Comparable-store sales are the standard metric to use in retail to compare companies' quarterly performance, but as The Motley Fool's own Buck Hartzell has pointed out, it's not always the best standard for comparison. Instead, we can look at sales per square foot to see how stores are doing. This is especially useful when comparing retailers of very similar types, which often have very similar store layouts and sizes.
Today, we're looking at three denim retailers to see how they stack up on a square-foot basis. We'll look at Buckle (NYSE:BKE), Fifth and Pacific's (NYSE:KATE) Lucky Brand, and True Religion (NASDAQOTCBB:TRLG.DL).
True Religion runs retail locations on the smaller side. The company has a total of 314,000 square feet of retail space, with the average store being about 1,900 square feet. Buckle runs larger, with stores closer to 5,000 square feet and a total footprint of 2.2 million square feet. Finally, Lucky comes in the middle, with stores around 2,400 square feet, and a total of 560,000 square feet to work with.
The trick in this comparison is finding the right measurement. True Religion doesn't report its sales per square foot, nor does it break out its revenue into brick-and-mortar versus online. Last year, RetailSails estimated that True Religion was bringing in $1,227 per square foot, but that math doesn't seem right.
The company did $365 million in total sales through its direct and international channels -- the channels where it has actual stores, but this also includes e-commerce sales. If it was managing $1,227 per square foot, then it would be getting $385 million from its stores' 314,000 square feet, which is more than its total sales. So the sales per square foot has to be less than $1,160, depending on how much of its sales come from e-commerce. According to their square footage figures, Buckle and Lucky do 93% and 55%, respectively, of their total sales through their stores.
Who's making it count?
Using the broad range from Buckle and Lucky, True Religion is earning between $650 and $1,100 per square foot. That's a decent bit of math to say that True Religion is winning. Lucky earns $462 per square foot, while Buckle is pulling in $475. Even at $625, True Religion is miles ahead on a square-foot basis, which isn't surprising, as the company's jeans sell for two to four times what Buckle's and Lucky's do.
So why is True Religion getting so much stick from investors? The problem is that it seems to have maxed out, which may point to customers being more price-conscious. While True Religion is winning per square foot, there's still something to be said for increasing volume in-store. While Lucky and Buckle have both been growing sales per square foot -- Lucky's CEO said recently that he wants the company to surpass $600 -- True Religion has faltered.
Although comparable-store sales don't tell the whole story, they do explain what's going on here. True Religion's comparable U.S. sales grew just 3% last year, while Lucky's were up 10%. True Religion seems to have hit a wall, while Lucky is just getting going.
On the plus side, True Religion should have a new CEO coming in, with Jeff Lubell stepping down. That should give the brand some new blood and may offer new solutions to the current problem of driving sales. I've been hesitant about True Religion in the past, but a look at the company's productivity has reopened my eyes to its potential.