What is Sales per Square Foot?

Sales per square foot is an indicator of sales efficiency. The formula for it is:

Sales Per Square Foot = Sales / Square Feet of Selling Space

How Does Sales per Square Foot Work?

For example, let's say Company XYZ sold $15 million worth of clothes last year in its 10 stores. Each store is about 3,000 square feet, for a total of 30,000 square feet.

Using this data and the formula above, we can calculate Company XYZ's sales per square foot:

$15,000,000 / 30,000 = $500

Why Does Sales per Square Foot Matter?

Sales per square foot is an indicator of how efficiently a company uses its assets to make sales. For this reason, the higher the sales per square foot, the better.

The measure is particularly popular in the retail and grocery industries, where analysts study which locations and layouts are most profitable. The measure also allows analysts to compare competitors and even entire industries to determine which are make the most and least productive use of their assets. In some cases, landlords set rent for retail tenants based on their sales per square foot.

Information about sales per square foot is often available from industry trade associations such as the International Council of Shopping Centers.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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