Forecasting Sales: A Model and Some Evidence from the Retail Industry

Contemporary Accounting Research, Forthcoming

48 Pages Posted: 15 Jan 2004 Last revised: 31 May 2013

See all articles by Asher Curtis

Asher Curtis

University of Washington

Russell J. Lundholm

University of British Columbia - Sauder School of Business

Sarah E. McVay

University of Washington

Date Written: February 1, 2013

Abstract

This paper presents a sales forecasting model and tests the model on a sample of firms in the retail industry. The model distinguishes between sales growth due to an increase in the number of sales-generating units (e.g. opening new stores) and growth due to an increase in the sales rate at the existing units (e.g. the comparable store growth rate). The model accommodates different trends in the sales rates, allowing new stores to earn more or less than existing stores, perhaps because new stores take either a long time to reach maturity or alternatively enjoy an early “fad” status. The model uses only a few years of firm-specific, publicly available information, yet generates in-sample forecast errors of less than two percent of sales, generates out-of-sample forecast errors that are almost as accurate as analyst revenue forecasts and, when used together with analyst forecasts, results in a modified forecast that is significantly more accurate than the analyst forecast alone.

Keywords: Revenue, forecasting, retail, financial statement analysis

JEL Classification: M41, G29

Suggested Citation

Curtis, Asher and Lundholm, Russell J. and McVay, Sarah E., Forecasting Sales: A Model and Some Evidence from the Retail Industry (February 1, 2013). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=486162 or http://dx.doi.org/10.2139/ssrn.486162

Asher Curtis

University of Washington ( email )

Seattle, WA 98195
United States

Russell J. Lundholm (Contact Author)

University of British Columbia - Sauder School of Business ( email )

2053 Main Hall
Vancouver, British Columbia V6T 1Z2
Canada

Sarah E. McVay

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States

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