HOW TO CALCULATE SAME STORE SALES?

Hi!

There are a number of ways to caculate like-for-like sales (or SSS), but before explaining the calculation it is probably worth spending 2' on the definition .

In the Retail industry, new stores usually don't generate as much sales as they could until 18 or 36 months depending on the format and the type of business you are considering. Why so, it usually takes time for people to be aware of the existence of a new store and start buying products (i.e. ramp up period for a furniture or apparel retailer). The same way, if you open a new burger restaurant, it's very likely that the sales will be artificially high for the first few weeks or months as people tend to be over excited by everything new. After that period, sales will tail off because people no longer feel like eating a burger three times a week...

Once you have stripped out these effects, you will be able to see how fast the business actually grows on a organic basis and what are the main drivers (i.e. Inflation / RPI, price increases, volume, etc.). In other words, you want to see how the core business performs once a store has been established for 12+ months or so.

How to calculate LfL sales? You need to exclude all the shops that have been opened for less than 12 months (or 18 months in some cases) over the considered period, as well as the shops that have been refurbished - as you know, refurbishing a store usually results in a significant sales uplift - or closed.

If you have the sales performance for each and every single store, it should be fairly easy to calculate. More often than not, retailers tend to include online sales to artificially boost their LfL. Ideally, you only want to look at the performance of the different cohorts excluding the impact of online.

Hopefully, that's clearer. Let me know if you have any question.

Camondo