What Is Like-for-Like Sales?
Like-for-like sales is an adjusted growth metric that includes revenues generated from stores or products with similar characteristics while omitting any with distinct differences that could skew the numbers.
Like-for-like sales are also referred to as comparable-store sales, comps, same-store sales, or identical-store sales.
Understanding Like-for-Like Sales
Like-for-like sales is a method of financial analysis that is used to identify which of a company’s products, divisions, or stores are contributing to its growth and which are lagging behind. It also excludes extraneous factors that could artificially inflate or deflate the numbers, such as a major foreign acquisition.
Like-for-like sales analysis helps companies and investors gain insight into which products are contributing to a company’s growth or decline. It is commonly used when making granular sales comparisons, such as comparing sales in specific regions or comparing two retailers selling identical products. It is particularly helpful when a company operates more than one type of retail operation, like Wal-Mart’s Walmart and Sam’s Club stores.
- Like-for-like sales numbers indicate the revenues of stores or products with similar characteristics, omitting outliers that could distort the results.
- Comparison of the numbers over time gives insight into the factors that are contributing to a company’s growth or decline.
- Sales analysis may be used to isolate many factors that contribute to success or failure.
When analyzing like-for-like sales, segments are typically grouped to show their percentage growth rates for a particular time period. As in any financial analysis, like-for-like data can be compared to the same quarter in a previous year, the prior quarter, or across several sequential quarters.
A company’s quarterly financial reporting often includes the like-for-like metrics it considers significant to its business.
Retail companies use the like-for-like metric most often for its insight into existing stores versus newly opened stores. If a retail company has a high like-for-like store sales growth rate and a high total revenue growth rate, it can be seen as a sign that established stores are driving growth. If a company has an average like-for-like store sales growth rate but a high total revenue growth rate, it can be a sign that new stores or new products are drawing shoppers’ attention.
Example of Like-for-Like Sales
Like-for-like or same-store sales commonly control for openings and closings by including only locations that have been in operation for a year or more. This also is key to isolating growth catalysts.
McDonald’s Corp. reported a global comparable sales increase of 4.4% in the fourth quarter of 2018 with a U.S. comparable store sales increase of 2.3% while total sales increased 5% overall. What does that tell us? McDonald’s opened a lot of new stores but existing store sales grew relatively modestly.
A company’s fourth-quarter reporting is often the best time to look at a company’s results, and specifically at its like-for-like sales metrics, as it provides a comparison based on the full fiscal year and prior fiscal year.
In addition to reporting sales revenue by comparable-store sales or geographical store sales, companies may use other segmentation approaches that are worth following. In particular, global companies have to deal with foreign exchange rates, which can affect sales revenue. Many of these companies will include details on currency adjustments and how they influenced sales and net income.