Same-Store Sales Can't Discount Profit

The paycheck cycle adds another variable to these monthly reports.
By Marek Fuchs ,

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) - Get Report 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) - Get Report

and

Kohl's

(KSS) - Get Report

were down, but

Costco

(COST) - Get Report

,

Wal-Mart

(WMT) - Get Report

and

BJ's

(BJS)

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)

. The only issue at the end of the day is how much profit remained after the discounting.

They Just Don't Get Retail!

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In an economic environment like this, getting a handle on the scale of the discounting is key, and

Bloomberg

, God bless it,

did so right up top

with these two essential paragraphs:

Consumers facing job losses headed for discounters instead of malls, hurting sales at Gap. Saks sold clothes for as much as 40 percent off to draw shoppers. As customer expenses rise, stores may need to keep up promotions, said C. Britt Beemer, founder of America's Research Group.
"If you didn't have a sale, you didn't have customers," Mr. Beemer said in a telephone interview. "Consumers are having a hard time dealing with inflation in both food and fuel."

The Wall Street Journal

, the little devil, didn't mention discounting until the second to last sentence, and then only to dismiss it. "There had been worries about the effects of widespread discounting on margins and profits going into the sales data. Instead, several firms boosted quarterly expectations."

True, but do a few firms make it safe enough to dismiss discounting as a concern? Especially with it so prevalent as a factor elsewhere? The

Journal

did better in its sub-headline

: "Early Easter Skews Data Comparisons; The 'Paycheck Cycle.'" The story acknowledges that many retailers blamed Easter for a slow March but did not credit a slow March for the strong April here. And the "paycheck cycle" involves reports from Wal-Mart that sales fell more than usual at the end of the month.

This seems to be saying that people are living paycheck-to-paycheck and does not speak to much in the way of this same-store sales news, which was greeted with excitement.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

click here

to send him an email.

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