What it means
Total revenue growth in a retail chain answers two questions at once, and that is the problem. Opening 20 new stores will lift total sales even if every existing store is quietly declining.
Comparable store sales separate the two effects by measuring only the stores present in both periods. The definition of comparable is set by the company, and it is not standardised.
Most use stores open for at least 12 or 13 full months, so a new site has had a full year to move past its opening surge. Stores that were closed for refurbishment, relocated or materially resized are usually excluded, and companies should disclose exactly which rule they apply.
The measure matters because it is the closest thing retail has to organic growth. Investors, lenders and boards use it to judge whether merchandising, pricing and service are working, independent of the capital being spent on expansion.
A chain reporting 15% total growth and -3% comps is a chain buying growth with new leases. How it is used in practice varies by sector.
Grocers and restaurants often split comps into transaction count and average transaction value, because knowing whether growth came from more visits or higher spend per visit points at completely different actions. Many companies now include online sales in comps where the digital channel is fulfilled by or attributed to stores, which is a judgement call worth reading the footnote on.
The nuance to watch is the calendar. Comparisons can be distorted by a shifted holiday, an extra trading week, unusual weather or a period when a competitor closed nearby.
Good disclosure quantifies those effects rather than leaving readers to guess.
In practice
Real-world examples.
Example
A coffee chain reports comparable store sales up 4.1%, split into transactions up 0.6% and average ticket up 3.5%. The board reads this as a price and mix effect rather than genuine footfall growth, and asks for a plan to lift visit frequency before raising prices again.
Example
A fashion retailer excludes 11 stores from its comparable base because they were closed for at least six weeks during a refit. It discloses the exclusion clearly, so analysts can see that reported comps of 1.8% do not include the disruption from the refurbishment programme.
Example
A supermarket group reports comps of -1.2% during a quarter when a major public holiday fell in the previous year's comparable quarter. It quantifies the calendar effect at 1.5 percentage points, which lets readers see that underlying performance was slightly positive rather than negative.
Formula
Calculation
Comparable store sales growth = (comparable store sales this period - comparable store sales in the same period last year) / comparable store sales in the same period last year x 100
A speciality retailer operates 138 stores. Of these, 120 have been open for more than 12 full months and were trading throughout both periods, so those 120 form the comparable base. Sales from those 120 stores were $246,000,000 this year and $240,000,000 in the same period last year.
Increase in comparable sales = $246,000,000 - $240,000,000 = $6,000,000
Comparable store sales growth = $6,000,000 / $240,000,000 = 0.025, or 2.5%
Suppose total company sales were $290,000,000 this year against $255,000,000 last year, which is total growth of $35,000,000 / $255,000,000 = 13.7%. The gap between 13.7% total growth and 2.5% comparable growth shows that most of the increase came from the 18 newer stores rather than from the established estate.Case study
Seen in the real world.
Halloway Home Stores is an illustrative, fictional homeware chain that grew from 96 to 138 stores over three years. Every board pack led with total revenue, which had risen from $255,000,000 to $290,000,000 in the latest year alone, and the expansion programme was widely seen as a success.
A new chair asked for comparable store sales to be reported alongside the total. On a 120-store comparable base, sales had moved from $240,000,000 to $246,000,000, which is growth of 2.5%, against total growth of 13.7%. Almost all of the headline growth was coming from new leases rather than from stores getting better, and the new stores carried fit-out costs of about $650,000 each.
In this fictional case the board slowed the opening programme from 18 stores a year to six and redirected the capital into refitting the weakest quartile of the existing estate. Total growth fell in the following year, but comparable store sales moved to 5.4% and cash generation improved because far less capital was tied up in new fit-outs.
Watch out
Common mistakes.
- Comparing comparable store sales between two companies without checking that both use the same definition of a comparable store.
- Reading strong total revenue growth as proof the business is healthy, when new openings can mask a declining core estate.
- Ignoring calendar and weather effects, which can move a quarterly comp figure by more than the underlying trading performance.
Questions
People also ask.
How long must a store be open to count as comparable?
Most companies use 12 or 13 full months, but the rule is set by each company and should be stated in its reporting.
Should online sales be included in comparable store sales?
It depends on the model, and either treatment can be defensible, so what matters is that the company states its policy and applies it consistently between periods.
Why split comps into transactions and average spend?
Because the actions differ completely: falling transactions points to footfall, marketing or competition, while a falling average spend points to pricing, mix or promotional depth.
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