Apple Store Sales Drop as Fans Wait for the New

Source: Apple

Sales at Apple’s (NASDAQ:AAPL) retail stores have recently declined as the company enters a seasonal slowdown ahead of its next product refresh cycle. According to data compiled by Needham & Co. analyst Charlie Wolf and obtained by AppleInsider, same-store sales dropped by 5 percent in March after jumping 3 percent in December.

Per a research note seen by AppleInsider, the Needham & Co. analyst attributed the slowdown to a dearth of new product introductions that typically drive traffic to the company’s retail stores. So far this year, Apple’s only “new” product has been a minor MacBook Air processor upgrade. Apple derives the majority of its revenue from the iPhone, which was last updated in September. However, Wolf noted that the widespread availability of the iPhone has also contributed to the recent sales decline at Apple Stores. In this sense, Apple’s retail operations are a victim of the iPhone’s success.

“The sales performance of the Apple Stores is also hostage to the company’s distribution strategies,” wrote Wolf in the note acquired by AppleInsider. “To illustrate, Mac sales in the stores were adversely impacted in 2009, when Apple broadened Mac distribution in the U.S., adding other chains, such as Best Buy, as resellers. iPod sales in the Apple Stores tanked when iPod demand caught up with supply and Apple responded by vastly increasing the number of outlets selling the product. Same-store sales have also been affected by the rollout of the iPhone to carrier stores around the globe.”

However, the analyst also noted that despite the drop in same-store sales, Apple Stores’ share of the company’s overall revenue remains approximately the same. “Despite the dramatic expansion of Apple’s distribution network to the stores of 250 carriers, the Apple stores have managed to almost hold their own as a percentage of total Apple revenues,” wrote Wolf, per AppleInsider. “This underscores the vitality of the Apple Stores in creating a shopping experience that we believe is superior to that in any other retail chain.”

Apple Stores are considered the most successful retail stores in the U.S. based on sales per square foot. Fast Company reports thatApple’s retail stores make over $6,000 per square foot, approximately twice what the closest runner-up makes. Apple Stores have also increased their share of the total specialty electronics retail market in the U.S. amid an overall market decline. According to Euromonitor International data cited by MarketWatch, Apple’s share of the U.S. specialty electronics retail market grew from 3.8 percent in 2007 to 15 percent in 2013.

Besides pointing out the fundamental strengths of Apple’s retail business, Wolf also noted that Angela Ahrendts — the new head of Apple’s retail and online store operations — will likely boost the company’s sales in China. The former Burberry CEO significantly upped the British fashion house’s retail sales in international markets during her tenure.

However, the Needham & Co. analyst pointed out that significant sales growth at Apple’s retail stores will likely only come with the introduction of “new products in new product categories,” reports AppleInsider. Apple CEO Tim Cook has repeatedly said that the company would reveal exciting new products this year. Many rumors have suggested that one of the new products will be the so-called iWatch or another type of wearable tech device. However, Wolf said that “it’s an open question whether they can be the blockbuster hits that the iPod, iPhone and iPad were.”

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