Apple recently filed its Form 10-Q, a required document that the company needs to periodically send to the United States Securities and Exchange Commission (SEC). While there are few surprises in the 10-Q for analysts who have been paying attention to Apple’s quarterly earnings reports and conference calls, the document reveals some aspects to Apple’s operations that haven’t yet been discussed in depth.
Apple’s fiscal year 2001 ended on September 29, 2001, and the 10-Q filing focuses on Apple’s performance during its first quarter of fiscal 2002, which ran through the end of December, 2001. The company is currently in the second quarter of its fiscal year.
More than 400 jobs eliminated
Apple noted what it called a “restructuring action” which incurred a US$24 million dollar charge during its first quarter of 2002. The action was “designed to eliminate certain activities and better align Apple’s operating expenses with existing general economic conditions,” as well as to offset the costs of product development and the development of Apple’s retail business, according to the report.
The action eliminated 425 jobs, 375 of which were gone by the end of the first quarter. Apple said that the positions eliminated were in Operations, Information Systems, and Administration. Equipment leases were terminated and existing projects and activities were also stopped as part of the restructuring action.
Retail sales numbers
Perhaps of greatest interest are the results of Apple’s retail sales initiative. The company noted that for the three months ending December 29, 2001, they’d accrued US$48 million in sales specifically attributed to their Retail segment, which they defined specifically as Apple-owned retail stores in the United States. The stores generated an operating loss of $8 million for the quarter.
“To assess the operating performance of the Retail segment, cost of sales for this segment includes a mark-up above standard cost to approximate the price normally charged to the Company’s major channel partners in the United States,” noted Apple. “For the first quarter of 2002, this resulted in the Retail segment recognizing additional cost of sales above standard cost and an offsetting benefit to corporate expenses of approximately $8.6 million.”
Apple later mentioned that the average store generated net sales of about $2.6 million per quarter. Apple Store customers are spending a lot on accessories and software, too — 44 percent of the stores’ net sales are generated from peripherals and software, twice what the company sees as a whole.
Apple said that its retail segment will lose money for the remainder of this fiscal year, but it expects its retail stores to improve their financial performance progressively each quarter.