According to the KPMG/Synovate Retail Think Tank, the retail industry must work together on creating a guide for compiling like-for-like sales figures, or risk the measurement becoming obsolete...
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.
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.”
See the full White Paper here
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About the Retail Think Tank
The RTT was founded by KPMG and Synovate in February 2006. It now meets quarterly to provide authoritative ‘thought leadership’ on matters affecting the retail industry. All outputs are consensual and arrived at by simple majority vote and moderated discussion. Quotes are individually credited. The Retail Think Tank has been created because it is widely accepted that there are so many mixed messages from different data sources that it is difficult to establish with any certainty the true health and status of the sector. The aim of the RTT is to provide the authoritative, credible and most trusted window on what is really happening in retail and to develop thought leadership on the key areas influencing the future of retailing in the UK. Its executive members have been rigorously selected from non-aligned disciplines to highlight issues, propose solutions, learn from the past, signpost the road ahead and put retail into its rightful context within the British social/economic matrix. The RTT panellists rely on their depth of personal experience, sector knowledge and review an exhaustive bank of industry and government datasets.
Nick Bubb, Arden Partners Prof. John Dawson, Universities of Edinburgh and Stirling Dr. Tim Denison, Synovate Retail Performance Helen Dickinson, KPMG Neil Saunders, Verdict Research Richard Lowe, Barclays Retail & Wholesale Sectors Vicky Redwood, Capital Economics Mark Teale, CB Richard Ellis
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
Synovate, the market research arm of Aegis Group plc, generates insights to help clients drive competitive brand, product and customer experience strategies. A truly borderless company with offices in over 60 countries, our approach combines best in class global research capabilities with personalised service, local knowledge and the flexibility to create teams and processes that meet clients' specific requirements. At Synovate, our clients sit at the top of our organisational chart, driving us to continually develop more innovative research solutions that predict actual business outcomes. For more information on Synovate visit www.synovate.com.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.