Like-for-Like Sales

Like-for-Like Sales (also known as 'Comparable Store Sales' or 'Same-Store Sales') is a key performance metric, especially popular in the retail and restaurant industries. Think of it as an “apples-to-apples” comparison of a company's sales performance. Instead of looking at total revenue, which can be inflated by opening new stores, like-for-like (LFL) sales focus only on the revenue generated by stores that have been open for a year or more (typically 12 to 13 months). This filters out the “noise” from expansion or store closures, giving investors a much clearer picture of the core health and organic growth of the business. Is the company getting better at selling things from its existing locations, or is it just growing by building more shops? LFL sales answer this crucial question, revealing whether a brand is genuinely resonating more with customers over time.

For a value investor, overall revenue growth can be a vanity metric. A company can boost its top-line number simply by spending a lot of money to open new stores. While this might look impressive on the surface, it could be masking serious problems. The new stores might be cannibalizing sales from older ones, or the existing stores might be seeing fewer customers. LFL sales cut right through this fog. A healthy, positive LFL sales figure is a sign of a strong business with a potential competitive advantage. It indicates that the company is successfully doing one of two things, or both: attracting more customers to its existing locations or persuading each customer to spend more per visit. This is the hallmark of true, sustainable growth. It shows management is executing well, the brand is strong, and the business model is working. Conversely, consistently negative LFL sales are a major red flag, signaling that the company is losing ground to competitors or that its appeal to customers is fading.

LFL sales growth isn't just one number; it's the result of two key components. A smart investor always looks to see which of these levers the company is pulling.

This is the measure of customer traffic. Are more people physically walking into the store (or visiting the website for an established e-commerce business) and making a purchase compared to the same period last year? Strong transaction growth is fantastic news. It suggests the company's marketing is effective, its brand is growing stronger, and it's successfully taking market share. It's a sign of genuine, growing demand.

This measures the average amount spent per transaction. Are customers who come in buying more items, or are they buying more expensive items? Growth in the average ticket size can be a sign of successful upselling strategies (“Would you like to make that a large?”) or strong pricing power, where a company can raise prices without scaring away customers. For example, a coffee shop’s ticket size might grow because it successfully convinces customers to add a pastry to their usual coffee order.

LFL sales are one of the most honest metrics for evaluating a retail or restaurant business. It's a direct report card on how well the company is managing its core assets. Here’s how to use it to your advantage.

• Consistency: Look for a track record of steady, positive LFL sales growth over several years. A single great quarter is nice, but consistent performance is the sign of a durable business.
• Peer Comparison: How does the company’s LFL growth stack up against its direct competitors? A company that is consistently outperforming its rivals is likely doing something special.
• The “Why”: Dig into the company’s financial reports (like the 10-K or 10-Q) and conference call transcripts. Management will often discuss what drove the change. Is it higher traffic or higher prices? Understanding the why behind the number is just as important as the number itself.

• Negative Growth: Persistent negative LFL sales figures suggest the business is in decline. It’s losing relevance with customers, and management needs to find a solution, fast.
• Price Hikes Masking Weakness: Be cautious if LFL sales growth is driven entirely by higher prices while the number of transactions is falling. This can be an unsustainable strategy, like squeezing the last few drops of juice from a lemon. Eventually, customers may balk at the price and go elsewhere.
• Definition Games: Companies can define “comparable store” slightly differently. Some may include online sales, while others may use a 13-month cutoff versus 12. Always check the footnotes in the financial statements to ensure you understand exactly what is being measured.