Glossary

Like-for-like sales

One way of making meaningful year-on-year comparisons, especially with retail stocks, is by looking at 'like-for-like' sales growth.

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.

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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%.

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