One number holds the key to Apple Retail in 2009

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A critical figure will emerge from Apple's conference call next Tuesday, when the company discloses how many new retail stores will open during fiscal 2009. The number will not only signify the electronics maker's commitment to reach even more customers, but will represent a wager — big or small — on a world economy in turmoil.

Chief financial officer Peter Oppenheimer traditionally provides the number during his review of the retail operation, and his forecast has been in the range of 35 to 40 stores almost every year. In fact, the number of grand openings has ranged from 32 to 46 until last year, when it totaled 50.

Over at ifoAppleStore, I've identified 18 Apple new store projects that will result in grand openings some time during 2008-2010. Tipsters have pointed to another 38 store projects that are in some stage of planning, and which could be either slowed down, cancelled or given the green light.

A slow-down in store openings would affect Apple in two ways — it would reduce exposure to potential new customers in new territories and, perhaps more importantly, it would reduce the Genius Bar service options for existing customers. As the number of Apple users increases, offering support has become just as important as promoting sales at the stores.

If Apple does decide to slow down, fate has offered them the right time to do it. Typically, the largest number of stores is scheduled to open during the period from June to December, since that coincides with the company's back-to-school and holiday store promotions. Right now, Apple's planning team is working on the slowest period for stores openings, the first half of next year, which typically represents just 30 percent of grand openings.

So, a decision made now to slow down store expansion would affect fewer projects that have already been given the green light. That would result in less costs associated with delaying or canceling the projects.

At the same time, Apple's new stores have recently included a higher percentage of international locations. And almost all of the international stores that opened in fiscal 2008 were "branding" type stores, intended to provide visibility to the company's logo and products first, and to generate revenues second. Since this branding is so important to Apple, it's likely that international location openings will continue as previously scheduled.

Financially, Apple has never skimped on funding the stores through the years. Capital expenditures have increased each year, reaching $294 million for fiscal 2008. The company's lease commitments for the stores reached a substantial $1.3 billion at the end of the last quarter. With a huge cash reserve, funding new store construction and signing long-term store leases doesn't seem to be much of a liability for Apple.

Lastly, Apple has very sophisticated systems for analyzing real estate locations, revenue and store visitors. It would not be difficult to create "success" forecasts for each store that's now in the planning process, and to predict its level of profitability, even in the face of a consumer buying downturn.

Here's the IFO forecast for Apple's store openings during 2009, based on tips and other inside information:

  • U.S - There are several large stores in the planning stage that will definitely open over the next 18 months, including New York City, Chicago and Washington (DC). There are several smaller stores that will most likely open.
  • Canada - Only one potential new store, in Toronto, has been reported, although a second Vancouver store has been rumored. It's likely this country may not see any new stores beyond those.
  • Japan - Sales of Apple products into this highly competitive environment have never been stellar, and Japan's economy was fragile before the recent downturn. Best bet, no new stores.
  • Australia - A second store in Melbourne is possible, but stores in other cities probably are unlikely.
  • UK - The high-profile Covent Garden store is moving ahead for an early 2010 opening. A street-level store in Edinburgh is definitely possible. Stores already in the late implementation phase in Brighton, Reading and London will definitely open. However, Apple's plans to open a store on every High Street in every major city (35 to 40 total) could be delayed.
  • Germany - The Munich store is scheduled to open in December. Beyond that, stores in other cities are unlikely.
  • France - The Carousel de Louvre store is on track for a 2009 opening, and a second store in the Opera district is probable. Other stores in the country probably won't appear.
  • Italy - There have been persistent tips about a second or third store in cities beyond Rome, but their progress isn't known. It's likely the one existing store will serve Italy for awhile.
  • Switzerland - The second Zurich store will definitely open late in 2008. No other locations have been reported, and are unlikely.
  • China - The second store in Beijing is already ready for construction, and it's considered a high-profile, brand-carrying location. It will be built. The Shanghai store would fulfill the same role in a very important trade center, but it's not clear if the project is far enough along to make it a sure thing.

Here's the complete list of current and future stores.

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.


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