Monthly Comp-Store Sales Reporting
After reporting sales for the month of January, Abercrombie & Fitch, Aeropostale and American Eagle Outfitters announced they will stop reporting monthly sales, Bloomberg reported on Wednesday.
This was concerning to some analysts. “The more information the better,” said Michael Baron, an analyst for Baron Capital Inc. in New York. “More information helps us determine the true value of the company.”
Others disagreed. “Many retail executives say reporting sales from stores open at least a year puts too much focus on short-term results,” said Brian Sozzi, an analyst for Wall Street Strategies Inc. in New York. In addition, many retailers don’t include sales generated on the Web or on mobile devices, he said. Because the three teen retailers are stopping at once, “it makes it easier for others to follow,” said Sozzi, who in an interview called monthly reporting “archaic.”
My perspective is that the real significance of this move is to take the focus off of same-store sales and put it more squarely on earnings.
I've long believed that monthly reporting of same-store sales was a poor indicator of a retailer's financial health. The obvious issue is that it's too easy to buy sales with deep discounts that erode margins. But the deeper issue is the composition of the same-store base. A chain with a higher percentage of newer stores in the base will generally show greater increases, but those stores are generally not as profitable as more mature stores, nor are they assured of profitability.
To me, it's really not an issue of short-term versus long-term perspective. Quarterly reporting forces its own imperatives. But quarterly reporting of financials puts the focus where it ought to be, on earnings, while retaining visibility to revenues. This is where management's focus should be.