Jim Armitage: It's pointless obsessing over sales figures when it's profit margin that matters

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The Independent Online

Outlook While you're trying to thread your way through the battlefield of retailers' Christmas trading figures, don't lose sight of one fact: you can't really trust them. So says the accountants' professional body, the ICAEW, which is utterly excoriating of the concept of the "like-for-like sales" which obsess the City at this time of year.

The ICAEW argues that like-for-likes, presented by big retailers as the key measure of a chain's underlying performance, are merely a mirage, a convenient "trick" which can mislead shareholders, and even managers, about the true health of a business. First off, it isn't sales that should be obsessing us all. As every businessman knows: "sales are vanity, profit is sanity". Any fool can sell at a discount, it's the profit margin that matters, as Philip Clarke will be stressing at Tesco today.

More troubling, though, is the fact that companies all measure these sales in different ways, so the exercise of spotting winners and losers becomes ever more pointless. And, a cynic might argue, ever more easy for companies to fix.

Previous wheezes include fiddling the dates to compare strong weeks with weak ones last year, or counting revenues from stores that have been extended, lavishly refurbished or refitted with space-boosting mezzanine levels. All ways of flattering the performance of the mouldy old fleapits in the rest of the chain.

The ICAEW is mainly concerned about how sales are split between online and high street. If a customer "clicks and collects," is that a web sale or a high street one? Depends what the CEO wants it to be. More innocently, perhaps, if a customer sees and tries something in store but buys it online later, what's that?

Tricky debates, but ones which count, as investors decide with whom to invest our pensions. The retail industry should standardise, quickly, or our fund managers should take our money back.