Understanding and Calculating Same Store Sales Growth Percentage

Same Store Sales Growth (SSSG) is a crucial metric that helps retail businesses evaluate their performance by excluding the impact of new store openings or closures. This metric provides a clear picture of how existing stores are contributing to overall sales growth, making it an essential tool for strategic planning and decision-making. In this article, we will walk through the formula and steps to calculate SSGP and provide an example for better understanding.

The Formula for Same Store Sales Growth (SSSG)

The formula for calculating SSG is as follows:

Same Store Sales Growth % (Sales in Current Period - Sales in Previous Period) / Sales in Previous Period × 100

This formula helps retailers measure the growth accurately by focusing only on the performance of stores that have been open for at least one year.

Steps to Calculate Same Store Sales Growth (SSSG)

Determine the Sales for the Current Period

For this step, you'll need to collect the total sales revenue from the stores that have been open for at least one year during the current period. For example, if it's the fourth quarter of 2023, you would sum up the sales for all stores that were open as of the end of 2022.

Determine the Sales for the Previous Period

In this step, gather the total sales revenue from the same stores during the previous period. For instance, this would be the sales from the same quarter in the previous year (2022 Q4).

Subtract the Previous Period Sales from Current Period Sales

This subtraction gives you the change in sales, helping to identify any ups or downs in revenue from one period to the next.

Divide the Change in Sales by the Previous Period Sales

By dividing the change in sales by the previous period's sales, you obtain the growth rate as a decimal.

Multiply by 100

This final step converts the decimal growth rate into a percentage, making it easier to understand and compare across different periods or competitors.

An Example Calculation

Let’s illustrate the calculation with an example.

Sales in Current Period: 1,200,000 (Q4 2023)

Sales in Previous Period: 1,000,000 (Q4 2022)

Calculation:

SSSG (1,200,000 - 1,000,000) / 1,000,000 × 100 200,000 / 1,000,000 × 100 20%

In this example, the same store sales growth percentage is 20, indicating a positive growth trend in sales for the stores that were open in both 2022 and 2023.

Caveats and Considerations

While SSG is a powerful metric, it's important to consider certain caveats:

Inclusion of New Stores

nSome retailers only include stores that have been open for more than one year in the same-store math. This is because a new store's first year is often its best, with promotions and initial customer interest driving higher sales. As stores mature, this initial surge normalizes, leading to more realistic performance comparisons.

For example, if the current period is October, only include stores that were open in months 1 through 10 of both the current and the previous years. Exclude any stores that are less than one year old, even if they are open during the same period.

Overall Store Growth and New Store Impact

It's important to distinguish between overall store growth and same-store sales growth. If your overall store growth percentage is high, like 30.1%, this could be due to new store openings or potential acquisitions. A more reasonable SSG is typically 2% to 3%, which is generally in line with the Consumer Price Index (CPI).

Conclusion

Calculating same store sales growth accurately is crucial for retailers to understand the true performance of their existing stores. By following the correct methodology and considering the caveats, businesses can make informed decisions for future growth and strategy.