Record Retail Financials, Larger Stores Coming

October 18, 2010

Apple’s fourth-quarter financial results were all about setting records, including the highest overall revenues and profit, and the highest Retail revenues and profit, and most Macintosh computers sold. The company will resume full-scale expansion of its retail stores, opening 40 to 50 new stores during fiscal 2011, the number of stores that typically opened before the start of the economic downturn in 2008. Apple’s revenues totaled $20.34 billion during the quarter, and profit totaled $4.30 billion. The company sold 3.89 million Macintosh computers during the quarter, along with record numbers of iPhones and iPads. The Retail operation generated $3.57 billion in revenues (up 75 percent from Q4 2009), and $917 million in profit (up 223 percent). Macintosh sales at the stores were up 30 percent from the year-ago quarter, totaling 874,000. Average store revenues were $11.8 million, up 52 percent from the previous year, and the number of visitors reached a new record of 74.5 million. The company opened 24 new stores during the quarter, including 16 outside the United States. CFO Peter Oppenheimer noted that first-day sales at the Beijing and Shanghai stores exceeded all previous first-day sales. Looking ahead, Oppenheimer said besides opening new stores during fiscal 2011, the company will also “right-size” several existing stores to accommodate the larger number of visitors, and to “meet service goals.” The company has already upsized several of the original mini-stores that opened in 2004, converting them to full-size stores in the 5,000 to 6,000 square-foot range. See the charts and graphs for more numbers.

Apple said the increase in retail stores sales was driven primarily by, “strong demand for iPad, increased sales of Mac desktop and portable systems and a significant year-over-year increase in iPhone revenue.”

The company said it now has 15 “high-profile” stores, such as the Pudong (Shanghai) store that opened last quarter. The company expenses some costs associated with these stores to corporate marketing. For fiscal 2010, these expenses totaled $75 million, the highest total yet. High-profile store expenses were $65 million in 2009 and $53 million in 2008.

Retail staffing during Q4 increased by 18 percent from the previous quarter. The number is reported as “full-time equivalent positions,” and typically varies—up and down—each quarter by about 2,000. The 24 new stores account for about 2,400 of this quarter’s increase, while back-to-school and holiday hiring could account for the rest.

Looking ahead, the company forecasts that it will spend $600 million on capital asset expenditures on the Retail segment, compared to just under $400 million in each of the previous three years. This increase of more than 50 percent from 2010 is probably related to an extensive roll-out of stores in China, and an expansion of stores in Spain and France.

In the most recent years, Apple opened an increasing number of new retail stores each fiscal year, peaking at 50 grand openings in 2008. But as the economy turned downward in 2008, Apple shifted gears, opening just 26 stores in fiscal 2009. The downturn offered Apple several opportunities to expand in fiscal 2010, including a larger number of prime vacancies because of retailer closings and pull-back. The downturn and resulting vacancies also led to lower lease rates, allowing Apple to strike advantageous deals with property owners. As a result of these factors, the number of new stores during fiscal 2010 increased to 44. Here are the year-by-year new store openings:

  • 2001 – 8
  • 2002 – 30
  • 2003 – 23
  • 2004 – 21
  • 2005 – 38
  • 2006 – 41
  • 2007 – 32
  • 2008 – 50
  • 2009 – 26
  • 2010 – 44
  • 2011 – 40 to 50 (forecast)

The fiscal 2011 total of new stores will include some of the 21 additional stores Apple has said it will open in China before the end of 2012. The company already has two stores each in Beijing and Shanghai. It’s known that Apple is now working on a store in Hong Kong and a third store in both Shanghai and Beijing.

Apple’s 2011 forecast of opening half its stores outside the United States matches previous years.

Apple’s first stores were in the range of 5,000 to 6,000 square-feet in size. However, the size trended downward after the first year of grand openings, and subsequently have centered around 3,000 square-feet. Earlier this year the company announced its retail stores were “too small,” and that future stores would be larger. Several recent new stores have been in the 4,000 to 5,000 square-foot range. Last Saturday the St. Louis Galleria (Mo.) store moved from a mini-store space down the mall hallway, and re-opened in a 6,000 square-foot space.

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