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. Follow @rsaintvilus 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.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV