Table of Contents
- What Is Like-for-Like Sales?
- Key Takeaways on Like-for-Like Sales
- Delving Into the Details of Like-for-Like Sales
- The Strategic Advantages of Like-for-Like Sales
- Strategies to Enhance Like-for-Like Sales
- Important Considerations for Like-for-Like Sales Analysis
- Exploring Real-World Applications of Like-for-Like Sales
What Is Like-for-Like Sales?
Let me explain like-for-like sales directly to you: it's an adjusted growth metric that focuses on revenues from stores or products sharing similar characteristics, deliberately omitting any with distinct differences that might skew the numbers. You might also hear it called comparable-store sales, comps, same-store sales, or identical-store sales.
Key Takeaways on Like-for-Like Sales
When you look at like-for-like sales, you're getting a clearer picture of growth by comparing revenues from stores or products with similar traits, excluding outliers that can distort figures, such as new store openings or major acquisitions. This metric is essential for understanding how your existing locations contribute to growth compared to new ones, showing whether expansion is driven by established or emerging stores. By analyzing it, you can identify which products or segments are performing well, helping you make informed decisions about expansions, promotions, and investments. Remember, while it's beneficial, there's no industry-standard method for calculating like-for-like sales, so don't rely on it as the sole metric for evaluating a company's financial health or growth potential.
Delving Into the Details of Like-for-Like Sales
As I delve into this, like-for-like sales act as a method of financial analysis to pinpoint which of a company's products, divisions, or stores are driving growth and which are falling behind. It excludes extraneous factors that could artificially inflate or deflate the numbers, like a major foreign acquisition. This analysis gives you insight into which products contribute to growth or decline. It's commonly used for granular sales comparisons, such as in specific regions or between retailers selling identical products. It's especially helpful when a company runs multiple retail types, like Walmart's main stores and Sam's Club. When you analyze like-for-like sales, segments are grouped to show percentage growth rates for a period. You can compare this data to the same quarter last year, the prior quarter, or across several quarters.
The Strategic Advantages of Like-for-Like Sales
Retail companies often use like-for-like metrics to gain insight into existing stores versus newly opened ones. If a company shows high like-for-like growth and high total revenue growth, it signals that established stores are driving the progress. Conversely, average like-for-like growth with high total revenue might indicate new stores or products are attracting attention. These metrics help you determine if a product or store contributes to the bottom line and experiences desired growth. They can guide decisions on opening new locations or expanding production. Additionally, like-for-like sales can reveal if a new store is cannibalizing sales from established ones.
Strategies to Enhance Like-for-Like Sales
Improving like-for-like sales means boosting revenues and strengthening your bottom line. You can achieve this through promotions and sales to increase traffic and stand out from competitors—these must be planned carefully to protect profits and build customer loyalty. When executed well, they convert new customers and encourage repeat purchases. Another approach is gathering customer information to expand your base and increase sales. By collecting data through incentive or rewards programs, you identify what's important to customers and craft better promotions. This keeps you in front of customers, promoting new products and deals to drive purchases.
Important Considerations for Like-for-Like Sales Analysis
The fourth-quarter report is often the best time to review results, especially like-for-like sales, as it compares the full fiscal year to the previous one. Beyond comparable-store or geographical sales, companies may use other segmentations worth tracking. Global companies deal with foreign exchange rates affecting revenue, so they often detail currency adjustments and their impact on sales and net income. Keep in mind, there's no industry standard for these calculations, so use them alongside other metrics.
Exploring Real-World Applications of Like-for-Like Sales
In practice, like-for-like or same-store sales typically include only locations open for a year or more, isolating true growth catalysts. Take McDonald's: they reported a 7.5% global comparable sales increase in Q1 2021, with 13.6% in the U.S., while total revenues rose 9%. This tells you they opened many new stores, but existing store sales grew modestly.
Other articles for you
Qualified dividends are ordinary dividends taxed at lower capital gains rates if specific holding periods are met.
Labor unions are organizations that represent workers in negotiations with employers for better pay, benefits, and conditions, with a significant historical and modern role in the U.S.
Z-shares are a class of mutual fund shares offered to employees of the fund's management company as benefits without front-end or back-end fees.
Deleveraging is the process of reducing debt to lower financial risk and improve balance sheet health.
Underweight in finance means either a portfolio holding less of a security than its benchmark or an analyst expecting a security to underperform.
Quid is a slang term for the British pound sterling, the world's oldest currency still in use.
Experience rating compares an insured party's losses to similar parties to adjust insurance premiums, mainly in workers' compensation.
The price to free cash flow ratio is a valuation metric that compares a company's market price to its free cash flow to assess if its stock is undervalued or overvalued.
Private equity real estate involves pooled investments in managed funds for acquiring and owning properties, offering high returns but with significant risks and capital requirements.
Haggling is the process of negotiating prices between buyers and sellers until a mutual agreement is reached.