Like-for-Like Sales

Like-for-like sales is an adjusted growth metric that only includes revenues generated from organically comparable stores or products with similar characteristics and historical sales periods of operation. In general, like-for-like sales is a method of financial analysis that attempts to exclude the effects of expansion, acquisition or any other event that artificially enlarges or decreases a company's sales. Like-for-like sales can also be referred to as comparable store sales, comps, same-store sales, or identical-store sales.

Like-for-like sales analysis helps companies and investors to gain insight on revenue that is contributing to growth or decline. Different than other comparable metrics, the term like-for-like may be more commonly used when making intricate or granular sales comparisons – such as in comparing stores in certain regions or certain types of stores selling identical products. A more granular metric can be especially helpful when a company has store variations, like Walmart and Walmart Express stores, or wants to show store comparison by square footage.

When analyzing like-for-like sales, segments are typically grouped to show percentage growth rates depending on the time and segmentation used by the company. Like all types of financial statement analysis, companies can compare data from the same quarter in a previous year, the prior quarter, or across several sequential quarters.

Retail companies use the like-for-like metric most often because it helps provide 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 a sign that established stores are driving growth. Alternatively, if a company has an average like-for-like store sales growth rate but a high total revenue growth rate then it can be a sign that new stores or introductions are drawing attention.

Like-for-like or same-store sales commonly control for openings and closings by including only locations that have been in operation for a limited amount of time. This also is key to helping isolate certain 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.

Financial statement time periods and segmentation will differ by company depending on their financial reporting processes. Companies can compare data from the same quarter in a previous year, the prior quarter, or across several sequential quarters. A company’s fourth-quarter reporting can often be the best time to look at a company’s results, and specifically its like-for-like sales metrics because this can provide a comparison based on the full fiscal year and prior fiscal year.

In addition to segmenting sales revenue by comparable store sales or geographical store sales, companies may also use other segmentation approaches which can be important for stakeholders to follow. Specifically, international companies may have to deal with foreign exchange which can affect sales revenue. As such, many international companies include details on currency adjustments and how they influence sales and net income.Takeaways