What Are Comparable Store Sales?
Comparable store sales refers to the revenue generated by a retail location in the most recent accounting period relative to the revenue it generated in a similar period in the past.
- Comparable store sales (or same-store sales) refer to a company's revenue generated by a retail location in the most recent accounting period compared to the revenue it generated in a similar period in the past.
- Analysts use comparable store sales as a measure of sales growth to evaluate how established stores have performed over time compared to new stores.
- A negative comparative store sales number shows a company's sales are declining, while a positive number shows sales are increasing.
Understanding Comparable Store Sales
Investors and analysts reviewing a retail company’s financial statements rely on comparable store sales to provide a picture of how established stores have performed over time relative to the performance of new stores. In effect, comparable store sales is a measure of sales growth and revenue from a company’s store operations.
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.
Example of Comparable Store Sales
A retail company’s 10-Q report for a quarter may show that it brought in $18 million in revenue. However, this information will be useless if it is used as a stand-alone number. To make any sense of this figure, an analyst will compare it to sales generated over the previous quarter of the same accounting year or a previous accounting year.
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.
Calculating Comparable Store Sales
Comparable store sales are typically expressed as a percentage of an increase or decrease in revenue. This example shows how you would calculate the change in comparable store sales from one year to the previous year.
- Find the net sales figures for each of the years 2018 and 2017.
- Subtract any revenue related to stores closed during the past two years from the net sales earned in 2017.
- Revenue related to stores closed during the past two years should also be subtracted from 2018 revenue.
- Subtract any revenue related to stores opened during the past two years from the total revenue generated in 2017 to arrive at the total comparable store sales for 2017.
- Like #3 above, revenue related to stores opened during the past two years should be subtracted from 2018 revenue to arrive at the total comparable store sales for 2018.
- Subtract total comparable store sales in 2017 from total comparable store sales in 2018. This is the absolute dollar change in same-store revenues, which may be negative or positive.
- Finally, divide the absolute dollar change in comparable store sales by the total comparable store revenues in 2017. This amount, expressed as a percentage, shows the change in comparable store sales.
The Bottom Line
By comparing sales across different periods, company management and investors can determine how well a retail store is doing. 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.
Typically, stores with less than one year of sales history are excluded from comparable store sales calculations.