Apple Retail Stores: Macintosh Sales Centers And More

Apple Retail Stores: Macintosh Sales Centers And More

I was at the Apple retail store in Glendale, CA the day it opened in May 2001. It was the second Apple retail store to ever open, following the Tysons Corner, VA store opening by three hours. 

In the 10 years since that day Apple has expanded its retail store presence to include 323 locations as of the end of December with 87 of those stores located outside the United States. In the December quarter alone, retail store sales reached $3.847 billion dollars and revenue averaged $12 million per store.The retail margin on store sales exceeded $1 billion and the stores hosted over 75 million visitors. The stores are a major source of product sales for Apple and one of the company's most important channels for Macintosh sales.

As the graphs and table data below indicate, the retail stores are an important element in Apple's continuing growth in revenue and ongoing growth in Macintosh unit sales. 

		Retail Store	Retail % of	Retail	Retail % of	Retail Mac	Overall Mac
	Quarter	Revenue	Total Revenue	Mac Units	Mac Units	YOY Gain	YOY Gain
	FQ1 ’09	1,746,000,000	14.70%	515,000	20.40%	2%	9%
	FQ2 ’09	1,377,000,000	15.16%	438,000	19.77%	-4%	-3%
	FQ3 ’09	1,492,000,000	15.33%	492,000	18.90%	3%	4%
	FQ4 ’09	2,041,000,000	16.72%	670,000	21.95%	12%	17%
	FQ1 ’10	1,971,000,000	12.57%	689,000	20.49%	34%	33%
	FQ2 ’10	1,683,000,000	12.47%	606,000	20.59%	38%	33%
	FQ3 ’10	2,578,000,000	16.42%	677,000	19.50%	38%	33%
	FQ4 ’10	3,566,000,000	17.53%	874,000	22.50%	30%	27%
	FQ1 '11	3,847,000,000	14.39%	851,000	20.59%	24%	23%

Apple Retail Store Revenue
In Apple's 2010 fiscal year (ended in September), retail store revenue reached $9.798 billion dollars, representing about 15% of Apple's reported revenue. 

In the December quarter (the first fiscal quarter of the current fiscal year), retail store sales reached $3.847 billion, a 95% revenue gain year-over-year. The revenue total represented 14.39% of Apple's reported revenue in the holiday quarter.

The accelerating pace of retail store revenue growth, rising foot traffic and increasing average revenue per store suggests there is capacity for more retail stores as Apple's global product presence continues to expand. During the December quarter conference call with analysts, management mentioned the company's four China stores had the highest foot traffic and highest sales of all of Apple's retail stores. Clearly, new retail stores in previously underserved markets will benefit the company's overall results.

Apple Retail Stores and Mac Unit Sales

One signal indicator of the success of the Apple retail stores is the the consistency in which the stores have contributed to the continuing rise in Macintosh unit sales. Over the past five fiscal quarters the rise in Macintosh unit sales through the retail stores has at least slightly exceeded the overall rise in Mac sales. Apple's management has repeatedly stated roughly 50% of Macintosh buyers at the retail stores are new to the platform. 

The graph above illustrates how closely the growth in Macintosh unit sales through the retail stores tracks with the overall growth in Mac unit sales for the company as a whole.

Conclusion

There's no mistaking the importance of Apple's retail stores to the company's continuing growth in revenue and earnings and the ongoing growth in Mac unit sales. In the September quarter retail store revenue rose 75% versus the 66.7% rise in revenue for the company as a whole. The 95% rise in retail store revenue in the December versus the 70.5% rise in overall revenue suggests there is capacity for more retail stores as the company's global product presence continues to expand. 

Although products such as the Apple iPhone and Apple iPad have broad distribution through 3rd party channels, the iPad in particular appears to have boosted retail store revenue as well. This has led to a quickening of the pace of retail store revenue growth and consequential growth in total retail margin. 

This demonstrates capacity for more retail stores as Apple expands global distribution of the company's popular products. 


Robert Paul Leitao