In a world in which Internet companies crush their competitors who are bogged down in brick and mortar, retailers must utilize each square foot in helping to drive revenue. The best metric to measure that, is, of course, sales per square foot. And unsurprisingly, the top five companies in terms of sales per square foot all beat the flat market last year:
RetailSails, a retail industry research firm, released their 2011 Chain Store Productivity Report with these companies earning the top spots:
Sales per Square Foot
Net Profit Margin
Apple (NYS: AAPL)
Tiffany (NYS: TIF)
Coach (NYS: COH)
lululemon athletica (NAS: LULU)
True Religion (NAS: TRLG)
Source: RetailSails 2011 Chain Store Productivity Report.
Why these retailers?
These companies have several drivers that push them to the top of sales. First, these brands command high profit margins. These margins allow for high prices, and because of these high prices, customers might be more likely to shop in person and experience the product before committing to the purchase. It's one thing to look at a pair of $330 True Religion jeans on a computer, but quite another to try them on.
As the stores are not operated at razor-thin margins, like a bookstore, running a physical location is less likely to weigh the company down. And whereas a book will have the same words no matter where it came from, a Tiffany bracelet's authenticity is much more valid if it comes from the company's store.
The great news for most of these companies lies in the growth. Both Tiffany and Lululemon join Apple with double-digit growth in sales per square foot. While Coach only registered 6.9% worldwide growth in this metric, it did bust out with 27.5% growth in per-square-foot sales in China. True Religion hangs behind the pack at 1.8%, which is interesting because it is also is the youngest of the bunch, having started in 2002 -- just four years younger than Lululemon.
The Foolish bottom line
As fellow Fool John Maxfield calculates, a portfolio of the top 10 retailers in terms of sales per square foot performed the best over one year compared to portfolios of companies with the fastest-growing sales or highest sales per store, and much better than the SPDR S&P Retail ETF. These top companies might be worth a closer look, and investors should keep their eyes on future sales-per-square-foot figures.
One of RetailSails' top-performing retailers by square foot is Wall Street favorite Costco. The company's subscription-for-deep-discount model has proven enormously effective, but the secret has been out on these guys for a while.
Fortunately, there is one still-unknown company that's repeating this model in a fast-growing emerging market. Motley Fool's chief investment officer likes it so much he's dubbed it our top stock for 2012. This stock is growing its dividend yield, too! Learn all about it in this free report.
At the time thisarticle was published Fool contributor Dan Newman only shops at the lowest-sales-per-square-feet stores. He also holds no shares of any companies mentioned above. Follow him @TMFHelloNewman. The Motley Fool owns shares of Apple, Coach, lululemon athletica, SPDR S&P Retail, and Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Apple, Coach, lululemon athletica, and Costco Wholesale. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.