Retail case interview, same-store sales and a worked case

Fernbrook Home, an invented home goods chain, grew sales 8.4% last year to $585.1 million, but operating profit fell from $37 million to $22.7 million. The CEO wants to know why, and what to fix first. This case and every number in it are invented by Soreno for practice.

1. Split the sales

   Comparable stores down 3.1%

   Of last year's $585.1 million, $465.1 million came from the 100 stores open both years, $30 million from 10 new stores and $90 million from online. The 100 older stores sold $480 million the year before, so comparable store sales fell 3.1%. Total growth of 8.4% was hiding a decline.

2. Decompose comparable sales

   Traffic down 5%, basket up 2%

   Visits per store fell from 200,000 to 190,000, conversion held at 30%, and the average basket rose from $80.00 to $81.60. So 0.95 × 1.02 = 0.969, a 3.1% decline. Fewer people are coming in. The ones who do spend a little more.

3. Walk down the P&L

   Store gross margin 40% to 37%

   The buyers ordered for growth, comparable sales fell, and the extra stock was cleared at deep discounts: margin fell 3 points. Rent and staff are $1.3 million a store whatever it sells. Online keeps 40% gross margin but pays 15% of sales to pick, pack and ship, so it contributes 25% of its sales.

4. Bridge the profit

   $37 million to $22.7 million

   Lower comparable sales cost $6 million, deeper markdowns cost $14 million, new stores cost $1.9 million, online growth added $7.5 million. Head office was flat at $40 million. Markdowns are the biggest single hit, then the fall in comparable sales.

5. Check the new stores

   $190,000 short each

   Each new store sold $3 million in its first year. At 37% margin it needs about $3.5 million of sales to cover its $1.3 million of rent and staff. First-year stores often ramp, so ask how older stores did in their second and third years before calling these a mistake.

6. Recommend

   Fix buying first, then traffic

   Buy to the trend in comparable sales, not to the growth plan: recovering the 3 points of margin is worth $14 million a year and needs no new customers. Then find out why visits fell 5%: a market decline, a new competitor or the chain's own assortment. Keep growing online, where each dollar of sales contributes 25%, and hold new openings until the first ten show they can reach break-even.

How public retailers report sales, and the ratios a case expects you to use. Target's 10-K is the source where named. The rest are standard definitions in our words.

1. Comparable sales

   Same stores, same length of period

   Target's 10-K for the year ended January 31, 2026 says it uses comparable sales to measure the change in sales over the comparable prior-year period of equivalent length, leaving out stores open less than 13 months or closed. It adds that comparable sales measures vary across the retail industry, so ask how a client defines it.

2. Traffic

   Number of transactions, or visits

   Target counts traffic as the number of transactions. A store counter counts visits. Transactions are visits times conversion, so check which one the case gives you.

3. Average basket

   Sales ÷ transactions

   Target calls it average transaction amount. It is units per basket times the average price per unit, so a rise can mean bigger baskets or higher prices.

4. Conversion

   Transactions ÷ visits

   The share of visitors who buy. It falls when shelves are empty, lines are long or the assortment misses.

5. Gross margin

   (Sales minus cost of goods) ÷ sales

   Markdowns and promotions lower it. So does shrink, the stock lost to theft, damage and spoilage.

6. Sales per square foot

   Store productivity

   Compares stores of different sizes. Useful for deciding which stores to remodel, shrink or close.

7. Inventory turnover

   Cost of goods sold ÷ average inventory

   How many times a year the stock sells through. Slow turns tie up cash and end in markdowns.

8. Four-wall profit

   A store's profit before head office

   Store gross profit minus rent and store staff. The test for whether a store, or a new one, pays its way.

Benchmarks you can use to sanity-check a case. Use the interviewer's numbers when they differ.

1. Online share

   17.1% of U.S. retail sales

   The Census Bureau's August 18, 2026 release estimates second quarter 2026 e-commerce at $340.2 billion, 17.1% of total retail sales of $1,986.5 billion (seasonally adjusted). E-commerce grew 12.2% from a year earlier, total retail 6.7%. A notice on the release says that since September 28, 2026 it no longer has the most up-to-date estimates, and that revised figures come with the third quarter release on November 19, 2026, so check for newer numbers after that date. Fernbrook's online share, 15.4%, is close to that.

2. Margins

   Grocery thin, specialty wider

   Aswath Damodaran's Margins by Sector table at NYU Stern (data as of January 2026) puts gross margin at 26.31% for grocery and food retail (15 firms), 33.18% for general retail (23 firms), 35.3% for special lines retail (94 firms), with pre-tax unadjusted operating margins of 2.29%, 6.8%, 7.73% respectively. A grocer lives on volume, a specialty retailer on margin.

3. A real comparable sales split

   Target: comparable sales down 2.6%, mostly traffic

   Target reported comparable sales down 2.6% in its fiscal 2025, driven by a 2.2% fall in traffic and a 0.4% fall in average transaction amount. Store-originated comparable sales fell 4% while digitally originated ones rose 3.1%. That is the decomposition a case expects, in a public filing.

The openings are ours. Each names the first split so the interviewer hears a plan.

1. Sales or profit decline

   Comparable vs new vs online

   Separate the stores open both years from new stores, closures and online before anything else. Then traffic, conversion and basket for the comparable stores.

2. Promotions and pricing

   Lift, cost and what it steals

   Size the extra units a promotion sells, the margin given up on units that would have sold anyway, and sales pulled from other weeks or products.

3. Store network

   Four-wall profit by store

   Rank stores by profit after rent and staff, then ask what closing one does to nearby stores and to online sales in that area.

4. Going online or omnichannel

   Contribution per order

   Average order value times gross margin, minus picking, packing, shipping and returns. Compare with the store sale it might replace.

5. Private label or new category

   Margin gain against share risk

   Private label usually earns more margin per unit. Ask whether customers will switch and what the branded supplier does in response.

Kearney, Bain, Oliver Wyman and McKinsey each publish at least one retail or consumer practice case. These are the ones on the pages we read on October 31, 2026, plus a school's note on corporate retail interviews.

1. Kearney

   Promotional planning at a grocery and drug chain

   A national chain using high-low pricing is losing share, and benchmarks show its sales lift during promotions is smaller than its rivals'. The case asks how you would increase the lift. Its extra information covers how store managers order promoted stock weeks ahead, out-of-stock shelves and customer complaints, so in our reading the answer sits in operations, not price.

2. Bain

   FashionCo, a women's fashion company

   Revenue has fallen every year for five years. After the framework, the case compares a rewards program with intermittent sales, gives customer numbers, spend and discounts for each, and asks which earns more revenue this year. Say how you read each assumption before you compute.

3. Oliver Wyman

   Urban Grocers and Supermarket Pharmacy

   Urban Grocers (easy) asks whether a grocer should switch from 53-foot to 58-foot trucks that carry 10% more volume. Supermarket Pharmacy (medium) asks whether a single supermarket should open a pharmacy, with a payback of two years or less.

4. McKinsey

   Beautify, a prestige cosmetics company

   Beautify sells mainly inside high-end department stores. As shoppers move online, too many of its beauty consultants are left working in empty ones. The case asks whether training most consultants to reach customers through virtual channels could be profitable.

5. Corporate retail roles

   Mini-cases of 4 to 6 minutes

   A November 2018 guide from Wharton's MBA Career Management office, compiled from its advisors, says retail company interviews often use mini-cases of 4 to 6 minutes rather than full consulting cases, with questions like why a category's monthly sales are declining, plus favorite brand questions and 3 to 5 slide take-home assignments.