This Is Why Same-Store Sales Numbers Matter

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You'll find them everywhere that retail sales numbers are reported: "same-store sales." You might not think too much about the term, but it's important to understand what it's telling you.

For example, Zumiez, a retail chain of board-sports accessories, recently reported overall sales down 1.5% between this October and the previous October. That might not sound good, but its same-store numbers were even worse: They fell by 8.9%.

The same-store numbers are the most meaningful, because they reflect sales at stores that have been open for more than a year. Without this measure, a company could report rising sales year after year just by opening new stores, when in fact each store might be seeing its sales level shrink. The same-store number is what you should focus on.

Here are some recently reported numbers for some companies you may know:

Company	CAPS Stars (out of 5)	October Same-Store Sales
Costco (Nasdaq: COST)	****	5.0%
Target (NYSE: TGT)	***	(0.1%)
Kohl's (NYSE: KSS)	**	4.9%
Gap (NYSE: GPS)	*	4.0%
TJX (NYSE: TJX)	**	10.0%
Rite Aid (NYSE: RAD)	**	(0.5%)
J.C. Penney	*	(4.5%)
Abercrombie & Fitch (NYSE: ANF)	**	(15.0%)
Nordstrom	**	6.5%

Data: Motley Fool CAPS, Yahoo! Finance.

Making sense of it
Of course, things are rarely as simple as they may appear, right? It's true with same-store sales numbers, too. So look at the big picture. Noting that these numbers reflect the sales change since October 2008, think about what the economy looked like a year ago. Last year's sales were starting to look pretty ugly on the eve of the financial crisis.

Since 2008's numbers were weak, you should expect that this year's numbers would likely look better in comparison. When you learn, for instance, that Nordstrom's October 2008 same-store sales were down 15.7%, its recent 6.5% rise doesn't look quite as impressive as it would in isolation.

Retailing can be a tough business, so you'd do well to learn which metrics to study when evaluating retailers. That way, you'll have a better chance of picking the best stocks you can find.