# Boost Revenue With Like-for-Like Sales: Definition and Growth Strategies

## What Is Like-for-Like Sales?

Like-for-like sales are used as 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. They identify company growth drivers by focusing on established operations and omitting outliers like new acquisitions.

Like-for-like sales are also referred to as comparable-store sales, [comps](https://www.investopedia.com/terms/c/comps.asp), same-store sales, or identical-store sales. They aid business decisions like expanding or evaluating new store performance. Benefits include providing insights on existing vs. new store contributions to revenue, as well as its utility in showcasing organic growth.

### Key Takeaways

*   Like-for-like sales provide a clearer picture of growth by comparing revenues from stores or products with similar characteristics, excluding outliers that can distort figures, such as new store openings or major acquisitions.
*   This metric is essential for understanding how existing locations contribute to growth compared to new locations, highlighting whether the company's expansion is driven by established or new stores.
*   Analyzing like-for-like sales can help identify which products or segments are performing well, assisting companies in making informed decisions about expansions, promotions, and investments.
*   While beneficial, it's important to note that there is no industry-standard method for calculating like-for-like sales, so they should not be the sole metric for evaluating a company's financial health or growth potential.

![Like-for-Like Sales](https://www.investopedia.com/thmb/UKxv-goaX9rvtnhehDU9mo9dNPw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TermDefinitions_LikeforLikeSales-082c35c22c624abf8d12f7d83a0d4936.jpg)

*— Investopedia / Tara Anand*

## Delving Into the Details of Like-for-Like Sales

Like-for-like sales serve as a method of [financial analysis](https://www.investopedia.com/terms/f/financial-analysis.asp) that is used to identify which of a company's products, divisions, or stores are contributing to its growth and which are lagging. 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 Walmart Inc.'s Walmart and Sam's Club stores.

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.

> **Important**
>
> A company’s quarterly financial reporting often includes the like-for-like metrics it considers significant to its business.

## The Strategic Advantages of Like-for-Like Sales

Retail companies use the like-for-like metric most often for their 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.

Like-for-like sales metrics help companies know if a product or store is contributing to its bottom line and if it is experiencing desired growth. It can also help companies decide whether opening a new location or expanding production is worthwhile. Also, like-for-like sales can reveal if a new store is taking sales away from established locations, which is known as cannibalization.

## Strategies to Enhance Like-for-Like Sales

Improving like-for-like sales translates to increased revenues and a healthier bottom line. To improve like-for-like sales, companies can employ several strategies.

Promotions and sales are effective ways to increase sales and drive traffic, and it sets the business apart from its competitors. These events must be carefully planned and executed to protect profits and encourage customers to continue purchasing. When done properly, customer loyalty increases and new customers are converted.

> **Important**
>
> There’s no industry standard for calculating like-for-like sales, so they usually aren't the only metric used to measure growth.

Companies can also increase like-for-like sales by gathering customer information and using it to expand their customer base and increase sales. Collecting customer data can help companies identify what's important to customers and how to craft future promotions and sales. This can be achieved through incentive or rewards programs, whereby customer data is gathered in exchange for rewards and exclusive or early access to sales. Most importantly, companies can stay in front of the customer, promoting new products and offering deals to encourage purchases.

## Important Considerations for Like-for-Like Sales Analysis

The fourth-quarter report is often the best time to review a company's results, especially like-for-like sales, since it compares the full fiscal year to the previous 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.

## Exploring Real-World Applications of Like-for-Like Sales

Like-for-like or same-store sales commonly control openings and closings by including only locations that have been in operation for a year or more. This is also key to isolating growth catalysts.

McDonald's Corp. reported a global comparable sales increase of 7.5% in the first quarter of 2021, with a U.S. comparable store sales increase of 13.6%, while total sales/revenues increased 9% overall. What does that tell us? McDonald's opened a lot of new stores, but existing store sales grew relatively modestly.

## The Bottom Line

Like-for-like sales are a crucial metric in assessing the performance of comparable stores or products by factoring out external variables that might distort financial assessment. Analyzing like-for-like sales offers insights into which parts of a business are driving growth and which ones need improvement. These metrics are important in guiding strategic decisions, such as whether to open new stores or optimize existing operations.

Companies can enhance like-for-like sales through strategic promotions, data-driven customer engagement, and innovative sales strategies. Like-for-like sales identify and mitigate potential cannibalization between new and existing store locations.

While valuable, like-for-like sales should be considered alongside other metrics due to the lack of a uniform industry standard for their calculation.

> **Article Sources**
>
> 1.  McDonald's. "[McDonald's Reports First Quarter 2021 Results](https://corporate.mcdonalds.com/content/dam/gwscorp/assets/investors/financial-information/earnings-release/Q1-21%20Earnings%20Release.pdf)," Page 1.