Like-for-like sales

When you look at a company’s performance from one year to another, it is often difficult to see real gains or losses at a glance. A company might say that its turnover is up 10% on last year, but if it has doubled the amount of stores it owns or made bolt-on acquisitions since then, this may not best represent the state of the underlying business.

One way of making meaningful year-on-year comparisons, especially with retail stocks, is by looking at ‘like-for-like’ sales growth. This means excluding from the most recent numbers sales made in new stores or stores gained from acquisitions over the previous financial year – and adding back in any that might have come from stores disposed of over the same year. What you have left is a figure that shows how well the company’s previously existing business has done over the period.

In the year 2001 to 2002, for example, pub operator JD Wetherspoon’s opened 87 pubs and overall sales rose 24%. However, if you discount the new revenue streams (from the 87 new pubs), you will see that like-for-like sales – ie, those at its previously existing outlets – increased by only 5%.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.