Apple Retail Stores: Macintosh Sales Centers And More

  • Posted: 05 February 2011 05:12 PM

    My latest missive at Eventide.

    Snippet: There’s no mistaking the importance of Apple’s retail stores to the company’s continuing growth in revenue and earnings and the ongoing growth in Mac unit sales. In the September quarter retail store revenue rose 75% versus the 66.7% rise in revenue for the company as a whole. The 95% rise in retail store revenue in the December versus the 70.5% rise in overall revenue suggests there is capacity for more retail stores as the company’s global product presence continues to expand.

    The Apple retail stores are key to the company’s continuing growth in revenue and earnings and there’s definite global capacity for more retail store locations.

         
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    Posted: 05 February 2011 05:46 PM #1

    Apple depends a great deal on retail partners for areas outside high-income areas.  For iPads, iPhones and iPods, that is reasonable (or is it).

    But for a Mac, there is a shortage of quality Mac dealers.  There’s a great deal of emphasis on the hardware and os and the basic Mac apps.  The more Mac user communities, the more they can share about apps.

    If Apple wants market share, then it should stop concentrating on the choir and assemble the manpower and store fronts.  Move into more challenging territory.

    [ Edited: 05 February 2011 06:05 PM by Tetrachloride ]      
  • Posted: 05 February 2011 07:33 PM #2

    Tetrachloride - 05 February 2011 09:46 PM

    Apple depends a great deal on retail partners for areas outside high-income areas.  For iPads, iPhones and iPods, that is reasonable (or is it).

    But for a Mac, there is a shortage of quality Mac dealers.  There’s a great deal of emphasis on the hardware and os and the basic Mac apps.  The more Mac user communities, the more they can share about apps.

    If Apple wants market share, then it should stop concentrating on the choir and assemble the manpower and store fronts.  Move into more challenging territory.

    Tetra:

    The numbers suggest there are tremendous revenue growth opportunities through an continued expansion of the retail store presence. I’m even more bullish on the revenue potential from retail stores after reviewing the performance numbers. I suspect establishing retail stores in previously underserved markets would bring about immediate and positive results.

         
  • Posted: 06 February 2011 12:21 AM #3

    DT, interesting analysis.

    How many store openings are planned for this year?

         
  • Posted: 06 February 2011 02:03 AM #4

    Sparky - 06 February 2011 04:21 AM

    DT, interesting analysis.

    How many store openings are planned for this year?

    Sparky, good to see you back in the AFB. If I recall correctly from the September conference call with analysts, Apple plans to open 40 - 50 new stores in 2011.

         
  • Posted: 06 February 2011 02:24 AM #5

    DawnTreader - 06 February 2011 06:03 AM
    Sparky - 06 February 2011 04:21 AM

    DT, interesting analysis.

    How many store openings are planned for this year?

    Sparky, good to see you back in the AFB. If I recall correctly from the September conference call with analysts, Apple plans to open 40 - 50 new stores in 2011.

    This is about what I recall, and with over half being ex-North America.  What I noted, though, is that this is not an acceleration.  In fact did we not open about the same number in 2010?

    I infer that Apple has made the judgment that the U.S. is getting saturated within the context of their criteria.

         
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    Posted: 06 February 2011 01:28 PM #6

    From Seeking Alpha (do search for AAPL earnings transcript)

    We opened 24 stores during the September quarter, 16 of which were outside the United States, including spectacular stores in Beijing, Shanghai, London and Paris. Our new Beijing and Shanghai stores opened on the last day of the quarter, and first-day sales from both stores exceeded all previous store openings. Our four China stores are our highest traffic stores in the world and are among our highest performing.

    We also entered our eleventh country, with the opening of stores in Barcelona and Madrid. That brings us to a total of 317 stores worldwide as at the end of the quarter, with 84 of them outside the United States. With an average of 301 stores opened during the September quarter, average revenue per store was $11.8 million compared to $7.8 million in the year-ago quarter, an increase of 52%.

    Retail segment margin was $917 million compared to $564 million in the year-ago quarter. We hosted a record 74.5 million visitors in our stores during the quarter compared to 45.9 million visitors in the year-ago quarter, an increase of 62%.

    As we look ahead to fiscal 2011, we see great opportunity to continue our retail growth with our focus on international expansion. In total, we expect to open 40 to 50 stores in our fiscal 2011 with over 50% of them outside the United States. We will also begin replacing several stores in the United States to get them right-sized for Apple’s current product line and to meet our service goals.

         
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    Posted: 06 February 2011 03:16 PM #7

    adamthompson3232 - 06 February 2011 06:36 PM

    Overall, I think Apple is far too prudent in its retail approach. The cash hoard would allow them to open far more stores per year without worrying one bit about the cap ex needed to do it. I just think Apple is being cautious in case some macro level event slows the need for additional stores. I don’t see this happening and I don’t really see any reason to not open at least double the stores per year they are currently opening.

    Maybe Apple is simply building the stores as fast as they possibly can. It’s another example of a supply constrained product like the iPhone 4. They just can’t build them fast enough.

    Remember these stores aren’t cookie-cutter type affairs. They’re very careful in selecting not only locations, but often specific architecturally unique buildings. I’m sure there’s a limited number of architect & designer teams available to work on these projects.

    Money isn’t the constraint. Talent is.

         
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    Posted: 06 February 2011 03:21 PM #8

    Although I have no knowledge to declare, my sense says there are architects willing and able to work for Apple for a variety of locations.

         
  • Posted: 06 February 2011 05:57 PM #9

    ChasMac77 - 06 February 2011 05:28 PM

    From Seeking Alpha (do search for AAPL earnings transcript)

    We opened 24 stores during the September quarter, 16 of which were outside the United States, including spectacular stores in Beijing, Shanghai, London and Paris. Our new Beijing and Shanghai stores opened on the last day of the quarter, and first-day sales from both stores exceeded all previous store openings. Our four China stores are our highest traffic stores in the world and are among our highest performing.

    We also entered our eleventh country, with the opening of stores in Barcelona and Madrid. That brings us to a total of 317 stores worldwide as at the end of the quarter, with 84 of them outside the United States. With an average of 301 stores opened during the September quarter, average revenue per store was $11.8 million compared to $7.8 million in the year-ago quarter, an increase of 52%.

    Retail segment margin was $917 million compared to $564 million in the year-ago quarter. We hosted a record 74.5 million visitors in our stores during the quarter compared to 45.9 million visitors in the year-ago quarter, an increase of 62%.

    As we look ahead to fiscal 2011, we see great opportunity to continue our retail growth with our focus on international expansion. In total, we expect to open 40 to 50 stores in our fiscal 2011 with over 50% of them outside the United States. We will also begin replacing several stores in the United States to get them right-sized for Apple’s current product line and to meet our service goals.

    Thank you.

    40 to 50 stores in 2011 is what I remember. That’s a more than 12% increase in the number of stores. Apple did slow the pace of retail store openings in the early days of the Great Recession and if I recall correctly found some superb lease values that prompted the company to get back on track with new locations.

    More than 50% outside the US is encouraging. Apple is quite particular in the locations the company selects and prime properties take time to lease and develop.

         
  • Posted: 06 February 2011 06:01 PM #10

    adamthompson3232 - 06 February 2011 06:36 PM

    I don’t think the U.S. is anywhere near saturated. In fact, I am certain of that. Apple could easily have 2-3 stores in every major city in the U.S. so there are literally hundreds (perhaps even 1,000) additional locations here in the U.S. I hope they never get to 1,000 locations, though, because the prestige of an Apple store may begin to wear off if they are ever too ubiquitous. I don’t think we will ever see that day (at least not in the next ten years) so I am not worried about it. They can open a few hundred more here without running into that problem.

    Sure, a slower new store schedule allows them to really get laser focused on the building and opening of each new store which is obviously the Apple way to do everything but it also is holding back some of the growth they could be realizing. Of course, the company is growing so damn fast as it is it’s hard t complain about this but I still would like to see more store openings.

    I don’t think Apple has reached a saturation point in the US either. But locations are meticulously selected. I also agree the pace of retail store openings is limiting some growth potential.

    Looking at the graphs and table data one more time, retail store revenue growth exceeded overall growth in revenue in each quarter following the iPad’s release. To sustain strong Mac unit sales growth the retail stores are a key component of that strategy.

         
  • Posted: 06 February 2011 07:12 PM #11

    ChasMac77 - 06 February 2011 05:28 PM

    From Seeking Alpha (do search for AAPL earnings transcript)

    We opened 24 stores during the September quarter, 16 of which were outside the United States, including spectacular stores in Beijing, Shanghai, London and Paris. Our new Beijing and Shanghai stores opened on the last day of the quarter, and first-day sales from both stores exceeded all previous store openings. Our four China stores are our highest traffic stores in the world and are among our highest performing.

    We also entered our eleventh country, with the opening of stores in Barcelona and Madrid. That brings us to a total of 317 stores worldwide as at the end of the quarter, with 84 of them outside the United States. With an average of 301 stores opened during the September quarter, average revenue per store was $11.8 million compared to $7.8 million in the year-ago quarter, an increase of 52%.

    Retail segment margin was $917 million compared to $564 million in the year-ago quarter. We hosted a record 74.5 million visitors in our stores during the quarter compared to 45.9 million visitors in the year-ago quarter, an increase of 62%.

    As we look ahead to fiscal 2011, we see great opportunity to continue our retail growth with our focus on international expansion. In total, we expect to open 40 to 50 stores in our fiscal 2011 with over 50% of them outside the United States. We will also begin replacing several stores in the United States to get them right-sized for Apple’s current product line and to meet our service goals.

      Forty new Stores at $12 Million each per quarter amounts to $1.920 Billion in additional revenue YoY.  And that doesn’t include online sales, or sales from Apple’s partners.

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  • Posted: 06 February 2011 08:26 PM #12

    Gregg Thurman - 06 February 2011 11:12 PM

      Forty new Stores at $12 Million each per quarter amounts to $1.920 Billion in additional revenue YoY.  And that doesn’t include online sales, or sales from Apple’s partners.

    I’ll expect on average higher sales from the new stores especially stores in previously underserved international locations. Looking at the numbers, the more stores the more Mac sales in particular.

    If Apple can maintain 20%+ Mac unit sales gains through FY2011 and well into FY2012, it provides a strong foundation for sustained overall revenue growth.

         
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    Posted: 06 February 2011 09:29 PM #13

    Apple has already picked the best retail venues in the US - I mean, Ron Johnson and crew have been at this for 10 years now.  I have no problem with Apple building out more slowly from now on. 

    IIRC, Apple has never closed a store, and the discipline in selecting locations has a lot to do with it.  Apple will get the best ROI from here on internationally, and that’s the obvious place to be focusing.

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  • Posted: 06 February 2011 10:10 PM #14

    I’ve been following Mac sales and the Mac’s overall contribution to Apple’s revenue and rising Mac sales through the Apple retail stores. I’m doing this for a particular reason.

    The Mac has roughly twice the revenue weight of an iPad or iPhone on a per unit sold basis. Granted both the iPhone and the iPad are in eras of explosive growth, but the Mac is fundamental to sustaining current levels of revenue and earnings growth.

    The prospect of 40 to 50 new stores this year bodes well for Mac unit sales and the mutual halo effect among Apple products. I’m not concerned about FY2011 revenue growth. But the better the prospects for FY2012 revenue growth the better the prospects for sustained share price appreciation in the latter half of this calendar year.

         
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    Posted: 06 February 2011 10:24 PM #15

    That’s a key point.  The Apple Stores are needed to sell Macs more than the iDevices.