State of US Same-Store Sales - Feb. 2010 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 February 2010 numbers. The data excludes fuel sales (which would have distorted numbers because of high gas inflation, then deflation, in 2008) and is available in Excel format from the link below:
Department Store
- Macy’s reported a 3.7% increase in February 2010.
- JCPenney reported a 1.2% increase in February 2010.
- Gap reported flat sales in February 2010.
- Kohls reported a 3.7% increase in February.
- Sears reported a 2.5% decrease in Q4 2009.
Discount
- Wal-Mart reported a 2% quarterly decline.
- Target reported a 2.4% increase in February 2010.
Dollar Store
- Family Dollar reported a 2.4% quarterly increase.
- Dollar General reported a 9.4% quarterly increase.
Discount Warehouse Club
- Costco reported a 2% increase in February 2010.
- Sam’s Club reported a 0.7% quarterly increase.
Drugstore
- Walgreens reported a 2.4% increase in February 2010.
- Rite Aid reported a 3.2% decrease in February 2010.
- CVS reported a 4.9% increase in Q4 2009.
Fast Food
- McDonald’s reported a 0.7% decrease in January 2010.
- Burger King reported a 3.3% quarterly decrease.
- Arby’s reported an 11% decrease in February 2010.
- Wendy’s reported a 3% decrease in February 2010.
Consumer Electronics
- Best Buy reported an 8.2% increase in February 2010.
General Monthly Analysis
Department Store
With the notable exception of Sears, the department store vertical is showing signs of a general recovery after widespread poor performance in 2009 and 2008. Gap, which reported a 1% same-store sales hike in December 2009 following a difficult 2009, continued that trend with a 2% gain in January 2010. Gap recently launched a major strategic initiative to regain market share in its three store banners. The initiative includes efforts to improve assortment, product categories, in-store customer experience, and advertising and marketing.
Kohl’s reported a 3.7% same-store sales increase in February 2010, its seventh straight month of gains. Kohl’s has been launching a number of private-label apparel partnerships with celebrities popular with the tween/teen girl market in the past year, including Lauren Conrad, Britney Spears and Avril Lavigne. Kohl’s is confident enough in its ongoing success to have recently opened nine new stores and launch plans for 30 new store openings and 85 store remodelings this year.
JCPenney, which reported modest 1.2% same-store sales growth last month, has been seesawing in its same-store sales results as of late. JCPenney saw same-store sales drop 4.6% in January 2010, after experiencing a mild December rebound following a difficult autumn. JCPenney reported declines of 5.9% in November and 4.5% in October. JCPenney reported declining same-store sales for every month of 2009, with December’s decline coming in as the second-lowest after a 1.4% drop in September. JCPenney has been actively promoting a variety of new online services and licensed private label goods.
And Sears, which recently reported soft results for Q4 and fiscal year 2009, should be disappointed with its same-store sales drop considering the numerous activities it has recently undertaken to launch new product lines and improve multichannel customer service. Sears has closed 62 underperforming stores in the past 12 months, which may have affected same-store sales.
Discount, Dollar Store, Warehouse Club
The discount vertical traditionally poses the biggest challenge to department store retailers, and discount leader Target reported a 2.4% same-store sales improvement in February 2010, following increases of 0.5% in January 2010 and 1.8% in December 2009.
Target finished fiscal year 2009 on a high note, reporting significant Q4 and annual growth in net earnings, retail sales and gross margin. Target may be seeing the benefits of a warehouse club-inspired sales promotion it launched in approximately 1,000 of its 1,740 U.S. stores at the beginning of last month. Called “The Great Save,” the promotion offers items including bulk-packaged CPG and grocery goods, as well as designer apparel and home décor products usually not available at Target, in what Target calls a “warehouse club-like setting.” Customers will not need to pay a membership fee or get an ID card to participate in the promotion, which ends Sunday, February 21, 2010.
The recent same-store sales success of discount warehouse club mainstays Costco and Sam’s Club further bolsters the idea that this shopping format appeals to cost-sensitive shoppers in a lingering recession.
Discount leader Wal-Mart, which switched to a quarterly same-store sales reporting format last year, saw its same-store sales drop during the second, third and fourth quarters of its fiscal 2010. Wal-Mart expects same-store sales without fuel during Q1 fiscal 2011 (ending April 30, 2010) to be flat, plus or minus 1%, as compared to 3.6% for the comparable period last year.
Meanwhile, consumers at all income levels are starting to turn to dollar store retailers for many purchases. The most recent quarterly same store sales results from major dollar store players Family Dollar and Dollar General are indicative of this growing trend.
Dollar General in particular reported very strong same-store sales growth of 9.4% in its most recent fiscal quarter. Like Kohl’s, Dollar General is confident enough in its performance to plan store growth this year. Dollar General’s plans are substantially more ambitious than Kohl’s, as it intends to open 600 new stores by February 2011, creating as many as 5,000 new jobs. This follows 2009 growth of 450 stores and 4,000 employees. Dollar General raised $716 million in gross primary and secondary proceeds in a November 2009 IPO (initial public offering), with supporting growth as a primary rationale.
Fast Food
Burger King, the number two fast food chain in the U.S., reported a disappointing same-store sales drop of 3.3% in its Q2 fiscal 2010. However, Burger King is forecasting a positive second half of fiscal 2010. The retailer expects to add 250-300 net new restaurants worldwide, reimage and remodel North American stores, and introduce new value-based promotions, among other anticipated achievements.
McDonald’s reported a same store sales drop of 0.7% in January 2010, and also reported some same-store sales declines late last year. However, McDonald’s Q4 fiscal 2009 same-store sales still rose 2.6%, and has allocated $2.4 billion toward capital expenditures in 2010 for strategic brand differentiating investments such as store reimaging, which may help same-store sales later this year.
Smaller national fast food chains Wendy’s and Arby’s both posted negative same-store sales results during February 2010, suggesting that if the vertical leaders are not doing well in terms of same-store sales, smaller competitors are not necessarily picking up the slack.
Consumer Electronics
In the consumer electronics vertical, Best Buy reported a strong 8.3% same-store sales increase. Best Buy came off a very strong 2009 holiday season performance, with domestic revenue growing 13%.
Since then, Best Buy has launched a variety of tools and approaches to reach customers via mobile device, including targeted mobile marketing efforts designed to lure customers into stores.
Previous Analysis
Wal-Mart Poses Cross-Vertical Threat
Retailers in verticals such as drugstore, consumer electronics, supermarket, toys and arts and crafts face a new, heightened challenge from discount giant Wal-Mart. The retailer launched a new program called Project Impact in 2009, designed to improve customer service and knock vertical competitors out of business. Project Impact includes features such as less crowded aisles with better sight lines, more convenient placement of consumables, improved assortments, and more prominent promotion of vertical products. If Project Impact proves successful this year, numerous vertical retailers may see their same-store sales slip.
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.