Same-Store Sales Can't Discount Profit

I, your humble Business Press Maven, have iterated more than once that retail investors shouldn't think of same-store sales results as the forged steel of financial results. These comparisons can inform, or guide to a degree, and if a company like Macy's(M Quote) stops reporting them all of the sudden, your antennae should wiggle. (Perhaps toward this National Public Radio interview that followed.)

But this week raised a whole new concern that got my antennae twitching

We had what looked on the surface to be surprisingly good same-store results. Target (TGT Quote) and Kohl's(KSS Quote) were down, but Costco(COST Quote), Wal-Mart(WMT Quote) and BJ's(BJS Quote) were up nicely.

The temptation in newsrooms across America was to sum up the results in an excited headline, and we unfortunately had our share, but being the positive soul that I am, let's look today at a pair of articles that, taken together, tell the whole story. Or at least give you a sense of what to watch out for and factor in when you look at same-store sales results for the month. Remember, you have to think them through without getting too immediately excited or grim.

Bloomberg started where many did, pulling on the thread that the discounters did well. Here is the headline, all fine and good: "Retailers' April Is Mixed, With Discounters Strong."

Leave it there, though, and you've only done a half-job. It is essential to remind non-professional investors, but it's also frequently overlooked by the pros in an occasional fit of excitement: same-store sales are only top-line numbers. In the end, only profits matter. So while discounters were strong, as were some non-discounters, such as Aeropostale(ARO Quote). The only issue at the end of the day is how much profit remained after the discounting.

They Just Don't Get Retail!