Apple Stores reportedly stall growth at top US shopping malls

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Apple Stores, which consistently rank among the most profitable retail outlets per square foot, are reportedly bogging down growth at a chain of upscale shopping malls across the U.S.




In a quarterly earnings call on Tuesday, General Growth Properties CEO Sandeep Mathrani intimated that Apple's retail locations weighed down growth for a sub-category of tenants whose stores come in at under 10,000 square-feet, reports BuzzFeed. GGP operates 97 upscale U.S. malls, 47 of which include an Apple Store.

"We experienced sales increases throughout the country," said General Growth Properties CEO Sandeep Mathrani. "Nearly every major retail category was up, with the exception of electronics, primarily due to Apple."

Mathrani said sales for under-10,000-square-foot stores grew 3 percent in 2015, bringing the average to $588 per square foot, but that number jumps to 4.5 percent if Apple Stores are excluded. The 10,000-square-foot denominator removes anchor tenants like Macy's from the equation. GGP's report only applies to 17 percent of all U.S. Apple Store locations and is not necessarily indicative of an overall decline in sales.

With the rise of iPhone, and a high-end shopping experience, Apple's standalone flagship and in-mall stores quickly became highlight destinations. In 2013, Apple Stores dominated other high-end brands, raking in an estimated $6,050 per square foot, double that of its nearest contemporary Tiffany & Co. The outlets proved so effective that other tech companies like Microsoft copied Apple's retail business model, albeit to lesser degrees of success.

Apple subsequently used its proven ability to draw in customers to negotiate favorable lease rates for flagship properties and mall outlets. Pure sales are not the only benefit of having an in-mall Apple Store, as the outlets have become destination stores for many shoppers, generating sizable increases in foot traffic.

According to BuzzFeed,, GGP previously mentioned negative Apple impact in August. At the time, Mathrani said growth for the trailing 12 months -- excluding anchor stores -- was at 3.4 percent, but would have been 3.9 percent if Apple Stores were not counted. In the year prior, however, Apple contributed a huge boost to sales growth. For the 12-month period ending in September 2014, GGP retail store sales growth stood at 6.7 percent, a number that would have peaked at 4 percent if not for Apple.
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Comments

  • Reply 1 of 68
    dreyfus2dreyfus2 Posts: 1,056member
    "The outlets proved so effective that other tech companies like Microsoft copied Apple's retail business model, albeit to lesser degrees of success." Tagging complete loss-makers a "lesser degree of success" is maybe a bit too much political correctness?
    latifbp6Sgoldfishpalomineargonaut
  • Reply 2 of 68
    buzdotsbuzdots Posts: 434member

    Apple subsequently used its proven ability to draw in customers to negotiate favorable lease rates for flagship properties and mall outlets. Pure sales are not the only benefit of having an in-mall Apple Store, as the outlets have become destination stores for many shoppers, generating sizable increases in foot traffic.


    I would say old Sandeep should thank his lucky stars that Apple has chosen to grace 47 of his malls with their presence.
    Having visited dozens of malls, in multiple states, I now judge the quality of any particular mall by whether they are able to attract Apple retail.

    I have yet to see a venue where Apples market research and demographics has failed.
    SpamSandwichlatifbpcalibrian greenequality72521bobschlob6Sgoldfishirelandredgeminipaicoco3
  • Reply 3 of 68
    buzdots said:

    Apple subsequently used its proven ability to draw in customers to negotiate favorable lease rates for flagship properties and mall outlets. Pure sales are not the only benefit of having an in-mall Apple Store, as the outlets have become destination stores for many shoppers, generating sizable increases in foot traffic.


    I would say old Sandeep should thank his lucky stars that Apple has chosen to grace 47 of his malls with their presence.
    Having visited dozens of malls, in multiple states, I now judge the quality of any particular mall by whether they are able to attract Apple retail.

    I have yet to see a venue where Apples market research and demographics has failed.
    Better yet he should cancel Apple's leases so he can replace them with one of his preferred "high growth" tenants.  Then he won't have to remove Apple sales figures any more to make sense of his growth charts.  
    latifbpcalibrian greenequality72521irelandredgeminipapalomineargonaut
  • Reply 4 of 68
    red oakred oak Posts: 609member
    This guy is fu**** for calling Apple out this way.  At minimum, he broke confidentially agreements.  Worse, he really pissed off the Apple Execs

    He is screwed 
    goodbyeranchlatifbpcalibrian greenredgeminipapalomineargonaut
  • Reply 5 of 68
    There's an acquisition target for Apple: Malls Apple currently graces with their presence.
    calipalomine
  • Reply 6 of 68
    "Nearly every major retail category was up, with the exception of electronics, primarily due to Apple"

    When I think electronics... I don't think of the mall.

    That might be part of the problem.

    With Radio Shack mostly gone... what electronics stores are at the mall?

    Some malls have Best Buy... but they are well over their 10,000 sqft cutoff.

    Anyway... it's kinda weird to blame Apple for other stores' lack of growth.  Like I said... I'm not sure what "mall electronics stores" bring to the table.

    Sidenote:  does anyone remember the organ store?  What was going on it that part of history that there were entire stores devoted to organs?


    edited February 2016 calistarbird73am8449argonautnostrathomas
  • Reply 7 of 68
    17381738 Posts: 3member
    With iPhones being financed by the carriers now, I wonder how the Apple Stores report phone sales now?

    I don't have a ton of accounting experience but Apple is likely claiming that revenue when they get paid by the carrier for the device. Not when it's sold. It may not reflect on stores revenue at all.

    With that said a carrier financed iPhone maybe a $0 sale. With each store likely selling 30+ phones a day, that could be where the "loss" came from.
  • Reply 8 of 68
    F**K ME,

    First, does this idiot prefer a bunch of mall stores increasing their square foot sales by 5% every year to get to $588/sq ft, or a retailer bringing in a consistent $5,000+/sq ft?  

    Seriously, what kind of miraculously stupid comment is that?  Without Apple, his average square foot numbers would be significantly lower.

    RANT WARNING -

    I understand that everyone likes to pile on to "bad" news, but Apple has not stopped "innovating", stopped making great products and making people's lives better, stopped making MOUNTAINS of profit for shareholders, or stopped being one of the best damn companies anywhere.  From the news reports and comments on this and other Apple enthusiast sites over the past few days, you would think it is 1996 again. 

    IT IS NOT.

    If you think you or any of us are qualified to recommend that Apple dump Tim Cook or any of the other ignorant crap I've seen over the past few days, remember that you are commenting to a BLOG FORUM.  You are qualified to recommend NOTHING.  Thank God Apple doesn't run its operations based on our ramblings.

    By the way, musing about what Steve Jobs would do is pointless.  He never cared what any of us thought about his management while he was alive, and probably advised Tim to ignore us as well.  And Steve is dead so what he may have done now does not matter for shit.


    latifbpbrian greenequality72521flaneurstarbird73mnbob1palomineargonautai46montrosemacs
  • Reply 9 of 68
    Other than for store pickups of online orders (through which means you can get new stuff much faster than at the Retail Store) or Genius Bar appointments (although I can get outstanding support via a telephone conversation) or product returns/exchanges (which is a genuine convenience), does an Apple Retail Store add all that much value anymore? 

    I can see why during a decade of getting customers to switch, the Apple RS played a massive role for people to get a hands-on experience with Apple products. Given the ubiquity now of the iPod, iPhone, iPad, Beats headphones, and even Macs, I am guessing that there's less of a reason to visit.

    Incidentally, I am surprised that we have not seen anything new or radical at the RS from the high-profile hire of Ahrendts. (I've been incredibly impressed by how Alphabet has put Ruth Porat to use as their public face, where she is now increasingly seen as a person who has brought tremendous cost and spending discipline to the company.)
  • Reply 10 of 68
    This is certainly an odd report.  Given the last quarterly sales set another all time sales record - something seems off.

    That said, I just came from the Corte Madera, CA store which last Saturday converted over to the new design.  Amazing lighting, a "video wall", all new furnishings (German hardwood, with enhanced grain), and amazing overhead lighting.  The store (in an old Abercrombie location) is more than twice the size of the older store (which was two doors down).  It was busy, but there sure are a LOT of staff (who are currently all wearing red Apple shirts).  When I asked if Angela Ahrendts, Sr VP Retail and Online Sales,  had any hand in the new store design not one of the floor folks knew who I was talking about, which I found surprising.

    Because the Corte Madera mall is built on landfill, Apple had to literally build the store separately within the mall (all on ground level).  They drilled pilings ninety feet down and created a steel encasement to hang the ceiling and keep the floor and structure from moving the slightest bit - this to enable the video wall, which has very tight tolerances.  All extremely impressive, but the cost per square foot must have been astronomical.  

    Apple's projected Capex for next quarter is through the roof as it was noted in the Qtly call that Apple was building out data centers and completing Apple Campus 2; but the refurbishment of the retail stores must also be very expensive.
    anantksundaramcaliflaneurpalomineargonaut
  • Reply 11 of 68
    I'm almost certain that the U.S. is suffering from weak economic conditions. It would be nearly impossible for Apple to not be affected by it at all. Apple is still doing as well as most stores considering the premium price of its products.
  • Reply 12 of 68
    tonester said:
    buzdots said:
    I would say old Sandeep should thank his lucky stars that Apple has chosen to grace 47 of his malls with their presence.
    Having visited dozens of malls, in multiple states, I now judge the quality of any particular mall by whether they are able to attract Apple retail.

    I have yet to see a venue where Apples market research and demographics has failed.
    Better yet he should cancel Apple's leases so he can replace them with one of his preferred "high growth" tenants.  Then he won't have to remove Apple sales figures any more to make sense of his growth charts.  
    How does he know what Apple store sales are? I doubt apple is giving him those numbers... Any one know how these leases work?
    edited February 2016
  • Reply 13 of 68
    I'm almost certain that the U.S. is suffering from weak economic conditions. It would be nearly impossible for Apple to not be affected by it at all. Apple is still doing as well as most stores considering the premium price of its products.
    What 'weak economic conditions'? The US economy is the one bright spot in the global economy. 

    And you know that "Apple is doing as well as most stores"? I am not saying that's not true, but how do you know that?
    afrodri
  • Reply 14 of 68
    Other than for store pickups of online orders (through which means you can get new stuff much faster than at the Retail Store) or Genius Bar appointments (although I can get outstanding support via a telephone conversation) or product returns/exchanges (which is a genuine convenience), does an Apple Retail Store add all that much value anymore? 

    I can see why during a decade of getting customers to switch, the Apple RS played a massive role for people to get a hands-on experience with Apple products. Given the ubiquity now of the iPod, iPhone, iPad, Beats headphones, and even Macs, I am guessing that there's less of a reason to visit.

    Incidentally, I am surprised that we have not seen anything new or radical at the RS from the high-profile hire of Ahrendts. (I've been incredibly impressed by how Alphabet has put Ruth Porat to use as their public face, where she is now increasingly seen as a person who has brought tremendous cost and spending discipline to the company.)
    Angela is a mystery to me... 25 million salary, 70 million hiring bonus.... And we get????
  • Reply 15 of 68
    Other than for store pickups of online orders (through which means you can get new stuff much faster than at the Retail Store) or Genius Bar appointments (although I can get outstanding support via a telephone conversation) or product returns/exchanges (which is a genuine convenience), does an Apple Retail Store add all that much value anymore? 

    I can see why during a decade of getting customers to switch, the Apple RS played a massive role for people to get a hands-on experience with Apple products. Given the ubiquity now of the iPod, iPhone, iPad, Beats headphones, and even Macs, I am guessing that there's less of a reason to visit.

    Incidentally, I am surprised that we have not seen anything new or radical at the RS from the high-profile hire of Ahrendts. (I've been incredibly impressed by how Alphabet has put Ruth Porat to use as their public face, where she is now increasingly seen as a person who has brought tremendous cost and spending discipline to the company.)
    Angela is a mystery to me... 25 million salary, 70 million hiring bonus.... And we get????
    What is it exactly that you want? "And we get???" is wrong on so many levels. Bill Gates is one of the richest men on earth. And we get what?
    pscooter63argonautai46
  • Reply 16 of 68
    An interesting data point, not that easy to interpret. People this month are buying at other stores (in the aggregate), but bought more at the Apple Store when the new Apple product was released?  Apple has other avenues of sale to the same customers, so ... ???
  • Reply 17 of 68
    Rayz2016Rayz2016 Posts: 3,502member
    colibri said:

    By the way, musing about what Steve Jobs would do is pointless.  He never cared what any of us thought about his management while he was alive, and probably advised Tim to ignore us as well.  And Steve is dead so what he may have done now does not matter for shit.


    Agreed. 'Steve would never…' is the most annoying meme on the internet today, mainly because it is repeated by armchair CEOs who never met him. 
    starbird73brucemcpscooter63argonautai46wvdirk
  • Reply 18 of 68
    Apple stores are likely treated as an anchor tenant in that they have a fixed monthly lease with no residual rent based on sales. Thus, Apple Store may have doubled in sales, yet the malls would treat their gross sales revenue as unchanged.  That being said, iPhone upgrades are happening pre-order, and IPad and iPod sales are down, so it's possible retail sales dependent on tangible shopping experience may have flatlined.
    ai46
  • Reply 19 of 68
    calicali Posts: 3,495member
    ....Doomidy Doom Doo


    Sidenote:  does anyone remember the organ store?  What was going on it that part of history that there were entire stores devoted to organs?


    Yeah those were weird. Always empty save for the 2 elder ladies playing the Wedding March and occasional Funeral March.
    edited February 2016
  • Reply 20 of 68
    foggyhillfoggyhill Posts: 4,620member
    This is one fracking crappy headline, so if a store sold $100000 a square foot and it increased to $102000, that would technically be true...
    But they're selling massively more than the rest and the one getting all those god damn rich people that are buying stuff elsewhere to your mall so it's complete idiocy.

    Apple has a lot more distribution points than before and many people use Apple stores mainly for servicing their device would probably impact sales.


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