Posted in Finance, Accounting and Economics Terms, Total Reads: 365
Definition: Same-Store Sales
Same store sales or identical store sales is an important statistical metric that is used by the retail industry to analyse the performance of a retailer’s existing outlets over a definite period, by comparing it with the past performance over an identical period.
Same-store sales is used to compare the revenues earned by the established outlets of a retail chain over a specified period (quarterly or annual periods) to remove seasonal fluctuations and geographical variations, with the revenues earned over a similar period in the previous year. The metric is used to analyse and determine the reasons for increase or decrease in sales revenue over the identical periods. Same-store sales can be used to attribute the sales growth to either an increase in the number of retail outlets or to an increase in sales revenues from improved operations.
The comparison excludes the revenue data attributed to outlets closed during the period and new outlets that may have opened, thereby making a comparison in sales data for the same set of outlets between the two periods. The process for obtaining the same-store sales is as follows:
- Starting from the sales data for year 1, subtract the revenues that are attributed to closing of stores for the period. The same operation is performed on sales data for year 2.
- Subtract the sales revenues arising from new outlets in the period for the two years. This makes it possible to compare sales data between existing outlets for the two years.
- The same-store revenues obtained for years 1 and 2 above are subtracted to determine the change in same-store revenues. This result can also be expressed as a percentage of same-store revenues for year 1.
A positive change in same-store revenues indicates gain in market share due to increased consumption or an increase in number of customers. A negative value implies decreasing revenues due to changes in consumption pattern or due to cannibalization.