the comparison of sales that are made within a certain period of time against the sales during another period of time in order to assess a change in revenue.
How Like-for-Like Sales Work
Also known as LFL sales or comparable-store sales, like-for-like sales are a special way to detect growth in a specific type or group of sales. In most cases, this entails ensuring that factors that could skew the results of the comparison are excluded in order to preserve the integrity of the metric.
For example, if a clothing business wanted to see how a jean collection was selling over time, they would compare the sales of that jean collection from the first year and the sales of only that jean collection the tenth year. This remains true even if that jean collection had created an extension jean shorts collection. In other words, you would only include the sales from the original jean collection and not the jean shorts collection in the assessment.
LFL sales are often used with like-for-like sales figures. Like-for-like sales figures model and show the difference (or lack thereof) in the sales recorded during each period that you are studying. You can use these figures to quickly depict and convey just how sales have fallen, grown, or remained unchanged over time.
Like-for-Like Sale Example
As a kid, you ran a lemonade stand each summer and kept detailed records of how much you sold. Now that you are an adult, you are curious to see how your sales compared and varied from year to year.
During the first year, you earned $80 selling 80 cups of lemonade for $1 each. The next year, you also decided to sell cookies with the lemonade and made a grand total of $190. In that second year, $110 of that money came from selling lemonade, again, each cup for $1. As an adult, you are interested in comparing these values as like-for-like sales.
Remembering that you should exclude any factors that could skew the results of the assessment. You decide to only compare the sales of the lemonade—$80 in the first year and $110 in the second year. In other words, you excluded the sales from the cookies because this would give an unfair advantage to the sales in the second year. If you were so inclined to, from this data and data from other years, you could produce a like-for-like sales figure.
Significance of Like-for-Like Sale
Today, comparing like-for-like sales is one of the main metrics for determining how a company’s sales have changed over time. This is mainly due to the fact that this method of assessment ensures that there are no outside factors that may skew the results, as seen in the jean collection example. Additionally, the comparison of LFL sales is popular because it is fairly easy to obtain like-for-like sales if an accurate and thorough report of sales is kept from year to year. This is the norm for most businesses in retail.