Examining Opportunities for Apple in Current Financial Crisis

by , 2:50 PM EDT, September 25th, 2008

The current economic crisis in the U.S. is unlikely to affect Apple's retail store operations, according to ifoAppleStore on Wednesday. While there may be effects from slowed consumer spending, Apple could also benefit from lower cost leases. In addition, it costs Apple less to open a new store than competitors.

There are several reasons why Apple retail stores will do well, and likely do better than the competition in the current market conditions:

First, Apple exposure to the financial squeeze seems negligible thanks to its financial position -- about US$20B in cash and short term investments.

Second, Apple opens its stores in a slow, even handed way to make sure each one is profitable. Other companies that over extended themselves in the boom could have to pull back drastically as their customers are reluctant to spend. That opens opportunities for Apple to negotiate more favorable lease terms in struggling shopping malls.

Finally, Apple has never felt the need to lower prices to boost sales, and customers haven't come to expect special sale periods. However, they do see Apple products as better investments as Christmas gifts than many other products.

All this means that Apple, despite a forecast for modest growth in holiday sales, is well positioned to outperform the rest of the industry. In addition, as Apple opens more and more international stores, that sector of Apple's business will be less and less affected by financial troubles in the U.S.

It's likely that Apple's retail stores will once again be jammed with customers this holiday buying season, the report concluded, and what seems like dismal financial times could turn out to be an opportunity for Apple.

Source: ifoAppleStore