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Companies ought to think twice about keeping quiet in tough economic times

Companies ought to think twice about keeping quiet in tough economic times

It’s long been said that in prosperous economic times, women’s hemlines rise, and when the economy falls into a slump, hemlines fall below the knee. Financial transparency, it seems, also follows suit. In good times, companies enjoy showing off their gams, but in bad times, glimpses of skin become few and far between.

Starbucks Corp., in the midst of its many recent changes to senior leadership, strategic direction, growth plans and branding, also decided to stop reporting same-store sales figures—entirely.

For some time, the trend among operators has been to move from reporting monthly same-store sales and instead to report them quarterly. Starbucks, however, is the first restaurant company to completely halt the disclosure of that metric. They will not share the figures monthly, quarterly or annually, officials said.

Starbucks’ chairman and chief executive Howard Schultz told analysts and investors that posting same-store sales would serve only as a distraction from the company’s long-term vision.

“In view of this new lens, we need to make decisions that are not based on driving comps in the short term,” he said.

Well, who am I to disagree with Mr. Schultz, but wouldn’t same-store sales trends, revealed even on a quarterly basis, help investors get a glimpse of whether all of the changes in store for Starbucks are actually working? It would seem logical that when a publicly traded company is in the midst of a turnaround more disclosure should be offered, not less.

When Home Depot announced in 2006 that it would halt its reporting of quarterly same-store sales, the decision was met with analyst comments that called the move “curious,” “strange,” “irresponsible” and “highly suspect.” Interestingly, the same did not occur with Starbucks. Restaurant analysts did note that the reduced transparency was not a good sign, but no one really held Schultz’s feet to the flame.

According to some, the lack of outrage occurred because same-store sales figures have lost a little bit of relevance.

“Starbucks appears to have come to the point of its life cycle where it is equally focused on aggregate returns in addition to brand extension,” said Matthew DiFrisco, securities analyst at Thomas Weisel Partners. “Accordingly, the traditional near-term same-store sales metric is a less relevant indicator of corporate health.”

I am not convinced, but I am certain we’ll see a flurry of companies grab hold of that argument, and the number of reported same-store sales figures will drop like the new spring hemlines. Obviously, it’s frustrating for me as a reporter, but I imagine it’s even more frustrating for an investor. How can investors expect to make informed decisions without seeing a company’s legs?

I’m just hopeful that when the economy takes an upswing, hemlines do indeed follow.

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