Photo: Brett Jordan via Flickr
The most startling news in Apple’s weak quarter was actually the performance of the company’s retail stores.Despite opening 30 new stores in the quarter, Apple’s retail revenue increased only 1% year over year.
This compares to a 36% revenue increase in the June quarter.
That’s quite the screeching halt!
On a same-store basis, the performance was even worse: The average Apple store sold $10.7 million worth of stuff this year, versus $11.8 million last year, a decline of 9%.
And, thanks to the high fixed cost of the Apple stores, Apple’s retail gross profit was the worst of the lot: Retail gross profit dropped from $917 million last year to $679 million this year, a drop of a shocking 26%.
Now, most of the disappointment here can be traced to the iPhone shortfall, which caught many people by surprise. Given that Apple’s iPhone sales in aggregate increased 21% year over year, however, this means the growth of iPhone sales happened outside of the stores and that sales of iPhones in stores dropped precipitously, which is scary.
(Apple says Mac and iPad sales in stores were up significantly year-over-year. For same-store revenue to drop 9%, therefore, iPhone sales had to drop sharply, perhaps by more than 20% year over year. To say Apple stores are highly dependent on the iPhone, therefore, is an understatement.)
Apple says retail-store traffic is still “very strong.”
Here are Apple CFO Peter Oppenheimer’s comments from the call:
I’d now like to turn to the Apple Retail Stores. Revenue was $3.6 billion, an increase of 1% over the prior-year quarter. The stores experienced very strong year-over-year growth in Mac and iPad sales, which was largely offset by decline in iPhone sales given the tough comparisons in the year-ago quarter when iPhone 4 was launched and compounded by speculation about a new iPhone this year. The stores generated record-breaking Mac results, with sales reaching 1.1 million compared to 874,000 in the year-ago quarter, an increase of 25%. And about half of the Macs sold in our stores during the September quarter were to customers who had never owned a Mac before.
We opened 30 new stores in the quarter, 21 of which were outside United States. On the last weekend of the quarter, we opened 7 stores in 6 countries, including our first store in Hong Kong. With our highest opening day for Mac sales ever, our Hong Kong store joins our 5 other China stores as the highest traffic and among our highest revenue stores in the world. We ended the quarter with a total of 357 stores. With an average of 336 stores opened, average revenue per store was $10.7 million compared to $11.8 million in the year-ago quarter.
Retail segment margin was $679 million compared to $917 million in the year-ago quarter. Store traffic continues to be very strong. We hosted a record 77.5 million visitors in the September quarter. As we look ahead to fiscal 2012, we will continue to focus on international expansion. In total, we expect to open about 40 stores with approximately 3/4 of them outside United States. We will also be expanding or replacing higher volume stores primarily in the U.S. that are simply too constrained to deliver our desired customer experience.