A focus on short-term figures simply damages retailers’ prospects in the long run, says Neil Gillis

Last spring I planted some sunflower seeds with my three-year-old daughter.

A few days later I saw her digging them up again with her toy spade. When I asked her what she was doing she told me she was checking to see how much they had grown.

Sometimes it feels as though the British approach to business has a similar obsession with the short term. We see it with the annual feeding frenzy surrounding retail Christmas like-for-like sales.

The entire strategy and long-term health of a business is summarised in one percentage reflecting sales over a matter of weeks. It is not even as if it is a particularly illuminating statistic.

Like-for-like sales take no account of where a business is in its development cycle. Young companies with relatively new stores typically enjoy stronger like-for-likes than established companies with mature stores.

Every business has different criteria for what it includes in its like-for-like estates and some of the more ‘imaginative’ will use small, selective investments to remove the worst performing stores from the like-for-like estate and enhance the figures.

Like-for-like sales do not reflect the level of discounting that has been employed to generate this sales number and hence are a poor guide to profit. Privately owned companies - which are not subject to the same high level of regulation as plcs - are increasingly issuing like-for-like performances but have the luxury of being able to do this when the numbers are good and not when they are poor and to carefully select the time periods and criteria they quote.

The obsession with short-term metrics can provide quite a distorted picture of the underlying performance of any given business. In the turnaround sector, for example, it is often said that all turnarounds are failures - up until the point they succeed.

That is because a turnaround business typically produces poor short-term indicators until the fruits of the underlying work are finally apparent at the very end of the process.

But why should any of this matter? An obsession with relatively blunt and uninformative short-term metrics can surely only harm those who try and profit from such information - and more fool them.

Unfortunately, though, I suspect that this malaise is one that might make us less competitive as a country. Other cultures - particularly the rising economies of the East - take a more sensible and longer-term perspective on business.

They can see long-term value in companies where we only see short-term fluctuations and they invest on the basis of a complete business cycle not just the last four weeks.

It is reminiscent of the much-told story of the negotiations to end the Vietnam war during the Paris Peace Accords. The North Vietnamese delegation was put up in houses that its government purchased before the negotiations begun.

The American delegation flew in and booked rooms in local hotels for a month. It is widely felt that the North Vietnamese out-negotiated the Americans because they chose to take the long view.

Neil Gillis is chief executive of Blacks Leisure