Sales per square foot is a measure of the dollar amount of sales generated by a retail location per square foot of displayed stock. Retailers use this data to examine differences in same-store sales over time. Corporate analysts use this data to compare sales in different store locations of a retail chain, regardles of store size. This comparison can aid in deciding which locations to expand and which to contract. In addition. Sales per square foot is also by commercial property owners used to determine to determine the appropriate level of rent to charge a store.
Examine sales records to determine the time period you wish to measure. Sales per square foot can indicate yearly or monthly sales. Generating both sets of data allows you to see store performance year-to-year as well as month-to-month.
Generate net sales figures for the time period in question. Net sales are equivalent to gross sales (the total dollar amount of products purchased at the retail location) less returns (the total amount of those products returned to the store for a refund). As an example, assume gross sales of $350,000 and returns of $50,000, resulting in net sales of $300,000.
Obtain retail square footage data for the store in question. The total retail square footage includes all area where stock is displayed, but does not include bathrooms, receiving areas or areas behind counters. For the example, assume a total retail square footage of 1000 square feet.
Divide the net sales by the total square footage to calculate sales per square foot. Following the above example, divide $300,000 by 1000 square feet, resulting in $300 in sales per square foot.
Tip
When comparing sales per square foot between different locations, calculate both the net sales and the retail square footage in the same way in order to obtain a useful “apples to apples” comparison.
