Like-for-like sales

Like-for-like sales are used by companies to compare the performance of the retail network in the reporting and base periods. The term like-for-like sales is also known as same-store sales, comps, or compatible sales. 

Like-for-like sales explained

Such a tool is used to determine which products, stores, or sectors of a company are causing the company to grow and prosper and which are not profitable or falling behind. Like-for-like sales used by many companies as a method of financial analysis.

Like-for-like sales also attract investors and help them achieve an understanding of how products contribute to either a business’ development or its failure. It is often used when either comparing two distributors who are selling the exact same product or when comparing sales of a certain product in different districts. It is extremely helpful for companies that operate multiple retail operations at once. 

Usually, segments are grouped when performing the analysis of like-for-like sales. It is done in order to show the percentage of growth rates for a certain period of time. The compiled data after the analysis can be compared between different time periods, such as the previous quarter, across several consecutive quarters. Only the metrics that are considered important to the business are included in the financial reports of a company. 

Like-for-like Sales’ benefits

Like-for-like metric is usually used by distributors in order to check the progress of the stores that were recently opened and the stores that already exist.One of the signs that the customers' attention is increased is the overall growth of gross income. 

In order for a company to determine whether or not the sales of a certain product/store are growing and the product/store is profitable, it uses like-for-like sales metrics. These metrics can also help companies determine whether opening a store in a new location or increasing production is worth it. With the help of such metrics, companies can clearly see if a newly opened store is taking the sales from stores that already exist; this process is known as market cannibalization. 

Improving like-for-like sales

When like-for-like sales are improved it results in increased company revenues and a better bottom line. There are several strategies that companies can implement to improve like-for-like sales. 

Promotion is one of the steps that can be done in order to drive traffic and increase sales. It also distinguishes a company from its competitors. However, such events need to be planned with all due diligence before their execution. This will help to increase customer loyalty, purchases and consequently, profits. This will also have companies to draw in new customers. 

In order to measure growth and performance, like-for-like sales are usually used in combination with other measuring tools.

Gathering customer information allows companies not only to increase sales, but also expand their consumer base and increase like-for-like sales. Compiling customer data gives companies an understanding of what is important to their customers. In order to encourage purchases, companies can stay in front of their customers, encourage purchases, and offer new deals.

Special considerations

The fourth-quarter reporting is considered to be the best time to look at what a company has achieved over a year. This reporting also allows the company to compare a current fiscal year with the previous one. 

There are other segmentation methods and approaches that companies can use other than reporting geographical store sales and sales revenue.

Like-for-like sales example

For example, if a business had 5 stores one year and another 5 stores in the first month of the next year, it could use like-for-like sales analysis to determine whether the sales have grown. Contrarily, the company would be comparing sales of 5 stories one year with the sales of 10 stores in the next year. During the analysis described above only 5 original stores would be used for analysis. However, the following fiscal year all of the 10 stores could be compared to the 10 stores of the previous year in order to establish like-for-like numbers.