The Same-Store Sales Reporting Debate
Last year when Home Depot, then under the leadership of Robert Nardelli, chose to stop reporting quarterly same-store sales numbers, the response from the investment community was less than enthusiastic.
At the time, Goldman Sachs analyst Matthew Fassler told CNNMoney.com, “We dislike any decision to reduce transparency, particularly one executed in a quarter when the measure in question most likely shows poorly. We can only surmise that [the decision] reflects a reality that this measure does – and will – reflect poorly on the firm vs. competitors.”
While analysts look to same-store sales as a gauge of a retailer’s health, some within the business itself feel as if the measurement is much less important than it is often made out to be.
Sears Holdings’ Edward Lampert has said the same-store sales metric has become “vastly overrated” and believes other benchmarks offer greater insight into how well a retailer is performing.
This week, the Women’s Wear Daily website ran an article that identified retailers including Bebe Stores, Charming Shoppes, Dress Barn, Guess, Gymboree, New York & Company and Talbots that have chosen to stop reporting monthly same-store sales in favor of quarterly accounting.
“I think we will see a big shift toward retailers reporting quarterly comps instead of monthly,” Eric Beder, specialty retail analyst at Brean Murray Carret & Co., told Women’s Wear Daily. “I used 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.”
Mr. Beder said too many variables can impact comp sales and therefore monthly numbers add an unnecessary element of volatility when assessing the relative strength or weakness of a company.
Ann Poole, retail analyst at Nolenberger Capital Partners, is an advocate of quarterly same-store sales reports. She told WWD.com, “Quarterly comps are usually reported at the same time as earnings, which gives investors a lot more information to digest and [with which to] evaluate the business. I think this eliminates some of the irrational weight that can be placed on a monthly comp.”
CL King analyst Mark Montagna said he understood the reasons behind retailers going to quarterly same-store sales reporting but that ultimately it will be investors who are hurt as a result.
“Overall, it’s a bad thing because companies should always be managing for the long-term anyhow and by not giving the monthly updates, it leaves more opportunities for investors to be surprised,” he said. “I think investors would rather have status updates along the way.”
Questions: In general, how important are same-store sales numbers in evaluating
a retailer’s health? What do you see as optimum frequency for retailers to
report same-store sales numbers?
- Retailers Opt Out of Monthly Comps – Women’s
Wear Daily (sub. required)
- Message from the Chairman (March 15, 2006) – Sears Holdings Corporation
- Defiant Home Depot = worried investors – CNNMoney.com