Every time a retailer or restaurant reports its latest financial results, one of the key metrics they always seem to mention is "same-store sales." The measure is held in such high regard that it's often cited by analysts as possibly more important than total revenues, or even net income during certain periods. What exactly are same-store sales, and what makes them so important?
The simple answer is that it measures sales results for locations open longer than a year. Chipotle (NYSE:CMG), for example, has been around for 11 years, and it keeps delivering on comps -- a synonym for same-store sales. Just this past quarter, the company's year-over-year sales growth was up 13% -- which is amazing, because it means that, not only do people keep returning to Chipotle for food, but even more people are discovering and eating the product repeatedly.
This is why same-store sales is an important metric for judging the business health of retailers and restaurants: It lets you know consumers desire your product. Or, as is the case with J.C. Penney (NYSE:JCP), rejecting it, since its same-store sales are just now beginning to slowly turn around.
In this episode of The Motley Fool's Where the Money Is, consumer-goods editor Mark Reeth and consumer goods analyst Sean O'Reilly discuss the importance of same-same stores, and break down these numbers for Chipotle and J.C. Penney,
Mark Reeth has no position in any stocks mentioned. Sean O'Reilly owns shares of J.C. Penney Company. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.