China Stores Fuel Record Quarterly Sales

January 18, 2011

Apple and its retail stores experienced records in almost every category during the last quarter, led particularly by sales growth in China, but also by international stores in general. On average, the four retail stores in China had the highest sales and customer traffic of any store in the chain during the quarter, while the international stores bested U.S. stores on average sales and traffic. The company posted revenues of $26.7 billion during the first fiscal quarter of 2011 and reported a $6.0 billion profit. The retail stores also posted records: $3.85 billion in sales and a profit of $1.0 billion. Sales of Macintosh computers soared during the quarter, with a record 4.13 million sold overall, with 851,000 from the retail stores, not a record. During the holiday quarter, the stores hosted 75.7 million visitors, yet one more record. During a conference call with financial analysts, CFO Peter Oppenheimer did not mention any future stores, and did not say how many would open during fiscal 2011. During a previous conference call Oppenheimer said Apple would open 40 to 50 new stores during the year. Oppenheimer also repeated the now-standard statistic: over one-half of Macintosh sales at the retail stores are to new-to-Mac customers.

CEO Tim Cook was unusually talkative during the conference call, discussing not only financial matters, but the company’s culture, philosophy and future. He displayed an impressive breath of knowledge about the company’s operations, and a sharp memory—he recalled statements from previous conference calls, names and figures.

Sounding like his boss, Cook’s answers were often expressive. Asked about how long into the future Apple plans its various operations, Cook declined to say, explaining, “That’s part of our magic.” At another point, he said that Apple had a very deep team, and that “excellence has become a habit.”

Not one analyst questioned Steve Jobs’ medical leave or even hinted at his future absence during the question-and-answer portion of the conference call. None of the Apple executives mentioned the subject.

Cook told analysts that sales in the Asia-Pacific region increased substantially. He said that “greater China,” consisting of China, Hong Kong and Taiwan, generated $2.6 billion in sales for the company during the quarter, or four times the figure for the same quarter of 2010. Korea sales were up based on iPhone and iPad sales, and Japan sales were up 83 percent year-over-year. He said the company is placing more resources into the area to take advantage of the increased sales, and is looking for more opportunities. Apple has previously said it will have 24 stores open in China by the end of 2012. Around the world, over one-half of the new stores will be outside the United States, company officials have said.

Sr. V-P Ron Johnson has confirmed a future Hong Kong store, possibly opening this year. However, there has never been any official word—or even rumors—of a future Apple store in Taiwan.

Sales of the iPhone increased substantially, Cook said, and were also substantially constrained by the inability make enough handsets. Sales of all iPod models were down by seven percent, but sales of the iPod touch model increased. Apple sold 7.33 million iPads during the quarter.

Cook said Asia-Pacific sales were up 67 percent for the quarter year-over-year, about 10 times the PC market growth for the region. Japan sales were up 56 percent, and Europe-U.S. sales were up “double-digits,” compared to a slumping PC market.

Cook said the enterprise has embraced the iPad very quickly since it was introduced last April. Up to 80 percent of the Fortune 100 companies are now either piloting or deploying the iPad, a sign the companies recognize its creative and productivity capabilities, Cook said.

Looking ahead, Apple forecast another excellent quarter. Cook said the company had no post-holiday sales experience for the new iPad product, but expected its sales to increase. He said Apple is “not sitting still” in the face of iPad competition from other companies.

Update: In documents later filed with the SEC, Apple reported having 29,700 “full-time equivalent” job positions. They also reported spending $59 million on capital asset purchases during the quarter for the retail stores. During fiscal 2011 they expect to spend $600 million, up from $463 during fiscal 2010. At the end of the quarter, retail store lease commitments totaled $2.2 billion. Lastly, Apple said it would open 40 to 50 new stores during fiscal 2011, “over half” located outside the United States.

View the charts and graphs for full financial information.

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