Retailers overstating growth by ignoring cannibalisation

 In Australia, Bunnings, Coles, NewZealand, Woolworths
Australia’s largest retailers are overstating same-store sales growth, a key measure of performance, by excluding sales from stores that are being cannibalised by new stores, a new report says.
Coles, Woolworths and Bunnings measure like-for-like sales growth by excluding existing stores that are being cannibalised by new stores, while retailers in the United States and Britain do not adjust for cannibalisation, a report by investment bank Morgan Stanley says.
Morgan Stanley analysts estimate that Woolworths might have been overstating like-for-like sales growth from Australian food and liquor stores by as much as 1 percentage point over the past few years by excluding stores being cannibalised by newly opened stores.
The retailer has been opening stores at a record rate and more than 60 per cent of new stores have been in close proximity to existing stores, eating into sales.
Woolworths’ same-store Australian food and liquor sales rose 3 per cent in 2014, but Morgan Stanley estimates that after including stores in close proximity to newly opened stores, actual same-store sales growth would have been 2 per cent.  Sydney Morning Herald – Read more…

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