs, EVP and CFO, told analysts, “We’ve got stimulus plans and other things that are sitting out there. But even with that, Walmart U.S. would have a 10 percent two-year stack. It will be very, very healthy growth.”

B.J.’s Wholesale Club CFO Bob Eddy said that, based on current pandemic trends, elevated consumer demand through the first half implies high-teens double-digit stacked comps for the first quarter. Mr. Eddy added, “We also currently expect something that looks more like normal life to emerge as more people are vaccinated. As that happens, and more people venture back to restaurants, we expect to give up some of the sales gains experienced in 2020 that resulted from increased consumption of food-at-home. But at this point, we cannot accurately judge the timing or degree of these changes.”

Most retailers are providing more limited or no guidance, given continued uncertainties.

DISCUSSION QUESTIONS: What challenges do 2020’s abnormal comparisons present to retailers or brands in 2021 as they do their forward planning? Should traditional performance metrics be ignored or significantly adjusted?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The toughest call about sales trends involves changes in consumer behavior over the past 12 months."
"This is a tricky question. I think we’re going to see a rebound effect in 2021 that will not be comparable to 2019 nor, frankly, will it serve as a base for 2022."
"Relying primarily on previous sales history just bakes the same errors into current forecasts. There are many other insights to consider..."

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18 Comments on "How are 2020’s wacky comparisons affecting retailers now?"


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Mark Ryski
BrainTrust

The tumult from the pandemic has create forecasting nightmare for virtually every retailer – regardless of whether business was up or down. I don’t think traditional performance measures should be ignored, but a high degree of caution needs to be applied in interpreting them. No doubt 2021 will continue to see broad guidance, if there’s any guidance at all, as business conditions begin to normalize.

Neil Saunders
BrainTrust

If parts of Wall Street gripe about softer growth numbers, retailers should be robust in defending them. 2020 was an exceptional year and it is both unreasonable and illogical to use it as a benchmark. Year-over-year analysis should still be provided but it should not, primarily, be used as an indication of the underlying health of a company. There are plenty of ways to judge performance including using two year analysis, assessing market share gains or losses, and comparing performance to peers.

Dick Seesel
BrainTrust

There is no “best by” date in terms of a return to normality, so it becomes hard to predict sales trends for the rest of 2021 and beyond. The mention of Dick’s is relevant because panelists just discussed their prospects earlier this week; I believe their strong comps may be tough to sustain in the second half as people return to offices and gyms.

The toughest call about sales trends involves changes in consumer behavior over the past 12 months. Are they permanent (and sustainable), or should we expect reversion to the mean? Will some of 2020’s toughest performers deliver the best results for 2021, because of easy comparisons? Ask me again in another 12 months.

Gene Detroyer
BrainTrust

Yes, Dick. The most important part of forecasting the future is understanding the changes in consumer behavior and determining which are permanent and sustainable and which are not. Forget the number comparisons, they will only lead to the wrong conclusions.

Jeff Sward
BrainTrust

Comp comparisons in normal times were useful because they were indeed comparable. Now, no matter what kind of history is used, 2020 or 2019, comparability is almost out the window. There are essential vs non-essential retailers. There are regional variables about who closed and re-opened and when and to what degree. If I am a retailer right now, I’m a lot more worried about gauging and evaluating demand, both short term and long term, and how I buy and flow into that demand than I am concerned about what kind of comp I end up with. External comps comparing one retailer to another won’t mean anything for a year or two. Internal comps measuring how the business is migrating between different channels might be a lot more instructive for the near future.

Gene Detroyer
BrainTrust

2020 –“Fuhgeddaboudit.”

Anyone that uses the numbers from 2020 as a base for anything is foolish at best.

However it would be very important to spend much time examining the behavior of shoppers and trying to determine which changes in behavior that the pandemic brought on stick and which ones don’t.

Dr. Stephen Needel
BrainTrust

If your business was pandemic-centric then using 2020 is not a very good idea. Plan off 2019, taking into account the trends from 2017-2019 and be conservative. Wall Street will slap you harder for low numbers than for higher-than-expected numbers. If your business was not very sensitive to the pandemic, then 2020 metrics will work as well as any.

Ricardo Belmar
BrainTrust

While it may prove interesting to compare to 2020 financials to see how much of the unprecedented momentum can be sustained, for most retailers it’s an unrealistic comparison whether they fared well or poorly in 2020, it was a year of extremes. 2019 will prove to be a more reasonable comparison. Using both years will paint a much more reliable picture for any retailer rather than relying on either single year alone. perhaps this says more about the usefulness of YoY comp-store comparisons that have traditionally been so pervasive in the industry.

Patricia Vekich Waldron
Staff

Relying primarily on previous sales history just bakes the same errors into current forecasts. There are many other insights to consider when making forecasts and comparisons, including overall trends, order information (vs. actual purchases), social trends, competitive results and overall market and segment performance.

Steve Montgomery
BrainTrust

Let us all hope 2020 was an anomaly. Depending on the business the retailer was in, for some it resulted in far better results than expected and for others it was a catastrophe. There were few, if any, retailers who had a normal year. Not a year anyone should be basing their forecast on.

Christine Russo
BrainTrust

It’s a long-shot but maybe retailers’ absolute obsession with looking backwards will be tempered a little and they will start to incorporate forward-looking analytics data using AI, machine learning and consumer sentiment to give guidance. It would be an absolute culture shift. Retailers’ obsession with the “beat last year’s ledger” mindset is still so incredibly ingrained in way too many decisions. See RetailWire’s article on the disturbing statistics on the LACK of use of data. If not now, coming out of a pandemic and with a lack of pressure to provide guidance by the Street, then when? when?!

Paula Rosenblum
BrainTrust

This is a tricky question. I think we’re going to see a rebound effect in 2021 that will not be comparable to 2019 nor, frankly, will it serve as a base for 2022. I think the only choice is to be nimble, agile and don’t overbuy out of the chute.

Joel Rubinson
BrainTrust

I think the biggest challenge might be managing how investors and the financial markets process growth numbers. Can they be “trained” to look at comps a different way because of COVID-19? I hope so, but so much of the stock market pricing is based on emotional aspects rather than fundamentals it is hard to know.

Venky Ramesh
BrainTrust

So much changed in 2020 that historical data from even before the pandemic is less indicative of the future potential. Zero-based planning sounds more appropriate for most retailers.

RandyDandy
Guest
8 months 15 days ago
The problem with predictions is that they don’t take in to account the unpredictable. But how can you forecast on what you cannot know? Thus, it comes down to the formulaic business hopes of increasing numbers. Favorably, when business is added business. Not, if it’s about rising costs or lost sales. Meanwhile, consider a place that is about “one industry” — like a cruise town. There was no reason to think higher 2020 forecasts could not be met. Obviously, that didn’t happen. But for every coming quarter it would be so, yes? No. So, for 2021, numbers would return—maybe even go up? Now, all predictions are for the same dire figures. Which leaves 2022, to bring back business. However, by then will habits of cruisers changed for better or worse? Can anyone (or any algorithm) predict that? Using another ship analogy, consider the 2020 nimbleness of some small businesses to quickly pivot and steer clear of wrecking. Of individual proprietors, to channel their inner entrepreneur to an “outside deck.” Conversely, there were bigger enterprises that… Read more »
Ananda Chakravarty
BrainTrust

“Past performance is no indication of future returns.” Unfortunately, we still need a reference point and 2020 just blew all previous references out of the water. Instead of relying on earlier data, retailers should be basing their planning on future customer views and how their customers are planning to come back to shopping. Traditional metrics shouldn’t be ignored, but until retailers can establish a new benchmark, earlier numbers will have far less impact. The most recent data is the the best data and retailers should work with the last 6 months and customer behaviors to better predict upcoming changes to business.

Craig Sundstrom
Guest

It’s not really the abnormal conditions in 2020 — or comparisons related thereto — but continued “abnormal” conditions that’s the problem: i.e. the possibility of a “new normal.” And we’ll just have to see, not so much in 2021 — which will be just as weird (in its own ways) as 2020 — but 2022 … and beyond.

William Passodelis
Guest

Really 2020 is a lost year if you are going to compare and not do zero base planning, which may not be the best thing either. You have to look back to 2019, and then 2021 may also not be a normal year either. When all is said and done, 2022 may have to be compared back to 2019 as well! This IS an unprecedented situation in recent history!

wpDiscuz
Braintrust
"The toughest call about sales trends involves changes in consumer behavior over the past 12 months."
"This is a tricky question. I think we’re going to see a rebound effect in 2021 that will not be comparable to 2019 nor, frankly, will it serve as a base for 2022."
"Relying primarily on previous sales history just bakes the same errors into current forecasts. There are many other insights to consider..."

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