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 – i.e., those at its previously existing outlets – increased by only 5%.
Come back soon for more on Like-for-like sales and explanations of banking words. Please join the mailing list to stay informed of updates.
Every comment you leave gets you an entry into the draw for 100 GBP of vouchers from Amazon UK. Next winner will be selected on [date].