Apple has taken quite a bit of pride in its successful retail operation, and rightly so. It has grown at a rate not seen by other electronics outlets as of late, and sales have been consistently higher every quarter.
Not so for the holidays. Traffic was essentially flat in the fourth quarter, down 1.8 percent. The real drop was in sales, falling 17.4 percent and showing that consumers are buying less, Needham analyst Charlie Wolf found.
“Consumers aren’t in a spending mood,” he quipped to Barron’s (subscription only).
Barron’s Mark Veverka also makes an astitute observation: Apple’s struggles at retail could reverberate. Malls will feel the difference as these stores have become attractions, bringing in new consumers that may have otherwise not shopped the mall.
Another effect is as Apple sells less, it produces less. This sends shockwaves backward into its whole supply chain. Companies that have produced iPod parts know this all too well: an adjustment in Apple’s ordering can cause them to completely miss their own financial goals (it’s happened).
While its certainly alarming to shareholders that one of Apple’s primary revenue drivers are falling upon hard times, consider this: Apple can afford some loss at retail.
As Doug McIntyre at BloggingStocks put it, these stores serve almost as a showroom of sorts for the company: “As long as Apple’s revenues are improving, there is hardly reason to complain,” he argues. I can’t argue with that.
By Harry McCracken | Posted at 9:26 am on Monday, November 16, 2009
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