Apple stores should be profitable before year’s end

Though it may need a bit of refining, Apple was “absolutely right” in its plans for the ever-growing number of retail stores, Chief Financial Officer Fred Anderson said in a conference call today discussing Apple’s latest financial results.

“We’ve confirmed that we were absolutely right in our decision to open the stores in upscale malls and lifestyle centers,” he said. “We were absolutely right to focus on service rather than high-powered sales tactics; 99 of visitors to the stores say they would recommend them to friends. We were right to hire folks who were truly knowledgeable in our products and digital hub strategy. And we were absolutely right to have solution centers.”

After opening its first 27 stores last year, the company took a “breather” to evaluate their business model for the retail stores and rev up a plan for this calendar year. Look for the number of Apple retail stores to jump from the current 29 to 49, perhaps 50, in 2002. Apple will also work on improving the “close rates” of potential sales, even while keeping the focus on service, Anderson said.

The retail stores still aren’t profitable, but they’re heading in that direction. Anderson said that revenues from the stores jumped from $48 million to $70 million in the past two quarters, while the loss was sliced from $8 million to $4 million. As more stores open, the significant costs of launching the retail initiative will be dissipated and the overall financial picture improve, Anderson said.

What’s more, the stores continue to attract high-volume traffic. In the past financial quarter, they saw 1.7 million visitors. And “anecdotal” evidence shows that 40 percent of those stopping by are Wintel converts, Anderson said. The stores are also getting professional customers, though the consumer focus remains, not surprisingly, the strongest area for the retail stores.

“We’re driving to profitability as soon as we can,” he said. “We hope to have a profitable quarter for our retail stores in the last half of the calendar year.”