Earnings Conference Notes: Retail Good; Q1 Outlook Bright

Aside from the main headlines of Appleis stronger-than-expected earnings, the announcement of six mini retail stores and Hewlett-Packard selling over 100,000 iPods, a number of other important pieces of news came out of the analyst conference call on Wednesday. Here is a short synopsis of other interesting developments:

  • Appleis total direct revenue through online and retail store sales was up to 52%, compared to 43% for the same quarter a year ago.
  • iTMS will expand to additional European countries by the end of the month, but Apple Chief Financial Officer Peter Oppenheimer did not say which countries. By the end of 2004, Apple will have 100 retail stores.
  • Average revenue from each of Appleis retail stores was US$4.6 million, up 48% from the same quarter a year ago.
  • Retail store traffic in the U.S. was up 34% to 7.8 million for the quarter, translating into 7,400 visitors per store, per week. A year ago, traffic was at 5,300 people per store.
  • Appleis first European store in London is still scheduled to open in November, Mr. Oppenheimer said. The company expects to open other stores in the U.K. and Japan next year.
  • Apple has $5.464 billion in cash reserves, up $500 million from the previous quarter.
  • Apple lost $40 to $50 of profit on each G5 iMac shipped in the quarter due to expensive air freight costs. Mr. Oppenheimer also said all G5 iMacs shipped in the current quarter will also come from Asia factories via air freight. He said the shipping costs were factored into Appleis fiscal Q4 guidance as well as fiscal Q1 for 2005.
  • Appleis total direct sales, meaning online, retail, U.S. education, and music, accounted for 52% of the companyis total world-wide revenue.
  • With an average of 81 stores operating during the quarter, per store revenue rose to 4.6 million per store, up from 3.1 million from the year ago quarter.
  • 45 to 50% of CPU buyers at Appleis retail stores are former Windows users or new to the Mac, said Tim Cook, Appleis Executive Vice President of World Wide Sales and Operations.
  • Apple sold $213 million worth of software and $271 million in peripherals and other hardware during the quarter.
  • Not broken out on the companyis detailed data sheet of systems sold, Mr. Oppenheimer said Apple shipped a total of 173,000 eMacs but only 56,000 flat-panel iMacs due to supply constraints associated with the Power Mac G5 processor.
  • When asked by an analyst why Apple doesnit have a cheaper priced CPU, Mr. Oppenheimer said Apple "feels very good" about its system pricing, and said that Apple has invested money into other products instead of producing a low-cost Mac.
  • Looking ahead to the first quarter of fiscal 2005, ending in December, Mr. Oppenheimer said he expects revenue of between $2.8 and $2.9 billion, and earnings per diluted share of 39 to 42 cents. "We expect growth margins to be about 27.25%," he said.

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