What is Comps
"Comps" is short for "comparables." It can refer to a retail company's same-store sales compared to the previous year, and is used by analysts to make apples-to-apples comparisons from year to year. Specifically, comps compare a company's revenue growth based on the sales created by the stores that are open for at least one year.
BREAKING DOWN Comps
Also known as comparable same-store sales, the comps metric is used by analysts and investors to determine what portion of sales growth is attributed to old stores compared to new stores. Some large retail chains release comps on a monthly basis.
New Stores vs. Old Stores Sales
Stores that have been open for less than a year are referred to as new stores. New stores will have high growth rates since they are starting from nothing. As a result, including new stores in the growth rate calculation for an entire retail chain can give artificially high growth rate results overall. Because the comps metric only compares results for stores that are older than one year, the metric gives a better indication of true growth for the overall firm.
Analysts typically like to hear that a company's comps are rising each period. This is a good indication a company's consumers are willing to pay more for its goods compared to the previous period, and/or they are willing to come to the store more often and spend more or less the same amount. The key is the company is seeing an increase in revenue without relying solely on opening new stores.
A company's sales growth rate is calculated by subtracting sales from the previous year from sales from the current year, and then dividing the difference by the previous year. For example, if company A earned $2 million in revenue last year and $4 million this year, the calculation to determine its growth rate is $4 million minus $2 million divided by $2 million, or 100%. An inquisitive investor would dig a little deeper and ask how much of the growth was due to new stores compared to old stores. The investor finds out that $3 million of the company's sales this year were generated from new stores and only $1 million of sales were from stores that were open longer. To calculate comp sales, the investor does not include sales from new stores. The new calculation is $1 million minus $2 million divided by $2 million, or -50%. When comp store sales are up, it means the company is growing sales at its current stores. When total sales growth is up and comp stores are down, it means the company is generating most of its revenue from the opening of new stores to maintain growth, which could be a sign of turmoil.