Apple Inc. (NASDAQ: AAPL) has about 250 retail stores. It's not surprising that their sales would be off. The recession in retail revenues has spread almost everywhere.
But, the trouble at Apple stores may be deeper than many investors would expect. According to Barron's, "Apple's same-store revenues, a key retail metric comparing sales of stores open for at least a year, slid 17.4% in the December quarter from a year earlier, reports Needham hardware analyst Charlie Wolf." Visitor traffic is fairly flat, so a lot of people are just hanging around checking out the Macs and iPods.
The poor performance of the stores hardly makes their existence a waste of money. A lot of people want to see and touch what they buy. They may not make their purchase at the moment they are in the store. They may not have the money to do so. But a month down the road someone who covets the MacBook he saw at the local Apple outlet may be online buying the computer.
Apple can afford to have stores that are showcases of its products. The company may even be willing to suffer a loss in its retail business, which is something almost no other company can do. One way to view the Apple retail strategy is that it is a form of advertising. As long as Apple's revenues are improving, there is hardly reason to complain.
Douglas A. McIntyre is an editor at 24/7 Wall St.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
Reader Comments (Page 1 of 1)
2-01-2009 @ 8:57PM
mongul said...
"Apple's same-store revenues, a key retail metric comparing sales of stores open for at least a year, slid 17.4% in the December quarter from a year earlier, reports Needham hardware analyst Charlie Wolf."
I'd like to know more about Wolf's methodology because these figures are not disclosed by Apple. I get the same result with publicly available figures, simply by dividing the retail quarterly revenue (from apple.com/pr/) by the average number of stores open during the quarter (from Seekingalpha's earnings call transcript). In the December quarter, the average revenue per store was $6.9 million, compared to $8.46 million in the year-ago-quarter, a 17.43% decrease. But I'm not comparing sales of stores OPEN FOR AT LEAST A YEAR. As far as I know, there is no way to do that.
IMO, the average revenue per store is sliding because a) the retail environment is difficult right now, b) the number of stores opened by Apple in the *September* quarter was unusually high (31 new stores, see ifoapplestore.com and seekingalpha's F4Q08 earnings call transcript). In a tough environment, the record number of store openings will tend to lessen the revenue per store. I don't think Apple's in trouble over this because the company is taking the prudent course. Apple plans to open just 25 new stores in fiscal 2009, after opening 50 last year (cnet.com).
www.ifoapplestore.com/stores/charts_graphs.html
Apple F4Q08 earnings call transcript
http://xrl.us/ouryf
Apple easing back retail expansion
http://news.cnet.com/8301-13579_3-10148170-37.html
2-02-2009 @ 5:47PM
John said...
Apple retail was something like $4,000 a sq ft. Drop 17% from that and you get around $3,300 a sq ft. That is still spectacular. Hardly a waste of space. Dust off this title when it falls under $500 a sq ft.
2-02-2009 @ 12:46AM
KenC said...
Congratulations, Doug, you win the Apple hit-whore prize!
2-02-2009 @ 8:16AM
Beltway Greg said...
One key metric you've neglected to mention are the earnings per sq. ft. which I believe are somewhere around $4000 which is far and away not just the leader in regard to tech sales but the leading retailer in the world. Tiffany, Best Buy, Home Depot, Target, ...Apple is the leading retailer in the world. And one more thing that has to be considered is that the stores are hardly small. Most are light-filled and contain plenty of room to roam which probably accounts for the dwell time. If there are two restaurants on a block and one is filled with people and the other is empty most people will gravitate towards the crowded restaurant.
As Bad Company sang, "We're running with the pack."
2-02-2009 @ 11:30AM
Beltway Greg said...
And one more thing.....this is a very dangerous week to be short anything. Best play this week? UYG currently trading at $3.20. Back-up the truck.
2-11-2009 @ 1:23AM
David said...
Comparing Dec. '07 with Dec. '08 and saying that Apple's sky is falling is kind of like comparing one of Bush's gubernatorial debate performances with his performance at any given press conference in 2004 and then claiming he has dementia, like this guy does...
http://www.youtube.com/watch?v=Z12lrlNsjgQ
In other words, it's misleading.