State of US Same-Store Sales - September 2010 and Quarterly Data Update and Full-Year Outlook
Retailer Daily has compiled comparable store sale data from the SEC filings of 26 major US retailers spanning several years, up to the most recently released September 2010 and quarterly numbers. The data excludes fuel sales and is available in Microsoft Excel format from the link below:
Indications from September 2010 and the most recent quarterly same-store sales results across several verticals suggest that most retailers entered the traditional fall sales season on a positive note. With the notable exceptions of Wal-Mart and Best Buy, retailers reporting recent negative same-store sales growth were chains which have been experiencing long-term difficulties. Vertical-specific overviews follow.
Kohl’s, Macy’s Continue Department Store Leadership
The department store vertical, which for a time appeared doomed by competition from discount and dollar store retailers based on generally atrocious same-store sales results from late 2007 through late 2009, has made a strong showing through most of 2010 and excepting a mild 1% drop in same-store sales at Gap (its fourth straight month of negative growth), continued to do so in September. Despite competition from discount and dollar store retailers (see below), consumers still appear to be more willing to spend more money to obtain better brand names than may be available in cheaper verticals.
Kohl’s, which was one of the first major department store retailers to begin turning around its same-store sales performance in July 2009, continues to be a leader in the vertical. More expensively priced chain Macy’s, which reported negative same-store sales growth every month from September 2007 through November 2009, is also a vertical leader, with its 10th straight positive same-store sales month in September.
JCPenney, which has fluctuated since producing its first positive results since November 2007 in February 2010, had its best month of 2010 since March, reporting 5.1% same-stores sales growth, the best September performance of all the department store retailers tracked by Retailer Daily. In recent months, JCPenney reported an uptick in August sales following a slightly down month in July and a positive month in June.
Wal-Mart’s Loss is Target’s Gain
While Wal-Mart does not exactly have to worry about losing its number one discount status to top competitor Target anytime soon, Target does appear to be gaining some of Wal-Mart’s expansive market share. Wal-Mart, which only reports same-store sales on a quarterly basis, has been reporting negative growth since its Q2 fiscal 2010 (August 2009). Prior to this, Wal-Mart’s last negative same-stores growth occurred in April 2007, when it still reported monthly results.
In contrast, Target, which still reports monthly same-store sales figures, has reported positive growth in every month since December 2009 except for an aberration in April 2010 which may have been partially due to an earlier Easter holiday. April 2009 marked Target’s only positive same-store sales month between July 2008 and November 2009, further bolstering the likelihood that Easter has played a significant role in Target’s April same-store sales results during the past two years.
Dollar Stores Earn Top Dollar
The recession continues to be extremely beneficial to the dollar store vertical. In their most recent quarterly reports, both Dollar General (5.1% increase) and Family Dollar (6.1% increase) continued a streak of strong same-store sales increases stretching back to mid-2008.
While there is no clear consensus on whether the economy is currently heading up or down, most experts agree the "new normal" of consumer frugality will continue when the recession finally ends. Same-store sales results in the dollar store vertical will serve as a key indicator of whether consumers maintain the conscientious shopping habits they have developed in the past few years of economic difficulty.
In Drugstore, the Rich Get Richer
Walgreens, which has reported generally positive monthly same-store sales growth for the past year, although for the third time this year it reported negative growth in May 2010, produced positive same-store sales for the fourth straight month in September 2010.
CVS, which reports same-store sales on a quarterly basis, produced a same-store sales increase in the third quarter of 2010, following a negative result in the second quarter and positive result in the first quarter. CVS has somewhat mirrored chief rival Walgreens this year, as two of Walgreens' three months with negative same-store sales growth occurred in the second quarter.
This fluctuation in same-store sales results from the country's two leading drugstore chains would suggest that increased competition in prescription and HBC products from discount and supermarket retailers is taking a toll on the drugstore vertical, although it may have stabilized.
Rite Aid, which plays a third fiddle to Walgreens and fellow national drugstore giant CVS, continued a long-term pattern of negative same-store sales growth in September 2010. Rite Aid’s last month with positive same-store sales growth was September 2009, and the retailer has not reported any consistently positive results since 2008.
In Fast Food, the Rich Get Richer, Too
McDonald's, the world's leading fast food retailer, reported strong September 2010 same-store sales results and has mostly been in positive same-store sales territory this year. The same cannot be said for McDonald's main competitor Burger King, which has reported negative same-store sales growth in the first three quarters of this year.
In addition, smaller fast food competitors Wendy's and Arby's, which share a corporate parent, reported declining same-store sales in their most recent fiscal quarter. Arby's in particular has been reporting significant decreases in same-store sales since the end of 2008, while Wendy's has experienced more of an up-and-down same-store sales pattern.
Discount Warehouse Club Offers Mixed Results
Of the two discount warehouse club retailers tracked by Retailer Daily, Costco and Sam's Club, Costco has been generally posting better same-store sales results in 2010. Sam's Club, which along with parent company Wal-Mart switched to a quarterly reporting format in May 2009, has so far reported a 0.7% increase, 0.7% decrease and 1% increase this year.
In contrast, Costco, which reports same-store sales on a monthly basis, reported flat results in January 2010 and since then has posted increases ranging from 1% (June) to 5% (August) every month this year, growing same-store sales by 2% in September.
Looking back to 2009 and 2008, Costco's same-store results have been relatively steady, but Sam's Club's results began notably declining in April 2009, when the retailer posted a 0.3% increase. This followed increases of 2.4%, 5.9%, and 6.2% the first three months of that year.
Home Improvement Rebound May Be Real
With a sagging housing market negatively affecting their performance, leading home improvement retailers Home Depot and Lowe’s both reported negative same-store sales growth in every quarter from 2007 through 2009. However, both chains have now reported positive same-store sales growth for the first two quarters of 2010, suggesting that the turnaround they have long been predicting may indeed be taking place.
One possible explanation is that homeowners realize they cannot sell their existing homes for decent value and are instead performing long-delayed repairs as they prepare to settle in until the housing market finally recovers.
Consumer Electronics Slightly Dips
Best Buy, the only significant national brick-and-mortar consumer electronics chain left in the U.S., reported a mild 0.1% same-store sales decline in its most recent fiscal quarter, following three straight quarters of growth. Discount and warehouse club chains, most notably Wal-Mart and Target, have become major players in the consumer electronics space, which may be having a negative impact on Best Buy's same-store sales. For the upcoming holiday shopping season, Best Buy plans to be more promotional and spend more on TV marketing this holiday season. The company is selling not only devices but also is offering different services, from in-home installation to its own mobile broadband service, designed to draw holiday traffic.
Office Supply Flattens
Dominant category player Staples appears to have stabilized its same-store sales situation since reporting flat results in Q4 2009. Staples began reporting mild same-store sales declines in Q3 2007, on the eve of the current recession, and had what could be called a disastrous 2008 and first three quarters of 2009, with same-store sales declines going as low as 13% in Q1 2009.
However, after reporting small increases in the first two quarters of this year, Staples reported flat same-store sales in its most recent fiscal quarter, despite what is being forecast as an improved back-to-school sales season.
Auto Parts Benefit from Recession
Advance Auto Parts and AutoZone have both been reporting positive same-store sales results in every quarter since Q1 2009. Most recently, AutoZone reported impressive 6.7% growth, while Advance also impressed with 5.8% growth. The recession appears to be beneficial to the auto parts vertical, perhaps because consumers are more prone to perform do-it-yourself auto repairs to save money, rather than buy a new car or pay a repair professional.
Kroger, Supervalu Head in Different Directions
Kroger and Supervalu are both Midwestern-rooted national supermarket conglomerates with thousands of stores operating under multiple banners. Despite these similarities, their same-store sales fortunes have been quite different in recent years. While Supervalu has not reported same-store sales growth since Q4 2007, Kroger has reported at least moderate growth in every quarter since Q1 2008, most recently reporting a 2.7% same-store sales improvement.
Increased food and CPG competition from the discount, dollar store and warehouse club verticals may mean there is less room for national supermarket retailers to thrive. It is worth noting that Supervalu is expanding its extreme discount Save-A-Lot banner in the Southeast, possibly in response to this off-price competition.
Same-Store Sales Influencers
Sales for existing stores typically reflect a combination of (a) the robustness of consumer consumption in their individual trading areas and (b) the local standing and competitiveness of each store within its trading area. Among other criteria, retailers look at average order size multiplied by the number of transactions during the period to identify sources of revenue growth per store. Growth might, for instance, be driven by a more expensive product mix if, say, a retailer started successfully upselling higher-end products to its customers.
Another issue affecting same-store sales is trading-area saturation, whether because of competitive pressure or self-inflicted causes. Home Depot, for instance, stated in a recent SEC filing that it opened stores "near market areas served by existing stores ("cannibalize") to enhance service levels, gain incremental sales and increase market penetration.... [N]ew stores cannibalized approximately 9% of our existing stores as of the second quarter of fiscal 2008, which had a negative impact to comparable store sales of approximately 1%."
Declining same-store sales can increase the weight of selling, general and administrative expenses (SG&A) as a percentage of sales. For instance, Home Depot said in 2008 that its "deleverage in SG&A reflects the impact of negative comparable store sales, where for every one percentage point of negative comparable store sales, we expect to deleverage expenses by about 20 basis points." Also, Mapping of the 155 stores
closed by Circuit City in November 2008 showed that overlap in some markets probably contributed to under-performance there. Were the current recession to last, it is quite likely that retail density will decrease with more store closures in areas showing the most overlap.