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Retail Update: future stores, missing stores, and Genius Bar stresses

IfoAppleStore's Gary Allen offers an update on all things Apple retail.

Apple's retail stores are in a period of quiet but active growth, especially as we start the second half of the year. Traditionally these later months see a rush of new stores in preparation for the crucial holiday shopping season. Even so, Apple's Retail segment hiccuped during the last fiscal quarter, achieving an increase in sales and profits compared to the same period last year, but a decrease when compared to the previous quarter.

Apple opened stores #112 and 113 on July 16th in Portland, Ore. and Northbrook, Ill. — the 11th store and 12th openings of 2005. In an unusual move, Apple also opened an enlarged and remodeled version of its existing store at The Westchester Mall in White Plains, N.Y. The new store includes a much longer Genius Bar to provide service and support, and a new Studio bar offering creative application support.

Overseas, tipsters say Apple staffers have been scouting store locations in Berlin. The company is believed to be assessing locations on the upscale Kurfürstendamm row, in the western part of the formerly-divided city. The street is dominated by the six-story KaDeWe department store, which proclaims itself the largest department store in continental Europe, but also includes high-end retailers Cartier, Yves Saint Laurent, Chanel, Tommy Hilfiger, and Gucci.

At the same time, a Swiss Apple executive announced the company will open a retail store in Zurich, but didn't provide a timetable or other details. The city's Bahnhofstrasse is home to many high-end international retailers, and must be considered a prime location for a street-level store. As for Paris, a French Web writer says he noticed Steve Jobs at the Regent Street (London) store and pleaded for Apple to open a Paris store. Jobs reportedly shot back, "We are...in 2007!"

In Japan, plans continue to open additional stores in Tokyo and Osaka, and first-time stores in the far-northern city of Sendai and the far-southern city of Fukuoka. More stores are likely for the UK, including Edinburgh and Glasgow (Scotland), Manchester, and the university towns of Oxford and Cambridge.

Elsewhere, Apple has been providing architectural, interior design and other assistance to international Apple retailers who operate Apple Centres, which have many familiar features: white walls, wood furniture and hands-on displays of all Apple's products. There are now Centres all over Europe and Scandanavia, and in several far-flung locations such as Argentina, Ecuador, South Africa, Kuwait, Hong Kong and even Beijing.

Back in the United States, Apple's goal to have 125 stores open by the end of September is on-target. There are 35 U.S. stores locations confirmed by various sources for near-term openings, and another 17 stores on the "probable" list in the U.S. and abroad. There are also several unannounced future store sites in metro areas of the U.S. already served by Apple stores, including Denver, Los Angeles, south Florida, Chicago, New York/New Jersey, and Dallas/Fort Worth.

Lastly, no discussion of store locations would be complete without a mention of two long-neglected cities: Birmingham (Ala.) and New Orleans. The former was reportedly the fifth ever Apple store location planned. Staff interviews were even held, but for some reason the store was never built or opened. As for New Orleans, it represents a 180,000 square-mile wasteland across the South without an Apple store. The city itself has 1.3 million residents served by fewer than 10 resellers, according to a list on Apple's Web site.

Adding up all the locations up, Apple could easily have 145 stores open by this time next year. And based on previous store opening schedules, the second half of 2006 could add another 20 stores to the chain.

Looking further out for stores locations, the Retail segment's recent financial performance could be a planning consideration. Retail store revenues for the third fiscal quarter totaled $555 million, and profits totaled $29 million. Both figures represent increases compared to the same quarter of 2004. But they were decreases of 3% and 31% respectively when compared to the previous quarter of 2005.

The Retail segment has suffered a similar hiccup twice before, and Apple CFO Peter Oppenheimer claims this latest decline was "largely seasonal."

Nevertheless, there is no doubt that Apple wants to keep retail revenues peaking as it continues to invest hundreds of millions into new store construction, lease and payroll costs.

Much of the company's store location planning must now center around locations in existing markets, where Apple's increased market share is putting pressure on the Genius Bars to keep up with the line of visitors.

According to financial analysts Piper Jaffray, Apple now has a 4.5% market share, compared to 3.7% last year. That not only represents a increase in sales, but also an increase in customer support that falls directly onto the retail stores. There have been reports of long-waiting lines for assistance at Genius Bars, and that reservations are often completely filled by 5 p.m. or earlier. A tipster claims Apple will extend the stores' hours to create more Genius Bar time slots. But that move will only increase payrolls and put pressure on the bottom line.

The next three months appear to be a critical period for the Retail segment, as they balance expansion, increased popularity of Apple's products, and the need to keep providing top-notch sales and service. As long as none of these elements swing out of range, you can expect to see many more back-lit Apple logos at shopping malls both in the U.S. and around the world.

Gary Allen is the creator and author of ifo Apple Store, which provides close watch of Apple's retail initiative. When Gary isn't busy publishing news and information on Apple's latest retail stores, he finds himself hanging out at one.