Apple Stores Outshine Retailers

Many Seeking Alpha contributors have noted anecdotal evidence of empty stores at the malls with one notable exception: Apple (AAPL) retail stores.

The numbers are starting to prove them right.

Bed Bath & Beyond (BBBY) posted flat revenues with same store sales down 0.4%.

Chico's (CHS) same store sales down 16 to 20%. Revenue estimates dropping to 422 million with last year's quarter at 538 million.

Analysts predict poor retail sales (and they'll be right):

But one shining light stands out in this dismal landscape: Apple retail stores. All those crowded Apple stores did translate into an impressive 74% year over year revenue growth to $1.45 billion. Same store sales grew an unheard of 48% qoq! Thirty four million customers visited its 208 stores. This is all the more remarkable in the setting of a dismal retail sector that has been showcasing a recession.

Disclosure: Author holds a long position in AAPL

Comments

[raman kandola]

Citi - "Apple remains our top hardware pick through calendar year-end, with a new $248 12-month target, following a 7-8% revenue beat with upside from all product lines in 1CQ08. A steady stream of new product announcements between June and September should allow the company to continue to gain significant market share in PCs and handsets during 2HCY08.

Soleil - "With Mac sales up 51% y/y- a rate of growth 3.5X better than the industry-we believe our long-term market share thesis for AAPL remains firmly intact."

WR Hambrecht - "With the Mac franchise as the core growth driver, we are still optimistic about the prospects for the iPhone, and we expect Apple to use many of its levers (e.g., price, new features, new models, and new carriers/distribution partners) to accelerate unit sales throughout the year."

Piper Jaffray - "The key takeaway from Apple's Mar. qtr is that the Mac units grew at the highest y/y rates (units 51% and revenue 54%) in 17 years. Macs are the most meaningful category with the most potential and they are performing the best."

Deutsche Bank - "We expect multiple product cycles (MacBooks, Air, 3G iPhone, etc) to sustain strong FCF and EPS growth." "Mac momentum to continue"

[raman kandola]

AAPL is heading to $200 sooner, than you can think !

[Trader T]

AAPL stores are cool places to go and hang out - cooler than SBUKS. And folks buy stuff. AAPL has reinvented the retail store experience and woven it into its brand.

[PK de C'ville]

Stephen,

You've written about Apple's iPhone deferred revenue accounting. There are reports today that Apple will move to a new distribution model featuring open sales of 'unlocked' iPhones/iPod touches with no exclusive telecom tiein in most countries (starting w/ Italy and Australia).

I think Apple wants to accelerate the coming dominance of the iApps Store connection as the iTunes/iPod model has inspired: The iApps store system will provide security, a large app mkt place, easy update and backup, and a whole new customer experience of ease, delight and reliability. I believe the succesful roll out of this system will lead to Apple trading above $600 by 2011.

What do you say?

[atlasapple]

Anecdotal but...

Sent my neophyte Dad to 5th Ave Apple store for my Bday gift. 400 plus people in the store (it was after work Friday). It took him less then five minutes to get help with finding my gift and also two games for my kids, and check out.

Packed but still great customer service...makes me happy to still be long AAPL

[TA]

When AAPL becomes a retailer and not a fashion company, will someone let me know?

[Zach Bass]

I spoke with my wife this morning, she's in Florida with my two teenage daughters vacationing on spring break. They found a mall in the Miami area and decided to go in, as girls are prone to do. She said the mall was nice, but she could not help noticing the buzz at the Apple store.

She said most other stores had average traffic, but the Apple store was frantic! She thought there was some sort of special event going on, so having their interests piqued, and also with my entire family being Mac users, they decided to see what was going on.

Well, to their surprise, there was no special event going on, just tons of people in the store, crowding around every display, sometimes 2 or 3 deep, waiting their turn to check out the product line up.

-zach bass
www.zachbass.com

[Zach Bass]

Concerning BlaBlah's comment. I have to differ with EXTREME disagreement. Apple is the de-facto standard in retailing excellence today. There isn't a single major retailer on the planet that is performing as well as Apple.

I read a report that Apple's revenue per square foot blows buy every other retailer at around $5400 per square foot. The next closet in the US is Tiffany's at around $2000 per square foot, followed by Best Buy at around $800 per square foot.

The report said that the average Apple store bring in more revenue than the average Best Buy store, even though Apple stores have only 1/5 the total square footage.

The interesting thing is that Apple has shown great success with store-in-the-store efforts as well, ironically with Best buy. They currently have the in-store Apple stores in 400 Best Buys, and expect to have them in 600 buy the end of 2008. Also, isn't Apple in negotiations with an Indian retailer to build 60 stores there?

In addition, Apple is going to open another 45 stores this year, of which many will be overseas. This overseas presence will grow no doubt, and I see it as an extremely important point in Apple's growth strategy.

-zach bass
www.zachbass.com

[KenC]

I believe there was a report that the richest man in India is planning on rolling out something like 150 stores under an Apple Distributor agreement, but will mimic the Apple Store in design, over the next two years.

Next to China, India is the other high-growth market for Apple to be in.