Same Store Sales Growth

Catchy title, eh?

I saw this chart in the Wall Street Journal Today and it really crystallized an idea in my head that I have held for a long while. So let me first start off by describing what same store sales are and why this chart is great, except I would have it do one additional calculation column.

There is not really a great definition, more of what it is not and then a nebulous gray area that remains is what it is. So here is my ad-hoc definition: A store that has been open for a year, then compares their month on month figures and this shows the same store sales growth or decay. So if I open a new Starbucks on July 1, 2008, I will not be able to do this analysis until the end of July 2009. If I open on the 15th of July the first month that I could do this comparison would be August '08 versus August '09.

What does it consist of? Well it is sales, which is another name for revenues, which are prices paid for merchandise times the number of items sold. So just two dimensions prices and volume.

If you followed the link you would see my chart is slightly different than the Journal's chart. See I broke the Same Store Sales growth into its two components so that it could be easier to decipher. Now we can see who dropped their prices to maintain their revenues and if anyone followed any other strategy.

So look at Aeropostle and BJ's. Two different strategies are afoot. BJ's kept their pricing the same and their volume suffered but they maintained positive growth. Aeropostle dropped their pricing by 7% but more than made up for it in pushing volume through.

Pricing is probably the more important story at thi spoint. It is almost a given that the US consumer will be tightening the belt until there are better economic winds blowing across the land. However, prices that fall portend deflation because it relies upon the consumers to spend. If consumers do not spend it is because they have less employment or are more cautious about the future (thus, saving more.)

I am going to follow up on this more at length and will probably grab these firms latest figures to do a quick DuPont analysis to see how these figures compare to their strategy.