Apple Reports Best Non-Holiday Financials

April 22, 2009

Despite the economic downturn and in the face of investor anxiety, Apple turned in its best non-holiday quarter in history, posting revenues of $8.16 billion and generating a profit of $1.21 billion. Retail store results fell in the middle of its historic non-holiday range: sales were $1.47 billion, compared to $1.451 billion for the same quarter of 2008. Retail profit totaled $308 million, compared to $334 million for Q2 2008. The stores sold 438,000 Mac computers, the lowest figure since Q3 2007, which contributed to average per-store sales of $5.9 million, also a Q3 2007 level. CFO Peter Oppenheimer attributed the store sales decline to the “continued weak consumer spending environment” and the expansion of Apple’s reseller base. The stores hosted 39.1 million visitors, a moderate decline, but also hosted 644,000 personal training sessions during the quarter. Oppenheimer reiterated the company will open “about 25″ stores during the fiscal year, with about one-half outside the United States.

In a later financial filing with the federal Securities and Exchange Commission, Apple said that its total lease commitments for the retail stores total $1.5 billion, an increase of $300 million from three months ago. The increase is slightly on the high side. Previous quarters experienced an increase or decrease of about $100 million.

Apple changed how it terms money spent on retail plant and equipment: previously they termed it “capital expenditures,” but now refer to it as “capital asset purchases.”

Overall, the company said capital asset purchases since the 2001 inception of the retail stores is $1.5 billion. For the current quarter, capital asset purchases were the lowest since Q2 2005–just $30 million. Although spending on stores during the second fiscal quarter is usually less than in others, the last two years have averaged about $83 million. The low capital expenditure figure in this quarter obviously represents the opening of just 25 stores in the next six to nine months, about half the previous year’s total.

Apple reported that it now has 14,000 “full-time equivalent” positions, compared to 15,600 in the previous quarter. The figure represents about 10 percent fewer hours worked, and doesn’t necessarily indicate 10 percent fewer employees at the end of the quarter. Apple reduced FTE positions previously, going from 15,900 store employees in Q4 2008 to 15,600 in Q1 2009.

The hours cut-back was reported here in late December 2008, and was to said to be limited to part-time employees. It was also reported that the employees were not terminated from Apple employment, which would permit them to be recalled to work if needed.

On a per-store basis, the staffing reduction represents the hours for about six full-time employees, or 12 half-timers. Taking into account the various shifts and days-off required of a retail store, the personnel reduction would reduce daily staffing by just four staffers on a weekday. A typical mall Apple store employs about 40 total persons.

Overall, the company said it sold 2.22 million Mac computers during the quarter, down three percent from the same quarter of 2008, but iPod sales rose three percent to 11.01 million devices. Sales of iPhones were strong, with 3.79 million handsets sold in 81 countries during the quarter.

The financial results seem to fall in the middle of the range of investor expectations–neither a disastrous downturn, nor a break-out record. The second quarter of each fiscal year is typically a let-down from the first quarter, which for Apple has almost always been a blow-out because of the holiday buying season. For example, the first quarter of 2009 (Oct.–Dec.) posted record sale of  $10.167 billion, with a profit of $1.61 billion. But during the previous three quarters, company sales were in the $7.5 billion range, slightly less than the results reported today.

Research firm IDC says that PC sales declined seven percent in the first three months of 2009 compared to the same period of 2008. Apple’s executives said their company’s sales were down three percent during those same three months. IDC pegs Apple’s computer market share a 7.6 percent, compared to 7.4 percent in 2008.

The quarterly financial results take into account Apple’s policy of deferring iPhone revenues, spreading them out and reporting them over the device’s 24-month expected life. This means that only a portion of this quarter’s actual iPhone sales were tallied for the quarter’s revenue figure. On the other hand, the deferred sales provide a somewhat improved view of future company revenues.

Review company and retail historical financial results. Download (pdf) the company’s full SEC filing.

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