INVESTING EXPLAINED: What it’s good to learn about LFL (like-for-like)

In this collection, we bust the jargon and clarify a well-liked investing time period or theme. Here it is LFL. 

What does this stand for?

LFL is an abbreviation of like-for-like, a extensively used time period within the retail sector.

It is a measure of progress in gross sales – over a set interval of 1 month, six months or over a 12 months – that strips out the impression on turnover of latest retailer house.

LFL numbers started to appear in retailers’ figures within the Nineteen Eighties. This was in opposition to the background of a speedy enlargement within the sector within the US and the UK.

Important: LFL is a measure of progress in gross sales – over a set interval of 1 month, six months or over a 12 months – that strips out the impression on turnover of latest retailer house

Stores have been opening on the High Street and big procuring centres have been being constructed.A easy metric was wanted to evaluate the underlying efficiency of the retailer.

Are LFL numbers nonetheless necessary?

Definitely. Almost extra so. The LFLs are among the most carefully watched figures in a retailer’s outcomes since they’re seen as a information to the true well being of the enterprise, notably at a time like now when shoppers are in a value of dwelling squeeze.

This week, for instance, information of the 5.5 per cent fall in LFLs throughout the Black Friday interval on the shops of style retailer Quiz, elevated hypothesis that the loss-making firm might be up on the market – though it additionally sells on-line. 

By distinction, when Marks & Spencer reported final month that its LFL meals gross sales rose by a better-than-expected 11.7 per cent within the first half, this brought on a bounce in its shares. 

In a month’s time, when the Christmas buying and selling updates seem, the City might be paying shut consideration to the LFLs from the supermarkets as a gauge of the attraction of their festive meals provide.

Any different purpose why I’m studying about this?

Retailers are more and more aware of the necessity to clarify what’s included of their LFL numbers.

This is in opposition to the background of a debate over the reliability of LFLs, given the extent of revolution within the retail sector in latest a long time.

What are the objections?

The lack of a agency definition of what the LFL ought to present implies that, in some instances, comparisons could also be lower than legitimate.

The critics insist that the determine doesn’t replicate things like a change in product combine that includes a shift to cheaper or costlier merchandise, or the increase to turnover of a refurbishment that makes a retailer brighter and extra welcoming.

The impression of the transfer to on-line buying throughout the pandemic is one other issue heightening the controversy.

And how are retailers answering their critics?

Some are offering far more info in annual reviews and accounts in an try to reply critics.

In its accounts for the 12 months ended January 2023, High Street style big Next provides a breakdown of its LFL figures, primarily based on retailer location.

During the pandemic, consumers most popular out-of-town retail parks, with their large automotive parks, to much less spacious metropolis centre shops however this development has reversed.

Next’s full-price LFL gross sales in every type have risen by 2.6 per cent since 2019/20.

Supermarket giants Tesco and Sainsbury’s present LFL figures excluding gasoline and together with gasoline, in order that traders can get a transparent image of the efficiency of their meals divisions.