Consumer and Retail Technical Interview Guide: Sector-Specific Metrics and Valuation Questions

An interviewer asks: "Why did Dollar General outperform while other discount retailers struggled?"

The candidate freezes. They know general valuation. They know DCF and comps. But they don't know what makes consumer businesses tick. They can't explain same-store sales or why private label matters or how inventory turns signal health.

Consumer and retail interviews expose this gap. The sector has distinct drivers, metrics, and competitive dynamics. Generalist preparation won't save you.

Here's what you need to know—the metrics that matter, how to think about consumer valuations, and the questions that separate sector specialists from everyone else.

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Why Consumer and Retail Is Different

The Demand Problem

Most industries sell to businesses. Consumer and retail sells to people.

This changes everything:

Demand is fragmented. Millions of individual purchase decisions. Small shifts in preference compound into big changes.

Brands matter enormously. A strong brand commands premium pricing. A weak brand competes on price alone.

Fashion and trends create volatility. What consumers want changes constantly. Companies must anticipate or react.

Scale economics work differently. Bigger retailers buy cheaper. Bigger brands spend more on marketing. Size creates advantages others can't replicate.

The Physical Constraint

Unlike software or financial services, consumer businesses handle physical stuff.

Inventory ties up capital. Too much inventory destroys returns. Too little means missed sales.

Real estate creates leverage. Fixed lease costs mean small same-store sales changes create big profit swings.

Supply chains determine margins. Sourcing, manufacturing, and distribution efficiency separate winners from losers.

Seasonality concentrates risk. Some retailers make 40% of profits in Q4. One bad holiday season can break a company.

Understanding these physical constraints is essential for consumer analysis.

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Essential Consumer Metrics

Revenue Metrics

Same-Store Sales (SSS) / Comparable Store Sales (Comps): Year-over-year sales growth at stores open for at least one year. The most important revenue metric for retailers.

SSS Growth	Interpretation
>5%	Excellent
3-5%	Strong
1-3%	Healthy
0-1%	Stagnant
Negative	Concerning

Comps strip out new store growth. They show whether the core business is healthy.

Two-Year Stacked Comps: Add this year's comp to last year's. Useful when comparing against unusual prior-year periods (like pandemic distortions).

Average Unit Volume (AUV): Average annual revenue per store or unit. Critical for franchise and restaurant concepts.

Traffic vs. Ticket: SSS breaks into two components:

• Traffic: number of transactions
• Ticket: average transaction value

Traffic growth is healthier. Ticket growth from price increases eventually hits limits.

Margin Metrics

Gross Margin: (Revenue - Cost of Goods Sold) / Revenue

Typical ranges vary dramatically:

Category	Typical Gross Margin
Grocery	25-30%
Discount retail	25-35%
Department stores	35-45%
Apparel	50-65%
Luxury	60-75%
Restaurants	60-75% (food cost 25-40%)

Four-Wall Margin: Store-level profitability before corporate overhead. Shows the economics of individual units.

For restaurants and retail: Sales minus COGS, labor, rent, and store-level operating costs.

Healthy four-wall margins:

• Restaurants: 15-25%
• Retail: 10-20%

EBITDA Margin: Standard profitability measure. Consumer companies typically 8-18% depending on category.

Operating Metrics

Inventory Turnover: COGS / Average Inventory. How many times inventory cycles through per year.

Category	Typical Turns
Grocery	12-15x
Discount retail	5-8x
Department stores	3-5x
Apparel	3-6x
Luxury	1-3x

Higher turns mean less capital tied up in inventory. But too-high turns might mean stockouts.

Days Inventory Outstanding (DIO): 365 / Inventory Turnover. Days of inventory on hand.

Sell-Through Rate: Units sold / Units received. Critical for seasonal and fashion merchandise.

Shrinkage: Lost inventory from theft, damage, or administrative error. Typical: 1-2% of sales. Above 3% is a red flag.

Unit Economics

Unit Volume / Productivity: Revenue per square foot (retail) or revenue per seat (restaurants).

Retail Type	Strong $/Sq Ft
Apple Store	$5,000+
Tiffany	$3,000+
Lululemon	$1,500+
Typical mall	$400-600
Department store	$150-250

Rent-to-Sales Ratio: Occupancy cost as percentage of sales. Typical: 8-12% for healthy retail. Above 15% is stressed.

Payback Period: Time to recover investment in new store/unit. Under 3 years is typically healthy.

Sales per Labor Hour: Revenue efficiency of labor investment.

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Consumer Sub-Sectors

Hardlines Retail

What it includes: Home improvement (Home Depot, Lowe's), electronics, sporting goods, auto parts.

Key metrics:

• Same-store sales and traffic
• Average ticket size
• Professional vs. DIY mix
• E-commerce penetration

Valuation drivers:

• Housing market correlation
• Big-ticket discretionary spending
• Competitive positioning
• Pro customer capture

Softlines Retail / Apparel

What it includes: Clothing, footwear, accessories.

Key metrics:

• Same-store sales
• Gross margin and promotional activity
• Inventory turnover and markdown rates
• Full-price selling

Valuation drivers:

• Brand heat and trend relevance
• Inventory management
• Speed to market
• Direct-to-consumer vs. wholesale mix

The challenge: Fashion is fickle. What's hot today is clearance next season.

Food and Grocery

What it includes: Grocery chains, convenience stores, specialty food.

Key metrics:

• Same-store sales (very competitive—2-3% is strong)
• Gross margin
• Sales per square foot
• Private label penetration

Valuation drivers:

• Scale and purchasing power
• Fresh and perishable execution
• E-commerce and delivery capability
• Location density

The economics: Low margins (2-4% net), high turns, significant operating leverage.

Restaurants

What it includes: Quick service (QSR), fast casual, casual dining, fine dining.

Key metrics:

• Same-store sales
• Restaurant-level margins
• Average check
• Traffic trends
• New unit growth and returns

Valuation drivers:

• Brand strength and concept freshness
• Unit economics and whitespace
• Franchise vs. corporate ownership
• Digital ordering and delivery

QSR vs. Casual Dining:

Factor	QSR	Casual Dining
Average check	$8-15	$15-30
Labor intensity	Lower	Higher
Real estate needs	Smaller	Larger
Traffic patterns	More consistent	Occasion-driven
Delivery potential	Higher	Lower

Consumer Packaged Goods (CPG)

What it includes: Food and beverage, household products, personal care.

Key metrics:

• Organic revenue growth
• Volume vs. price/mix
• Market share trends
• Gross margin
• Advertising and promotion spend

Valuation drivers:

• Brand strength and category position
• Pricing power
• Innovation pipeline
• Geographic diversification
• Channel mix (traditional retail vs. e-commerce)

The model: High gross margins (40-60%+), significant marketing spend, modest growth but stable cash flows.

E-Commerce and DTC

What it includes: Online retailers, direct-to-consumer brands.

Key metrics:

• Revenue growth
• Gross merchandise value (GMV) if marketplace
• Customer acquisition cost (CAC)
• Customer lifetime value (LTV)
• Repeat purchase rate
• Contribution margin

Valuation drivers:

• Growth rate and runway
• Path to profitability
• Customer economics
• Fulfillment efficiency
• Brand differentiation

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Valuation Approaches

Traditional Multiples

EV/EBITDA: Primary valuation metric for most consumer companies.

Sub-sector	Typical Multiple Range
Grocery	6-10x
Discount retail	7-12x
Specialty retail	8-15x
Restaurants	8-14x
CPG	10-15x
Premium brands	12-20x

What drives higher multiples:

• Strong same-store sales trends
• Margin expansion potential
• White space for new units
• Brand strength
• Defensible competitive position

P/E Ratio: More relevant for stable, mature consumer companies. Typical range: 12-25x depending on growth.

Revenue Multiples

EV/Revenue: Used for high-growth or unprofitable consumer companies (especially e-commerce).

Typical ranges:

• E-commerce: 0.5-3x
• High-growth DTC: 1-4x
• Traditional retail: 0.3-1x

Unit-Based Valuation

For retailers and restaurants, unit economics drive value:

EV per Store: Total enterprise value divided by number of stores. Useful for comparing scaled operations.

EV / Unit-Level EBITDA: Values the core store economics.

White Space Analysis: Value of future store growth potential. Key question: how many more units can this concept support?

Brand Valuation

Strong brands command premiums. Consider:

Price premium sustainability: Can the brand maintain pricing power?

Customer loyalty: What's the repeat purchase rate?

Category position: Market leader? Challenger? Niche?

Intangible assets: What would it cost to recreate this brand awareness?

Sum-of-the-Parts

For diversified consumer companies:

1. Value each brand or segment separately
2. Apply appropriate multiples to each
3. Sum and adjust for corporate costs
4. Consider conglomerate discount

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Common Interview Questions

Valuation Questions

"Why do luxury brands trade at higher multiples than discount retailers?"

Several factors compound:

First, higher gross margins. Luxury brands achieve 60-75% gross margins versus 25-35% for discount. More revenue converts to profit.

Second, pricing power. Luxury brands can raise prices without losing customers. Discount retailers compete on price.

Third, brand moats. Luxury brand equity is extremely difficult to replicate. Discount retail is more commoditized.

Fourth, asset-light potential. Luxury can license and franchise. Discount requires capital-intensive store bases.

Fifth, customer resilience. Luxury consumers are less affected by economic cycles than value shoppers.

"How would you value Lululemon?"

Start with comparable companies—other premium athletic apparel and specialty retail brands like Nike's direct business, Under Armour, and premium specialty retailers.

Calculate EV/EBITDA and EV/Revenue multiples for comps. Adjust for Lululemon's specific characteristics:

• Superior same-store sales trends
• Higher gross margins (50%+)
• Significant unit growth runway
• Strong brand and customer loyalty

Run a DCF projecting same-store sales growth, new unit additions, and margin trajectory. Terminal value on stabilized business.

Cross-check unit-based valuation: What's implied EV per store? How does that compare to unit-level economics?

"Nordstrom is struggling. Walk me through how you'd think about its valuation."

First, understand the challenges: declining department store traffic, competitive pressure from off-price and e-commerce, high fixed costs from legacy real estate.

Valuation approach:

• Compare to other department stores (Macy's, Kohl's)—distressed multiples in the 4-6x EBITDA range
• Separate full-price from Rack (off-price) business
• Consider real estate value separately
• Assess restructuring potential and cost reduction

Key questions: Can they stabilize comps? What's the right store footprint? Is the brand still relevant?

Sum-of-the-parts might show more value than consolidated multiple suggests.

Metrics Questions

"What's the difference between same-store sales and total revenue growth?"

Same-store sales measures growth at existing, comparable locations—stores open at least 12 months. It shows whether the core business is healthy.

Total revenue growth includes new store openings and acquisitions. A company can grow total revenue 10% while same-store sales decline 5%—that's a warning sign.

Same-store sales isolates the quality of growth from the quantity of expansion.

"Why does inventory turnover matter for retailers?"

Inventory is the largest current asset for most retailers. How efficiently you manage it determines capital efficiency and profitability.

High inventory turns mean:

• Less capital tied up in merchandise
• Lower risk of markdowns and obsolescence
• Fresher product for customers
• Better working capital and cash conversion

Low turns signal:

• Excess inventory that may require markdowns
• Poor merchandise assortment
• Working capital inefficiency
• Potential profitability pressure

Inventory turns should be compared within category. What's healthy for grocery (12x) would be disastrous for luxury (where 2x might be normal).

"What's four-wall margin and why does it matter?"

Four-wall margin is store-level profitability—revenue minus all costs directly attributable to running that store: COGS, labor, rent, utilities, and store supplies.

It matters because:

• Shows the core economics of the retail concept
• Determines new unit viability
• Separates store performance from corporate overhead
• Guides reinvestment and expansion decisions

A company can have poor company-level margins but strong four-wall economics—meaning the stores work but corporate costs are bloated.

Conversely, weak four-wall margins mean the fundamental unit economics are broken. No amount of corporate cost-cutting fixes that.

Strategic Questions

"Why has Dollar General outperformed traditional retailers?"

Several structural advantages:

Location strategy: Small-format stores (7,500 sq ft) in rural and suburban areas underserved by Walmart. Low rent, low competition.

Value positioning: Defensive in recessions, but also attracts customers trading down in normal times.

Operating efficiency: Simple stores, limited SKUs, low labor model.

Consumables focus: ~80% consumables drives repeat traffic. Not dependent on discretionary spending.

White space: Still 10,000+ potential locations. Growth runway remains.

Small ticket: Average transaction under $15. Not a stretch purchase for any customer.

The model combines defensive characteristics with growth opportunity—rare in mature retail.

"What makes a restaurant concept attractive for investment?"

Strong restaurant concepts share characteristics:

Proven unit economics: 20%+ restaurant-level margins, under 3-year payback.

Replicable model: Can the concept scale without losing what makes it special?

White space: How many units can the market support?

Differentiated positioning: Why do customers choose this over alternatives?

Management capability: Can leadership execute growth without breaking operations?

Franchise potential: Can the model work with franchise partners?

Red flags:

• Slowing same-store sales
• Declining traffic with only ticket growth
• Concept fatigue
• Rising labor or occupancy costs
• Overbuilding in core markets

"How do you think about e-commerce disruption in retail?"

The impact varies dramatically by category:

Highly disrupted: Books, electronics, toys, basic apparel. Amazon dominance.

Moderately disrupted: Department stores, specialty retail. Losing share but surviving.

More resilient: Grocery, off-price, dollar stores. Physical still matters.

Actually benefiting: Best-in-class omnichannel players who use stores as fulfillment advantage.

Key analytical questions:

• What percentage of category sales are online?
• Is the category growing online or stable?
• Does this retailer have e-commerce capability?
• Can stores become assets (pickup, showroom) or are they pure liability?
• What's the customer acquisition cost online vs. in-store?

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Sector-Specific Considerations

Seasonality

Consumer businesses have distinct seasonal patterns:

Q4 heavy: Apparel, toys, department stores (30-50% of annual EBIT in Q4)

Summer peak: Outdoor, sporting goods, travel retail

Back-to-school: Office supplies, teen apparel (August-September)

Spread evenly: Grocery, dollar stores, QSR

Understand seasonality for modeling and for interpreting quarterly results.

Private Label / Store Brands

Private label shifts category economics:

For retailers:

• Higher margins (typically 10-15% better than national brands)
• Customer loyalty and differentiation
• Leverage over branded suppliers

For CPG companies:

• Margin pressure and share loss
• Need for innovation and marketing to justify premium
• Trade promotion intensity

Private label penetration varies: 20%+ in grocery, minimal in luxury.

Franchise vs. Company-Owned

Different economics and valuation:

Factor	Franchised	Company-Owned
Revenue	Royalties (4-6% of sales)	Full sales
Margins	Higher (50%+ at franchisor)	Lower (10-20%)
Capital intensity	Lower	Higher
Growth speed	Faster (franchisee capital)	Slower
Control	Less	More
Risk	Lower but shared	Higher

Franchise-heavy models trade at higher multiples due to higher margins and lower capital requirements.

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Framework for Consumer Questions

The Quick Response Framework

For any consumer technical question, structure your answer:

1. Define the concept clearly (what it is)
2. Explain why it matters for consumer businesses specifically (context)
3. Give category-specific examples (concrete application)
4. Acknowledge variations across sub-sectors (nuance)

The Valuation Framework

When asked to value any consumer company:

1. Identify the sub-sector (retail, restaurant, CPG, e-commerce)
2. Select appropriate metrics (same-store sales for retail, organic growth for CPG)
3. Choose the right methodology (EBITDA multiple for most, revenue for growth)
4. Consider unit economics (what do the stores/restaurants look like individually?)
5. Assess brand strength (what's the intangible value?)
6. Sanity check your answer (does the implied per-store value make sense?)

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Key Takeaways

Consumer and retail interviews require sector-specific knowledge that generic prep doesn't cover.

Master these metrics:

• Same-store sales and traffic/ticket decomposition
• Gross margin by category
• Inventory turnover and days outstanding
• Four-wall margin and unit economics
• Revenue per square foot

Understand these sub-sector dynamics:

• Hardlines: housing correlation, big-ticket sensitivity
• Softlines: fashion risk, inventory management
• Grocery: low margin, high turn, scale advantages
• Restaurants: unit economics, franchise dynamics
• CPG: brand strength, pricing power, share trends
• E-commerce: customer acquisition, fulfillment economics

Be ready to discuss:

• Why luxury trades at premium multiples
• Dollar store structural advantages
• E-commerce disruption by category
• Private label implications
• Seasonal patterns and working capital

The best consumer candidates don't just know the metrics—they understand how consumer businesses actually work. They can explain why some retailers win while others die.

Interviewers want to see you think like an investor in the space, not recite definitions. Build the understanding. The interview performance follows.