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Like-for-like sales figures to become obsolete without standardisation

- Measurement is at risk of becoming obsolete without change
- The impact of online sales cannot be ignored
- An inclusive and standardised set of principles is required to maintain like-for-like's relevance

The retail industry must work together on creating a guide for compiling like-for-like sales figures, or risk the measurement becoming obsolete, according to the KPMG/Synovate Retail Think Tank.

There are currently no guidelines for retailers producing like-for-like sales figures, which aim to provide a measure of underlying performance by stripping out the impact on sales of new or closed stores.

Retailers are currently free to choose whether to include or exclude figures on store refurbishments and extensions, VAT, inflation, changes to product mix, discounts and promotions, often without explicitly stating which adjustments are made. Thus comparing figures across different retailers is fraught with danger.

Helen Dickinson, UK Head of Retail at KPMG, said: "Retailers are not consistent in the way they draw up their like-for-like figures and practice varies widely on how the metric is used. The continued validity of this much loved measure, given the diversity of measurement methods, and range of trading periods quoted, is questionable."

Tim Denison, Director of Retail Intelligence, at Synovate, said: "To the outside world, the value of disclosed like-for-like sales figures is diminishing, simply because all too often they neither provide a fair reflection of underlying sales, nor do they provide a fair comparative base between retailers."

The increasing importance to retailers of online transactions further muddies the waters, as how sales from online and other emerging channels should be treated is far from clear and far from consistent.

Richard Lowe, Head of Retail & Wholesale at Barclays Corporate, said: "A retailer may well be enjoying remarkable online growth with sales driven through a combination of click-and-collect and purchases made via the internet, but these may not visible if you were to look at business' like-for-likes in isolation."

In its latest white paper, the KPMG/Synovate Retail Think Tank calls upon the industry and leading retailers to work together to draw up guiding principles that will ensure like-for-like sales remains a relevant metric for the 21st century. It also offered its suggestions on what should and should not be included in like-for-like sales.

Key recommendations:

- New stores, store closures and store extensions: Excluded from like-for-like sales figures

- Store refurbishments: Included unless the store closes for a substantial period of time and contributes a significant portion of the chain's income

- VAT: Like-for-like sales figures should be provided both with and without VAT to aid the comparisons between retailers who have varying mixes of products attracting VAT at different rates

- Inflation, changes to product mix, discounts/vouchers/promotions: No adjustments should be made

- Website sales: Included in like-for-like sales, except for new website launches. Only if sales through alternative channels are completely independent of the existing portfolio, should they be excluded, which is expected to be rare

- Reporting periods: Trading updates of like-for-like sales figures should cover the same period across the sector, especially over Christmas.

KPMG's Helen Dickinson said: "In a world where stakeholders continue to demand clarity over published KPI's – both financial and non-financial, surely it is only a matter of time before a 'standard' measure, or at the very least some clear best practice, becomes a reality."

Source : BookTrade.info
www.booktrade.info/index.php/showarticle/35345

16 August 2011
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