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New Apple retail VP John Browett planned to cut jobs to raise profits

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Reports that recent hires at Apple Stores were being laid off, followed by claims they weren't, are now being explained as a reversal of a policy enacted by Apple's new retail vice president John Browett in an attempt to cut costs and raise profits within the retail segment.

According to a report by IFO Apple Store, "a series of recent administrative moves to reduce the number of Apple retail store employees" has been blamed upon an effort by Browett to increase Apple's retail profit margins.

The report cited sources with "close ties to the retail stores" who said Browett felt the stores were "too bloated" with employees, and began making cuts "despite strongly-worded advice from Retail segment veterans that reducing personnel ahead of the annual Back-to-School promotion and the September introduction of the iPhone 5 could create a customer service catastrophe."

Browett reportedly ordered Apple Store managers to cease all recruiting and hiring events, stop making promotions, lay off all newly hired employees still in their probationary period, reduce available hours for part time employees, reduce or eliminate overtime and layoff or fire employees who can only work more than 32 hours a week.

John Browett, Apple's new SVP of Retail. | Credit: Dixons

The report also noted that Browett said Apple's retail outlets need to "learn to 'run leaner' in all areas, even if the customer experience is compromised."

During fiscal 2011, Apple's retail stores generated $14.1 billion in revenue and $3.1 billion in profits. The chain has operated at around a 22 percent profit margin over the past five years, the report notes, and Browett was seeking to improve upon that. Retail operations currently contribute about a tenth of Apple's profits.

In January, Apple recruited Browett to head its retail operations. He formerly served at the chief executive for Dixons, a discount European tech retailer, and before that, the British equivalent to Wal-Mart.

Writing for The Loop, well-known Apple blogger Jim Dalrymple wrote, "it seems to me that Browett is trying to make Apple retail just like every other retail store on the planet. A few employees trying to satisfy an ever growing consumer base. That formula doesn’t work. It may save a few dollars in the short term and Browett may look like a hero on paper, but in reality the whole company would suffer the consequences."