Guide to Retail KPIs

This guide highlights the key performance indicators for the retail industry and where investors should look to find an investment edge. While this guide is not a full integrated retail industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key retailer metrics that will aid market participants in identifying retailer trends and future performance of retail companies – including The Home Depot, Carvana, Chewy and more – by region and retailer type.

Guide to Retail KPIs

This guide highlights the key performance indicators for the retail industry and where investors should look to find an investment edge. While this guide is not a full integrated retail industry primer, as the market leader in granular consensus estimates data, Visible Alpha works with partners and clients to determine the key retailer metrics that will aid market participants in identifying retailer trends and future performance of retail companies – including The Home Depot, Carvana, Chewy and more – by region and retailer type.

Retail Industry Overview

The health of the retail industry is driven by consumer spending, which forms a significant portion of a country’s GDP. The retail industry is composed of companies or retailers who sell goods or services to end consumers through brick-and-mortar stores or through online business models, acting as a link between manufacturers and consumers.

The global shift towards digital commerce has also led to the rise of omnichannel retailers who sell through both online and offline platforms, with the online banner often used to enhance the store-based brand. Store developments continue to see a strong focus on frictionless and seamless experiences. From creating an integrated smartphone-enabled, in-store shopping experience, to dedicating a store entirely to online orders and expanding click and collect offerings, many of the world’s largest retailers are moving quickly to embrace a digital future for stores. This information is available as a downloadable eBook >

This guide covers the following industries on the Visible Alpha platform:

Retailers
- Apparel retailers
- Department stores
- Hypermarkets
- Supercenters
- Specialty stores
- Food retailers
- Home furnishings retailers
- Home improvement retailers
Automotive retailers
Online retailers

Retail Business Model

RETAIL REVENUE MODEL

Retailer revenue comprises merchandise sales, recognized at the point-of-sale and ecommerce sales, recognized upon the shipment of a product to the customer. The retail industry’s business model is primarily based on comparable-store sales growth, also known as same-store sales (SSS) growth or like-for-like (LFL) growth. Comparable-store sales are sales from stores that are operational for more than 12 months. Note that many companies are inconsistent about whether they include online sales in comparable-store sales. Comparable-store sales eliminate the sales impact from new store openings, closings or acquisition, to measure the sales growth of a retailer on a comparable basis. This makes comparable-store sales the most important metric that is generally analyzed across retailers. Comparable-store sales is a function of store traffic, which is the change in the number of people visiting a store, and ticket, which is the change in spending per customer.

A new or acquired store’s sales growth is the impact on sales due to a change in the number of stores operated by a retailer, during a given period. It is calculated as the product of square footage growth and new store productivity. New store productivity measures the sales generation efficiency of a new store in its first year as a percentage of the performance of a pre-existing or same-store. New store productivity of 100% would indicate a similar performance of a new store compared to a pre-existing or same-store.

Retail revenue is derived from total growth, which is the sum of comparable sales growth and new stores’ sales growth. More often than not, for retailers, retail revenue equals total revenue, which is further broken down by distribution channels such as store-based sales or ecommerce sales. Retailers could also have other revenue segments such as wholesale and licensing to sum up to total revenue.

AUTOMOTIVE RETAIL REVENUE MODEL

Companies in the automotive retail industry primarily focus on the following reportable business segments:

New vehicles, which covers the revenue generated from the sale of brand new vehicles,
Used vehicles, which covers the revenue generated from the sale of pre-owned vehicles,
Parts and service, which covers the revenue generated from automotive parts, maintenance and repair services, and
Financial services, which covers the revenue generated from automotive finance and insurance services.

Each of these business segments is modeled in a similar manner, which is by bifurcating these segments into same-store sales and new or acquired store sales. Same-store sales and new or acquired store sales are calculated by multiplying the units sold in the respective stores with the average selling price (ASP). Comparable sales growth is also a frequently tracked growth metric that measures the growth of a retailer on a same-store basis. Depending on the nature of the business, some companies also provide a break up of retail and wholesale revenue streams.

ONLINE RETAIL REVENUE MODEL

Online retailers operate their business segments under a first-party (1P) business model, a third-party (3P) business model, or a combination of the two.

In a 1P operating model, the retailer purchases goods or services from suppliers and sells them to consumers by listing the goods on its website or app. Additionally, the retailer may also sell its own private-label products. The revenue generated from such an operating model is termed first-party revenue. In a 1P model, the entire amount of gross sales, also termed gross merchandise value (GMV) flows into the retailer’s revenue.

In a 3P operating model, the company acts as a marketplace where sellers list their goods or services to sell to buyers. Both parties use the company’s website and/or app and the company charges a fee to the seller in the form of a take rate. Gross merchandise value multiplied by the take rate equals the total 3P revenue that a company will then book on its income statement.

Gross merchandise value (GMV) is computed by multiplying the number of orders in a given period by the average basket size. The number of orders is calculated by multiplying the number of active customers by the number of orders per customer. In some cases, GMV can also be calculated by multiplying the active customers by the GMV per customer. The sum of 1P and 3P revenue is platform revenue, which refers to the revenue earned by selling goods or services via the company’s online platform.

Digital advertising is also an important source of revenue for some online retailers. Additionally, retailers generate fulfillment and shipping revenue on processing and delivering goods to end-users. Often retailers include fulfillment and shipping revenue in platform revenue.

Key Retail Metrics

Key performance indicators (KPIs) are the most important business metrics for a particular industry. When understanding market expectations for the retail industry, whether at a company or industry level, here are some of the retailer KPIs to consider:

View Online Retailer KPI Forecasts

Retailers

Traffic Growth
Traffic growth refers to the growth in the number of customers visiting a retailer’s stores. It is one of the most important factors in assessing retailer revenue as higher store traffic leads to higher sales.
Ticket Growth
Ticket growth refers to the growth in average spending per customer. Ticket denotes the amount each customer spends per visit.
Comparable-Store Sales Growth
Comparable or same-store sales growth refers to the revenue growth of stores that are open and operated by a retailer for more than one year. The ‘more than one-year’ criteria and the inclusion of ecommerce sales in comparable-store sales growth varies across retailers. This metric is used to determine the performance of the existing operational store.
New Stores Sales Growth
New or acquired store sales growth refers to the revenue growth contribution of stores that are operated by a retailer for less than one year. Often retailers include the 53rd week and other impacts in new store sales growth.
Number of Stores
Number of stores is the total number of stores that are operated by a retailer at the end of a given period.
Store Space – Gross and Selling
Store space is the square feet area of a retailer’s store. There are two types of square feet information that a retailer reports, gross square feet and selling square feet. Selling store space includes the selling area of a store such as the in-store space where the products are displayed and the checkout area. Gross store space also includes the non-selling area such as the kitchen, break rooms used by staff, storage areas, administrative areas, elevators, washrooms, and so on.
Average Store Size
Average store size is the average square feet or average space per store.
New Store Productivity
New store productivity measures the sales generation efficiency of new stores. It is calculated as new store sales divided by the increase in the area of stores added.

Automotive Retailers

Comparable-Store Sales Growth
Comparable or same-store sales growth refers to the revenue growth of stores that are open and operated by a retailer for more than one year. The ‘more than one-year’ criteria and the inclusion of ecommerce sales in comparable-store sales growth varies across retailers. This metric is used to determine the performance of the existing operational store.
Units Sold
Units sold is the number of vehicle units sold by an automotive retailer in a given period.
Average Selling Price (ASP)
Average selling price (ASP) is the average price at which a unit of a vehicle is sold.

Online Retailers

Gross Merchandise Value (GMV)
Gross merchandise value (GMV) is the overall gross transacted value of goods/services purchased by customers via a retailer’s online platform. The value is inclusive of shipping charges unless otherwise stated and taxes such as VAT.
Take Rate
Take rate is the percentage charged on GMV to a retailer’s sellers. It generally includes commission fees and shipping fees charged when the company acts as the shipping provider and other seller services. Take rate could be on a blended basis or just a 3P basis.
Active Customers
Active customers are consumers who have made a purchase from a retailer’s online platform in the last 12 months.
Number of Orders
Number of orders is the total number of orders placed by consumers on a retailer’s online platform in a given period, inclusive of gross returns and net cancellations.
Orders Per Active Customer
Orders per active customer is calculated as the number of orders divided by active customers. This metric is indicative of how frequently a customer is likely to place an order in a given period.
Average Basket Size
Average basket size refers to the GMV per order. It is the average value of all orders placed on the retailer’s online platform in a given period.
GMV Per Active Customer
GMV per active customer is the GMV divided by active customers for a given period. It indicates the gross transacted value of goods/services attributable to each customer.

Visible Alpha’s Standardized Industry Metrics

To understand market expectations for the retail industry, a key information source is sell-side analyst estimate and consensus forecast data. The buy side, sell side and public companies leverage this type of data to conduct peer analysis, a type of analysis conducted by professional analysts that involves comparing standardized metrics of one company with those of similar companies. Because companies report metrics differently – and sometimes report on different metrics altogether – standardizing the key metrics for each company can be a cumbersome process.

Visible Alpha Insights includes analyst data, company data and industry data at level of granularity unparalleled in the market. Our industry data – Standardized Industry Metrics – enables market participants to quantify and compare market expectations for companies across 150+ industries.

Data as of January 2023

Our Retail Industry Data Set Includes:

407

Global Tickers

4,510

Current Analyst Excel Models

3,014

Proprietary line items in our standardized operating metrics data

138

Contributing Brokers

5,130

Total standardized line items

2,116

Proprietary line items in our standardized financials data

Available Comp Tables – Consensus Estimates

Visible Alpha offers 63 retailer comp tables, comparing forecasts for key financial and operating metrics to make it easy to quickly conduct relative analysis, whether you are interested in looking at key values for Walmart competitors or GMV for Amazon and other online retailers. Every pre-built, customizable comp table is based on key operating metrics.

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Financial and Operating KPIs Available for 320 Retailers including:

Retailers

Lululemon Athletica Inc. (LULU)
The Home Depot, Inc. (HD)
Walmex (WALMEX_MX)
J Sainsbury Plc (SBRY_UK)
Fast Retailing Co Ltd (9983_JP)

Auto Retailers

Carvana Co (CVNA_US)
O’reilly Automotive, Inc. (ORLY)
Cia de Locacao das Americas (LCAM3_BR)
AUTO1 Group (AG1_DE)
China Yongda Automobiles Services Holdings Limited (3669_CN)

Online Retail

Amazon.com, Inc. (AMZN)
Chewy Inc (CHWY_US)
MercadoLibre, Inc. (MELI)
Farfetch Ltd (FTCH_GB)
Alibaba Group Holding Ltd (BABA)

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