Redbox parent Coinstar turned in a great third quarter this year, with same-store 
Redbox sales growth at more than 17%. The Wall Street Journal feels, however, that this growth number can be a bit deceiving, and some of it should be chalked up to the fact that there are now two Redbox kiosks at many locations.
Coinstar’s method of calculating revenue is to immediately begin including the second kiosk’s revenue in same-store sales because it is considered part of an existing location.
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This approach, different from most other retailers, has the WSJ a bit concerned about the clarity of Coinstar’s numbers. From the Journal:
“Generally, when retailers expand a store’s square footage by at least 15%, they take it out of the group from which same-store sales are calculated . . . Excluding new outlets’ sales contribution is crucial for assessing the underlying strength of companies that are expanding their retail locations rapidly like Redbox.”
The crux of the WSJ‘s argument is this: with Coinstar’s current approach to measuring revenue from second kiosks, it is unclear how the second machine affects the sales of the first.
Coinstar believes it is being transparent in its reporting on this matter—what do you think?
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Should Coinstar investors be at all concerned about the company’s revenue reporting strategies?
(via The Wall Street Journal)
Yeah if you listen to FLON you’d know the whole company he works for likes to skew the numbers like this.
I actually think they should calculate their numbers differently but in no way shape or form does it affect the revenue and bottom line of coinstar. Same store sales is a non GAAP calculation and as long as it is defined properly there is no reason to harp on this issue.
If ‘toomuch’ can give other examples of coinstar skewing numbers then I’m all ears.
That’s no different than a retail store physically expanding. The same store numbers still count, and are valid.
Agree. I don’t see it as any different than say calculating the total sales for one McDonalds fast-food location. Perhaps in that one McDonalds location 30% of food sales are attributed to customers ordering thru the drive-thru, while the other 70% are sales attributed to sit-down customers. At the end of the day, you’d still add up the drive-thru PLUS sit-down sales to get total sales for that ONE McDonalds location. Don’t see any numbers being skewed in doing so.
Well it’s completely different from your example. Your example would hold if the Mcdonalds didn’t have a drive through last year but added it this year. Then we would have an apples to apples comparison.
So if a specific one location McDonalds, that last year had one drive thru window, added a second drive thru window this year and at the end of the day 15% of drive thru customers/sales now were at previous window 1, and 15% of drive thru customers/sales now at new window 2, and sit down sales still made up for 70% of sales–at the end of the day it still adds up to the same 100% of sales previously divided between 2 sources (1 drive thru/1 sit down in store), but now divided between 3 sources (2 drive thru/1 in-store sit down)…
I’d like to hear Coinstar’s side of it and how it really works on their end rather than taking an article’s word for it. Investors aren’t concerned I’m sure, they receive a lot more information to go off of than just ‘same store sales’ numbers.
Except that RedBox has doubled their expense (or at least their capital investment). Investors want to know that…are you getting more return on the same investment or is it costing more to get to that growth?
They do more together than they would do if placed separately so it’s a net pick-up in revenue which means it’s a better return on the capital outlay.
Flon, no big deal on the numbers, but your last statement is inaccurate. Of course there would be a better return on investment if these kiosks were placed in virgin territory. They would generate much more revenue generally speaking, and there is plenty of “new” opportunity out there for them. Plus the more locations the more convenient it would be for the renters. It is curious that the would report this way however, looks a little shady.
My last statement accurate. A mature kiosk plus a new placement in a different location would do $80,000 combined. The new placement next to another kiosk would about $90,000 combined. The new placement therefore has a faster ramp and therefore a better return on investment. A dual at a very popular retail outlet is even more convenient than a new placement.
You people are really overthinking this. It’s very simple, RedBox is reporting on the amount of possible sales per location. This data shows that they haven’t reached saturation point which is what they want to explore. As long as the market is still growing their potential is untapped.
There are all kinds of numbers that can be crunched in a thousand different ways. Blu-Ray versus DVD versus Games
Department Stores versus Restaruants versus Gas Stations
Rentals broken down per day, per genre etc…
no one has brought up the “operating cost’ effect. A second kiosk at the same location doesn’t cost as much to operate (stocking the machine with movies, mileage, etc…) as a stand alone kiosk 2 miles down the street. This alone factors in more revenue for that same-store location when you have less operating cost going out. as mkiker stated, there are a lot numbers/factors in determining how revenue is generated in any industry. there will always be more than one way to skin a cat.
Great point.
Theory sort of reminds me of how in businesses it ends up being more ‘cost effective’ for the employer to pay present longtime/fulltime employees overtime (time and a half pay) to fill in/work a lot of overtime THAN TO hire more newbies to fill in/work where/when needed. The hiring of more newbies may come with a lower initial hourly wage than a longtime employee and thus prevent the need to pay out a higher overtime rate to these longtime/fulltime employees, BUT newbies also end up costing the employer the additional health/dental/retirement/vacation/personal day, etc. benefits that must be paid out for each fulltime newbie. Likewise, a second Redbox kiosk at a busy location is probably more ‘cost effective’ for Redbox than adding a single kiosk at a new location because a lot of additional costs of operating a single kiosk at a new separate location is prevented.
redbox still sux. I hate those eyesores and the losers that use them. They Lie!
It especially sucks to compete against them but at least all the cheap, pathetic losers that stand in front of them are saving money.
LOSER! Strident shill.
It is simple. If you add a second machine how long will it take to recover the initial investment. Once that is achieved then you can get valid numbers.
The numbers are actually being skewed by having two kiosks as a opposed to an actual expansion. If you have two kiosks at one location, it is still counted as TWO separate entities. If they changed the kiosk to a larger one, say twice the capacity which there are kiosks that are up to 4 times bigger than current models, then the numbers would be more accurate. Now if the numbers showed the difference of growth between location with one kiosk against one with two kiosks, then the number can then show the accurate growth for locations. In my area, the best example I can give, there was a McD’s on a corner area when a Wal-Mart was built behind it. The franchisee was able to get the McD’s in the store as well. His P & L report shows both McD’s as ONE location because they are basically on the same lot. But any true accountant will tell you that unless it is an expansion to an existing building, separate structures are are not counted as one. It should be the same for Redbox. Just a thought.