Comp sales allow a business to contrast its current retail location revenue with that from a prior accounting period. The store is likely doing well if the location generates more revenue in the current accounting period compared to the prior accounting period. Some larger businesses may perform comp sales calculations frequently to assess how various locations are performing. The new calculation is $1 million, minus $2 million, divided by $2 million, or -50%. When comp store sales are up, the company’s sales are increasing at its current stores. When total sales growth is up and comp stores are down, the company is generating most of its revenue from the opening of new stores to maintain growth, which could be a sign of turmoil.

Comparable store sales refers to the revenue generated by a retail location in the most recent accounting period relative to the revenue it generated in a similar period in the past. Same-store sales is calculated by comparing the sales from a current period (e.g., a quarter or a year) to the sales from the same period in the previous year for locations that were open during both periods. Net sales are a company’s total sales over a given time period minus allowances, returns, and discounts. Typically, you would combine the net sales from the current and previous years. The current year should remain the same, but if you’d prefer, you could select a different year than the one before.

Calculation Formula

However, comp calculations also measure progress in achieving sales benchmarks. For example, 2021 sales for February, the third quarter, or annual sales relative to the previous year’s targets during the same periods. To calculate a company’s sales growth rate, subtract the previous year’s sales from the current year’s sales and then divide the difference by the previous year’s amount. For example, if Company A earned $2 million in revenues last year and $4 million this year, the calculation to determine its growth rate is $4 million minus $2 million, divided by $2 million, or 100%.

Understanding Comps

• Positive or negative changes in sales may be due to price fluctuations, changes in customer traffic, and economic factors that impact consumers.
• A retail company’s 10-Q report for a quarter may show that it brought in $18 million in revenue.
• In order to correct for skewed data due to stores closing, you can also deduct revenue from closed stores from both 2020 and 2021.
• The importance of same store sales (comps) is that it gives us the real growth picture of the retail business.

Alternatively, new store sales may be less than projected due to poor marketing, inadequate advertising, and lackluster promotions. As a result, including new stores in the growth rate calculation for an entire retail chain can supply inaccurate growth rate results. Because the comps metric only compares results for stores that are older than one year, it gives a better indication of true growth for the overall firm. A financial analyst might be able to identify the factors that contributed to the positive or negative change in your comp sales value. You could continue your current practices or even invest in new stores if your business is doing well. You can try to change your business model or reallocate your resources if sales at your company are declining.

Analyzing one store

However, this information will be useless if it is used as a stand-alone number. To make any sense of this figure, an analyst will compare it to sales generated over the previous quarter of the same accounting year or a previous accounting year. A determination on performance can be made under the assumption that companies that are similar should trade at similar multiples.

Negative or positive same-store sales might be due to increasing or falling prices or a change in the number of customers who frequent the stores. Retail analysts use comp sales calculations to compare older stores’ performance to newer ones. Or the current year’s sales performance versus the previous year’s sales to check the present sales status. A best practice in calculating comp is to exclude new stores as they tend to skew results.

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• For example, if company A earned $2 million in revenues last year and $4 million this year, the calculation to determine its growth rate is $4 million, minus $2 million, divided by $2 million, or 100%.
• When comp store sales are up, the company’s sales are increasing at its current stores.
• He discovers that new stores generated $3 million of the current year’s sales and stores open for one or more years generated only $1 million of sales.
• If the business is experiencing Like-for-like de-growth and it has started to be a trend, i.e it wasn’t only for a single quarter or year, then this is a red flag.

When a business starts opening new stores, each store should bring new revenue to the company, so that it can justify its costs and the investment that has gone into it. If this is not the case, then the company could actually be losing money on the bottom line, because those stores are adding costs and not bringing new sales, but rather eating at the sales from existing locations. The importance of same store sales (comps) is that it gives us the real growth picture of the retail business. Comparable store sales are typically expressed as a percentage of an increase or decrease in revenue. This example shows how you would calculate the change in comparable comp sales formula store sales from one year to the previous year. A retail company’s 10-Q report for a quarter may show that it brought in $18 million in revenue.

Competition sales are a great way to draw in new customers and retain existing ones by offering discounts and promotions. With competition sales, businesses can increase their customer base, improve customer loyalty, and increase their bottom line. Not only do competition sales offer customers an incentive to shop, but they also provide businesses with an opportunity to differentiate themselves from the competition. In this blog post, we will discuss the benefits of competition sales and explore strategies for successfully utilizing them.

New stores typically experience high growth rates for several reasons, including promotions, increased interest from launches and grand openings. Same store sales growth depends on how long the businesses has been open and the market situation. For example a new business is typical to show a high LFL growth in its second year of trading, that could reach double digits. If the retail business is having a Like-for-like growth, then it means that the business is in growth mode and is still acquiring new marketshare. In this case opening new stores is the go-to strategy to sustain this growth, reach more customers and drive out competition.

Example of Comparable Store Sales

Companies usually apply comp sales metrics to retail outlets older than one year. Holiday and other seasonal factors, such as Christmas, also impact comp sales calculations and  can skew monthly revenue figures. In general, financial analysts are aware that new stores provide incomparable data and avoid including them in comparable company analysis. Comparable (comp) sales are calculations that reveal important details about how a store location is doing right now in comparison to how it was doing during a prior year or accounting period.

We will also consider the potential disadvantages of competition sales and examine ways to minimize any risks. Ultimately, the goal is to help businesses leverage competition sales to gain a competitive edge. Since it is normal that new locations will increase the total revenue of the business, looking at same store sales will show us if the business is actually growing, i.e other stores are also experiencing growth.

This takes into account inaccurate sales data from grand openings, allowing you to determine a more typical number. In order to correct for skewed data due to stores closing, you can also deduct revenue from closed stores from both 2020 and 2021. You can use comp sales calculations to support your decision to open more stores in different locations.