One of the most important metrics used in evaluating the success of retailers is revenue per square foot. Apple (AAPL -1.10%) reigned as the top retailer in the world last year with $5,546 in revenue per square foot, according to market research company eMarketer. Jewelry store chain Tiffany & Co. was also high on the list with sales of $2,951 per square foot.

But there's now a surprising new winner in this key sales metric. Marijuana retailer MedMen Enterprises (MMNF.Q) recently reported revenue per square foot of $6,541 at its seven cannabis stores operating in California. And MedMen is just getting started.

Finger pointing to magnifying glass icon to search for cannabis.

Image source: Getty Images.

Is it just the novelty of legal weed?

Apple's entrance into the retail market years ago was so revolutionary that the Apple Store was viewed by some as "the future of retail." The technology company succeeded by innovating in ways that other retailers hadn't. Is MedMen now the new future of retail? 

Some might scoff at the idea. They could suggest that MedMen is merely benefiting from the novelty of consumers in California legally buying marijuana in retail stores. After all, the state didn't allow the legal use and sale of recreational marijuana until January 2018.

However, MedMen's preliminary numbers for its quarter ending June 30, 2018, appear to point to more than just novelty accounting for its success. The company reported that its seven locations that were in operation throughout the entire quarter saw 94,000 new customers but also had nearly 130,000 returning customers.

Perhaps even more striking, though, is the comparison of MedMen's performance against other cannabis retailers in California. There are more than 400 licensed marijuana dispensaries in the state. MedMen's seven stores make up less than 2% of the total number of retail marijuana locations. But those seven stores generated around 6% of total legal sales of marijuana and related products in California in the last quarter, based on tax revenue data released by the state. MedMen's stores generate roughly three times more revenue on average than stores operated by rivals.

I think that much of MedMen's success stems from its adherence to the old retailing maxim: location, location, location. MedMen operates six retail cannabis stores in the Los Angeles area, with one in Beverly Hills, one in downtown L.A., another in West Hollywood, a very strategically placed outlet at the LAX airport, and two stores at Venice Beach (one of which just opened in June). In addition, MedMen has one store in Santa Ana and another in San Diego.

The company hasn't reported sales statistics for its retail locations in other states. MedMen opened its first branded store in Las Vegas in July and plans to relocate an existing marijuana dispensary from North Las Vegas to near the city's main airport. The company also operates four medical cannabis dispensaries in New York.

More stores on the way

Growth in the California market is a major reason why U.S. sales of marijuana are expected to soar to $22 billion by 2022. MedMen's primary focus on California makes a lot of sense. However, the company also plans to move into other markets.

MedMen is looking to open recreational marijuana retail locations in Massachusetts. Arcview Market Research and BDS Analytics project that the state's marijuana market will grow from $151 million last year to over $1.2 billion by 2022.

The company also plans to expand in Florida, which allows the legal use of medical marijuana but hasn't legalized recreational marijuana. Even without recreational marijuana sales, Florida is expected to become the third-biggest cannabis market in the U.S. within the next four years, with more than $1.7 billion spent on marijuana. 

MedMen has gone international as well. The company is teaming up with Cronos Group, one of the top marijuana growers in Canada, to develop branded cannabis products and launch retail stores throughout Canada.

In addition, MedMen is integrating vertically by building its own production facilities. The company recently opened a cultivation and manufacturing facility in Nevada. It's copying this facility's layout to construct a new facility in California that's expected to be ready for operations early next year. MedMen's plan is to replicate these facilities in New York and potentially in Florida.

One not-so-appealing metric

It's certainly a feather in the cap for MedMen to beat accomplished retailers like Apple and Tiffany in revenue generated per square foot. However, it's still early. MedMen's results were for only one quarter.

There's also one not-so-appealing metric about MedMen that investors should know about. The stock trades at nearly 120 times sales. Granted, this valuation measure doesn't reflect MedMen's strong revenue growth that has yet to be officially reported for its quarter ending June 30, 2018. Even if we included the company's preliminary revenue figure, though, the stock would still be ridiculously expensive.

Despite its retail success in California, MedMen's stock performance has been lackluster so far this year. While MedMen could be a huge winner as the U.S. and Canadian marijuana markets expand, my view is that shoppers for stocks might want to look elsewhere for now.