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Apple sales up but profits dip in Q4: what the experts say

Leading technology vendor and retailer Apple said yesterday that its fourth quarter profit dropped to $7.5 billion, from $8.2 billion one year before.

Sales were up $1.5 billion, though, rising from $36 billion in Q4 of last year to $37.5 billion for the three months to 28 September 2013. Gross margin was 37%, compared to 40% in the year-ago quarter, while international sales accounted for 60% of the quarterly revenue.

The Company sold 33.8 million iPhones and 14.1 million iPads during the quarter, and recently announced the launch of new new iPad mini with Retina Display and ultra-thin iPad Air, ahead of what is expected to be another busy Christmas period for the business.

Essential Retail caught up with a selection of retail commentators to analyse the Apple results and what the future holds for the tech giant.

Matthew Rubin, retail analyst at Verdict Research, said: “Despite unimpressive financial results for Apple’s fourth quarter, the company is still one of the most dominant competitors within the electricals sector, both in the UK and globally.

“A lack of particularly innovative products has clearly held back growth from market expectations; however, Apple’s forecast for an “iPad Christmas” is still likely to ring true. Retail has continued to be a focus for the business, with revenue growth of 6%, though revenue per store has fallen.

“The stores are an excellent way for Apple to showcase its brand and convince shoppers that the premium they pay is worthwhile, and with the upcoming arrival of Angela Ahrendts from Burberry to head its retail division, stores will continue to be a centrepiece in Apple’s future strategy.”

Paul Soanes, retail expert and co-founder at Worth Retail consutancy, said: “Apple has seen an inevitable decline in profits – this is typical of a maturing product set, coupled with the fact that they are inevitably investing in the next collection of innovative product blockbusters.

“However, we feel that Apple has never really put their foot to the floor with direct retail. Their stores are very much positioned as anti-retail, but this needs to change for several reasons:

“Mind you, making $7.5 billion in three months isn’t bad! And it will likely bounce back up in the next 18 months.”

Spencer Izard, head of European Retail Insights & Executive Advisory Programme at IDC Insights, said: “First off, it is important to consider that the numbers announced yesterday only account for some iPhone 5S/5C sales and not any iPads from the announcement last week. Taking this into account it is understandable to see iPad sales being less than the market was expecting, but still very good numbers, due to sustained, and lower cost, competition from the likes of Amazon and Samsung as well as consumers holding off on iPad purchases until the new announcement on the run-up to the holidays.

“Apple's exponential success has been driven through evolving themselves, over the past ten-plus years, into a lifestyle brand rather than just being product focused. This was an innovative approach for a technology company to take when Apple started doing it and this was clearly driven through their retail stores, and still is. The hiring of Burberry CEO Angela Ahrendts is a clear commitment by the Apple leadership on continuing this successful lifestyle brand strategy, as this is an established strategy for luxury retailers.

“The challenge for Apple, in established operating countries, is how to avoid becoming a victim of its own success by maintaining a cool lifestyle cache across its retail business because in the social enabled consumer world lifestyle trends can change at a whim and rapidly. Markets such as Brazil and China are essential growth opportunities for the Apple retail business and over the coming year, especially in Brazil, I would expect to see significant focus on those markets.”

Daniel Lucht, director at retail analyst firm Research Farm, said: “The Apple store has revolutionised retailing, with the process now more about drawing people in and engagement. The in-store Genius Bar is a great idea and has been one of the company’s core retail innovations. They kept working at it, and now in any of the stores you want to go to, you typically have to book the Genius Bar well in advance, which is evidence of the format’s success.

“In general, the Apple store works because of the products they sell. How the stores perform in the future depends heavily on the product, so with new announcements expected next year, it will be interesting to see what impact this has.”

What do you think? We are keen to hear the industry’s views on what the future holds for Apple. What impact will retail boss Angela Ahrendts make when she joins in 2014? Comment below or contact us on Twitter @EssRetail.