This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple and Retail Disease

Why did Apple management feel the need to mess with a working formula -- one that even Microsoft (MSFT) sought to emulate with the opening of its own stores?

Here's what Apple saw:

In its most recent earnings report, the company's retail segment produced $868 million in operating income on revenue of $4.1 billion. That equates to a 21.2% in operating margin, a pretty robust number by any standard. I would imagine even Wal-Mart and Target would drool over this performance. But as we have come to know, what is great for other companies is rarely considered "good enough" for Apple.

However, as great as these numbers were, the company's executives -- particularly CEO Tim Cook and Senior VP of Retail John Browett -- not only saw flattening operating margin, but also an annual decline of 170 basis points. Even more glaring was the fact that over the past 12 quarters its retail segment has seen its operating margins drop from over 25% to 23%.

So clearly Apple felt it had to do something, except it didn't go as planned. Even more remarkable is that in its third quarter, Apple said 17,000 people visit its stores on average per week.

So I wonder if it was worth risking the adverse impact that the decision to reduce staff was certain to have? After all, it is the "customer experience" that has made Apple what it has become today. Though understaffing some stores may have saved on expenses, it seems to have cost Apple a lot more by the mere fact that this option was ever considered -- reversal or not.

The fact is, Apple makes too much money to ever consider something like this, perhaps ever again. It's the largest company in the world with one of the best reputations around as it relates to consumers. Instead, leave the poor decisions and grave digging to the big boxes. Apple, you're better than that.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $127.60 0.00%
FB $83.09 0.00%
GOOG $535.38 0.00%
TSLA $205.27 0.00%
YHOO $44.66 0.00%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs