Key Takeaways
- Measures sales growth at existing stores only.
- Excludes new store openings and closures.
- Reveals true organic business performance.
- Helps target improvements in mature locations.
What is Like-for-Like Sales?
Like-for-like sales, also known as same-store sales, measure the revenue change from stores or divisions that have been open for a consistent period, typically excluding new openings, closures, or acquisitions. This metric provides a clearer picture of organic growth by isolating performance in existing operations without distortions from expansion or contraction.
By focusing on comparable periods, like-for-like sales help you understand true business momentum and operational efficiency, critical for accurate revenue analysis and decision-making.
Key Characteristics
Like-for-like sales have distinct features that differentiate them from total sales figures:
- Consistent Base: Only includes stores or units operational for at least one year to ensure valid comparisons.
- Exclusion of New/Openings: Removes sales from new locations or acquisitions to avoid inflation of growth figures.
- Reported as Percentage: Expressed as a percentage change compared to the same period last year, adjusting for seasonality.
- Adjustments: Can account for external factors such as economic disruptions or unusual events, enhancing accuracy.
- Variability: Methods vary by company, with some excluding refitted stores or using different timeframes, so standardization is limited.
How It Works
To calculate like-for-like sales, you compare revenue from the current period against the equivalent period in the previous year, focusing solely on stores or divisions operational during both periods. This isolates growth generated by existing assets rather than expansion-related increases.
Companies use this metric to identify underlying trends in customer demand and operational performance, often supported by data analytics for deeper insights. It helps you spot whether improvements come from marketing, product mix, or external factors.
Examples and Use Cases
Like-for-like sales are widely used across retail and service industries to track performance and guide strategy:
- Retail Giants: Walmart reports like-for-like sales to highlight organic growth amid new store openings and e-commerce rampup.
- Airlines: Delta uses comparable sales metrics to assess revenue trends in mature markets, isolating effects of route expansions.
- Stock Selection: Investors consider like-for-like sales growth when evaluating stocks in best growth stocks lists to identify companies with authentic operational momentum.
Important Considerations
While like-for-like sales offer valuable insights, be aware of potential pitfalls. Differences in calculation methods can make cross-company comparisons challenging. Moreover, focusing solely on like-for-like figures may mask underperformance in newer stores or online channels, which are increasingly important.
To maximize its usefulness, integrate like-for-like analysis with other financial metrics such as cost management and monitor for laggard segments dragging overall performance. Effective use of this metric supports strategic decisions that enhance sustainable, organic growth.
Final Words
Like-for-like sales isolate true growth by filtering out new store effects, offering a clearer performance signal for existing operations. Track this metric regularly to pinpoint strengths and weaknesses within your core business and adjust strategies accordingly.
Frequently Asked Questions
Like-for-Like Sales, also called same-store or comparable store sales, measure sales growth by comparing revenue from the same stores, products, or divisions during equivalent periods in consecutive years. This excludes sales from new openings, closures, or expansions to provide a clearer picture of organic business growth.
Companies use Like-for-Like Sales to get a more accurate view of underlying performance by removing distortions caused by new store openings or acquisitions. This helps investors and management assess true operational health and organic growth without artificial inflation.
Like-for-Like Sales compare revenue from stores or divisions that have been open for at least one to two years during matching periods year-over-year. The calculation excludes sales from new or closed locations and adjusts for factors like seasonality or unusual events such as COVID lockdowns.
Limitations include inconsistent calculation methods across companies, potential masking of underperforming stores or online sales weaknesses, and exclusion of sales from refitted stores in some cases. This flexibility can make direct comparisons challenging.
Retailers can boost Like-for-Like Sales by running targeted promotions, leveraging customer data for personalized marketing, optimizing store layouts and staff training, and closely monitoring product or division performance to focus on high performers and address laggards.
Positive Like-for-Like Sales growth indicates that existing stores or divisions are increasing revenue through improved performance rather than relying on new openings. It reflects successful organic growth and stronger customer demand at mature locations.
Yes, Like-for-Like Sales help detect cannibalization by showing if new stores are simply shifting sales from existing locations instead of generating additional revenue. This insight allows companies to avoid growth that harms overall profitability.
