Comparable store sales not only provide a picture of how specific locations are performing, they can also tell a story about how a retailer is performing as a whole. A negative number shows declining same-store sales, while a positive number shows increasing same-store sales. Negative or positive same-store sales might be due to increasing or falling prices or a change in the number of customers who frequent the stores. Investors and analysts investigating a retail company’s financial statements depend on comparable store sales to give an image of how laid out stores have performed over the long run relative to the performance of new stores.
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If this is not the case, then the company could actually be losing money on the bottom line, because those stores are adding costs and not bringing new sales, but rather eating at the sales from existing locations. The importance of same store sales (comps) is that it gives us the real growth picture of the retail business. This formula measures the percentage growth or decline in sales for a set of stores over a comparable time period. Starbucks has seen some of the worst traffic slides of major, publicly traded QSRs, with same-store sales falling due to traffic decreases for several quarters.
Denny’s managed to post same-store sales growth last quarter, though it was a modest 1.1% gain. The diner chain is still challenged by low store volumes, prompting closures and remodels that are lifting traffic and sales. Olive Garden is fighting sluggish performance by improving speed of service and dining room ambiance, a playbook intended to challenge fast casual brands.
This method utilizes the equivalent figures that are comparable to evaluate the percentage of change and the performance of a part, a store, or an outlet of an organization. In the above example, we can evaluate that the figures of the same outlet have been compared with the figures of the same period in both the fiscal years, which makes it more favorable an equivalent comparison. The method utilizes the figure for sales of a company’s already existing store or unit or outlet for the same period in two different fiscal years.
- Conversely, negative growth may signal declining interest or inefficiencies within the store’s operations.
- If there’s a long pattern of decline in same-store sales over a period of several quarters or even years, this may indicate a company has run out of room to expand despite opening new stores.
- For instance, the company may have taken on debt to finance the new store openings, deteriorating the quality of its financial position.
- By analyzing past sales patterns, customer behaviors, and external factors like economic indicators, businesses can anticipate future performance and adjust their strategies accordingly.
- CEO Todd Penegor believes a greater emphasis on core menu items and core markets will help, and aims to turn existing market into fortresses from which it can move into adjacent territories.
It is also used internally by retail managers and retail owners to asses their growth strategy, and its efficiency and to be able to take actions based on that. Access and download collection of free Templates to help power your productivity and performance.
Kroger executives have pointed to the company’s strong digital sales as a linchpin in its overall performance. Foley added that the retailer recorded the best digital profits it has ever seen during its latest quarter, noting that Kroger saw improvements in its delivery and pickup operations. If there’s a long pattern of decline in same-store sales over a period of several quarters or even years, this may indicate a company has run out of room to expand despite opening new stores. While a large chain retailer wants all its stores to perform as well as possible, existing stores may be neglected or even cannibalized by new stores. ThredUp’s annual Resale Report contains research and data from GlobalData, a third-party retail analytics firm.
Why Using Comparable Store Sales Metrics Is an Effective Way to Evaluate Performance
- Implementing augmented reality (AR) can allow customers to visualize products in their own space before making a purchase.
- An insufficient focus on value drove Popeyes’ sales drop, and Burger King is looking to an aggressive remodeling schedule to generate long-awaited sales lifts at many stores.
- Join the academy and take our in-depth courses to learn how to calculate all the important metrics, how to interpret them and how to use this information to devise the right strategies for the business.
- Effective promotions can attract new customers and encourage repeat visits, thereby increasing sales.
An increase in comparable store sales could be perceived to mean that the retailer is effective in holding its customers and may be better off zeroing in on its existing locations and stressing less over expansion. Supported negative same-store sales more than several quarters or even years might be an indicator that the comparable store sales retailer is in a difficult situation. When it comes to measuring the performance of a retail company, one important metric stands out – comparable store sales. Comparable store sales, also known as same-store sales, is a critical indicator that helps investors and analysts gauge a company’s growth within its existing store base.
Understanding Comparable Store Sales
Same-store sales figures are important points of analysis for the management of a retail chain and for investors evaluating the chain’s current and likely future performance. Market analysts frequently use same-store sales to determine the effectiveness of the management of a retail chain in producing revenue growth from existing assets. For chains that are growing quickly and opening new outlets, same-store sales figures allow analysts to differentiate between revenue growth that comes from new stores and growth from improved operations at existing outlets. Comparable store sales are most commonly used to compare the most recent year’s holiday shopping season to the previous year’s. It can also be used to compare this week’s, month’s, quarter’s, or year’s sales to last week’s, month’s, quarter’s, or year’s sales.
39% of younger generation shoppers have made a secondhand apparel purchase on a social commerce platform in the last 12 months. 48% of consumers say personalization, improved search, and discovery make shopping secondhand apparel as easy as shopping new. Papa Johns sees its core pizzas as the key weapon in its arsenal and is looking to make more of them. CEO Todd Penegor believes a greater emphasis on core menu items and core markets will help, and aims to turn existing market into fortresses from which it can move into adjacent territories. McDonald’s saw comps slip in Q2 2024, then turn positive after strong value messaging, though that gain was undone by an E.
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This timeframe ensures that the data reflects genuine performance changes rather than fluctuations caused by new openings or closures. Additionally, same-store sales figures can be helpful to retail chain management in making future decisions regarding existing stores and new locations. Increases or decreases in same-store sales commonly result from either price changes, changes in a store’s number of customers or changes in the number of items the average customer purchases. Company management often drills down into same-store sales figures to determine the exact cause of the change in revenues, which can be helpful to the company in making decisions. For example, a decline in sales revenues might result from a new or existing competitor offering lower prices on key items that the company’s stores sell.
Indicators of Positive and Negative Results
To comprehend this figure, an analyst will compare it to sales created over the previous quarter of the same accounting year or a previous accounting year. Machine learning algorithms further enhance predictive capabilities by continuously learning from new data. These algorithms can identify complex patterns and correlations that might be missed by traditional analysis methods.
What is the same-store sales analysis?
For instance, to look at February 2013 same-store sales and December 2013 figures would not be an apples-to-apples comparison. The busiest retail period of the year is, of course, the holiday shopping season, so December’s numbers are likely to be much higher (at least one would hope) than any other month’s sales. So, the next time you come across the term “comparable store sales,” you’ll have a clear understanding of what it means, how to calculate it, and why it matters in the world of finance. Sum the sales from all eligible stores for both the current period and the prior period to get the total sales for each time frame.
The grocery chain’s digital sales continue to impress, but they raise questions about store performance and how the company will compete against Walmart going forward. A more accurate comparison can be found by looking at existing same-store sales and identifying trends there. In some cases, a chain that has opened too many new stores too quickly might be in a lot more financial difficulty that the new stores’ revenue boost indicates. This is a more effective measurement of performance than comparing one-quarter of sales to the previous quarter because it shows the degree of revenue growth (or decline) to a similar period.
This not only enhances the shopping experience but also reduces the likelihood of returns, thereby boosting sales. For instance, the use of data analytics can help retailers understand customer preferences and tailor their offerings accordingly. Mobile payment options and self-checkout stations can streamline the purchasing process, making it more convenient for customers and potentially increasing sales. Among other things, the company reported same-store sales of 2.1% for US stores, 3.1% for US franchise stores, and 2.4% for international stores. As we will see in the example below, a positive same-store sales figure does not necessarily translate to a strong-performing company.
Our proprietary operating platform is the foundation for our managed marketplace and consists of distributed processing infrastructure, proprietary software and systems and data science expertise. With ThredUp’s Resale-as-a-Service, some of the world’s leading brands and retailers are leveraging our platform to deliver customizable, scalable resale experiences to their customers. ThredUp has processed over 172 million unique secondhand items from 55,000 brands across 100 categories. By extending the life cycle of clothing, ThredUp is changing the way consumers shop and ushering in a more sustainable future for the fashion industry. RBI’s keystone U.S. brands, Popeyes and Burger King, both saw relatively strong same-store sales growth in 2023 that evaporated in 2024. An insufficient focus on value drove Popeyes’ sales drop, and Burger King is looking to an aggressive remodeling schedule to generate long-awaited sales lifts at many stores.
In this blog post, we will dive into the definition, calculation formula, and provide an example of how comparable store sales are used. Examining same-store sales figures is helpful to investors in determining what portion of a company’s current sales revenues are a result of sales growth in existing locations and what portion is accounted for by the opening of new stores. If comparable store sales are up from a previous period, it is a sign that the retail company is moving in the right direction. An increase in comparable store sales could be interpreted to mean that the retailer is effective in retaining its customers and might be better off focusing on its existing locations and worrying less about expansion. Sustained negative same-store sales over several quarters or even years may be an indicator that the retailer is in trouble. By comparing sales across different periods, company management and investors can determine how well a retail store is doing.
The company has had long-festering problems with brand positioning, and CEO Brian Niccol’s Back to Starbucks plan aims to return the chain to its coffeehouse roots. That’s in line with findings from e-commerce analysis firm Brick Meets Click, which has reported for months that mass retailers led by Walmart are dominating the digital grocery space. While the company is tending to the needs of its new stores and spending resources to publicize and have promotional events, it has to take care not to siphon resources away from its existing locations.