Same Store Sales not a good metric for retail success anymore

[DavidVY]

I've been doing some thinking and reading of various retailers and most are stressing the effect of internet sales and in store visit coupled with internet shopping aka "omnichannel".

 

Same store sales (which don't count online)  have definitely taken a hit but I believe it is a broader structural change in how retailers are being run.

 

The store is a fitting room with limited selection (minimizing inventory risk) coupled with a warehouse distribution and direct shipping to a person's house

 

 

[berkshire101]

So what do you suggest we look at instead?

[DavidVY]

@ berkshire101- not really 100% sure to be honest. US shopping has really gone much more online. Maybe it's a familiarity w amazon prime or good postal service here...

 

Just musing on a riff from my recent visit to Nordstrom after reading their annual report.

 

I tried on shoes and jackets but I am an unusual size (tall/slender) for their luxury clothes. Rep immediately pulled up catalog and said we have your size online. Pay now and receive in 3-4 days. Free returns to the store if you change your mind.

 

Perhaps gross revenue, gross margin and cash flow from operations.

 

I would like to see increasing gross revenue and cfo, stable or increasing gross margin (minus forex exposure).

 

Just floating an idea out there and see what angles people can get back to me

 

 

[LC]

perhaps sales/sqft?

 

strategically located stores imho are still valuable. they legitimize the brand. but i agree the traditional mall model is dying.

[berkshire101]

My experience with retail is to always aim to have the lowest prices.  It should be in the mission statement.  Because with retail, you're the middleman.  And no one cares about the middleman unless they can give you a great deal.

 

So companies like TJX, ROST, WMT, and COST are doing well in this swiftly changing environment.  Not sure why anyone would shop at SHLD, JCP, M, or WFM and pay more for the same thing.  Shopping experience is nice, but that's a niche market.

[ScottHall]

Many retailers do count online sales in their SSS numbers. For example, from WMT's 10-K:

 

Comparable store and club sales is a metric that indicates the performance of our existing U.S. stores and clubs by measuring the change in

sales for such stores and clubs, including e-commerce sales, for a particular period from the corresponding period in the previous year.

Walmart's definition of comparable store and club sales includes sales from stores and clubs open for the previous 12 months, including

remodels, relocations, expansions and conversions, as well as e-commerce sales. We measure the e-commerce sales impact by including those

sales initiated through our websites and fulfilled through our e-commerce distribution facilities, as well as an estimate for sales initiated online,

but fulfilled through our stores and clubs. Changes in format are excluded from comparable store and club sales when the conversion is

accompanied by a relocation or expansion that results in a change in retail square feet of more than five percent. Comparable store and club

sales are also referred to as "same-store" sales by others within the retail industry. The method of calculating comparable store and club sales

varies across the retail industry. As a result, our calculation of comparable store and club sales is not necessarily comparable to similarly titled

measures reported by other companies.

 

http://d1lge852tjjqow.cloudfront.net/CIK-0000104169/e9f9e299-fd66-4675-b9a9-9f6e56e5cc2b.pdf?noexit=true

[Jurgis]

So companies like TJX, ROST, WMT, and COST are doing well in this swiftly changing environment.  Not sure why anyone would shop at SHLD, JCP, M, or WFM and pay more for the same thing.  Shopping experience is nice, but that's a niche market.

 

Although I hold TJX stock and we shop there, you should not seriously suggest that TJX, ROST, WMT, and COST cover clothing needs for middle-high income shoppers. It might be fine for some, but if my wife needs something specific, good luck finding it in TJX/etc. That's where M, JWN, 21 Forever, Anthropologie, Free People, etc. comes in.

[berkshire101]

Yes, true.  TJX doesn't cater to everyone.  That's why retail is such a diverse and growing industry.  There are many customers with different needs.

 

My point is that eventually it comes down to price.  If two retailers have the same product then most shoppers will go for the lower price one. 

 

WFM had products that no one else offered, so people went there to shop.  Now you have COST and WMT offering the same product at lower prices.  So WFM will have to compete on price eventually.

 

My best investments retail were ones that aim to have the lowest prices.  Because in good times everyone loves a bargain.  And in bad times everyone needs a bargain. 

[Jurgis]

My best investments retail were ones that aim to have the lowest prices.  Because in good times everyone loves a bargain.  And in bad times everyone needs a bargain.

 

I won't argue with that. ;)