Comps: A Long/Short Analyst’s Guide to Retail Stocks

How do top long/short analysts think about comps?

One of the major drivers of revenue and profit growth for retailers is comps. As we saw last time, we care about how revenue and profit grow because that’s what drives changes in the value of the business and its stock over time.

What are the drivers of comps? What is sustainable comps growth?

What is an “easy” or a “difficult” comparison? What is the multi-year comp stack and why do we care about it?

As we prepare to pick a name, build out the model and explore how to generate variant ideas, all these questions are major building blocks that we need.

Comps, at least the math behind them, are somewhat analogous to growth rates, which are relevant for analyzing any stock. We have previously explored how to forecast next quarter’s comp and shared some useful formulas to manipulate comps. Those formulas will come in handy today.

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Let’s get into it…