Within the retail industry, one of the key success drivers an analyst loves to pay attention to is of course the same-store-sales (SSS) growth, which for most part, is a self explanatory calculation. And for most part, this numerical figure does provide you with a much greater performance insight than a simple revenue growth figure.
In the case of two well-known retainers, Indigo Books (TSX: IDG) and Sears Canada (TSX: SCC), SSS growth does not seems to be a problem, showing a 2.7% and 2.9% growth respectively, which beats Canadian 2014 GDP growth of 2.5%. But wait – isn’t the book industry butchered by an influx of e-readers, and isn’t Sears a little too old and unattractive? Those are the questions that should be asked when analyzing strict numbers, and in today’s case, the positive growth figures are very deceiving.
Taking a look at the change in store counts, we notice a whole 98 store closures for Sears, while Indigo shut down only 5. Sears being a much larger company, the 98 stores represent a 4.7% drop, ending with 2,006 stores currently operating. In contrast, the 5 store closures for Indigo represent 2.2% of stores closed, ending with 226. On the upside though … there is no upside. The two have not opened any new stores, and more importantly, are running their current stores at an operational loss. Both chains loosing 4 cents on the dollar from operations, it is no surprise that more business is shutting down. And while the SSS growth might amaze you, it is only a strategic move by management to rid of the worst of stores first.
Oh, and if you were still wondering about their simple revenue growths, Indigo experiences an annual decline of 3.2%, while Sears has bombed down by 6.8% annually, over the past 3 years.
