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Apple’s sales increase despite store closures

Friday 1st May 2020

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Strength in Apple’s services business and sales of accessories such as Airpods and watches helped the iPhone maker beat analyst estimates and increase revenues slightly last quarter, even though it shut down retail stores across the globe due to coronavirus.

The California technology group has also seen an “uptick” in its business in recent weeks thanks to a new iPhone model, after plunging activity last month, according to its chief financial officer. 

Apple reported $58.3bn in revenue for the three months to March, its fiscal second quarter, up 1 per cent from a year ago and well above the $54.5bn expected by analysts. Net profits fell 2.7 per cent to $11.25bn.

“We’re proud to report that Apple grew for the quarter, driven by an all-time record in services and a quarterly record for wearables,” said chief executive Tim Cook.

The company declined to offer guidance for the current quarter, which many analysts expect to be its most difficult period related to the virus.

“We really didn’t feel there was enough visibility and certainty to provide guidance and frankly we didn’t want to do something that didn’t have much value for investors,” finance chief Luca Maestri told the Financial Times.

Earnings in March were hampered by “downward pressure” that extended into the first half of April, but in the last two weeks “we’ve actually seen an uptick”, Mr Maestri added, attributing the growth to the new iPhone SE and updates for the iPad tablet and MacBook Air computer.

“I think people are starting to get more adjusted to the new reality that Covid-19 is not going away any time soon and so they are trying to adjust their spending patterns as well,” he said.

In particular iPad and Mac sales are expected to improve in the current quarter from a year ago thanks to online learning and people working from home. “So, we are going to see some advantages there,” Mr Maestri said.

Apple had originally expected an increase in total revenues of 9-15 per cent in the quarter just ended, to as high as $67bn, but it withdrew that guidance in mid-February as Covid-19 caused factory shutdowns across China. Conditions deteriorated further when Apple closed all its retail operations outside China, shifting to online-only sales.

Sales of the iPhone smartphone fell 6.7 per cent to $29bn, accounting for just under half of revenue for its fiscal second quarter. That slowdown was offset by strong increases in the services and wearables divisions — where revenues were up 17 per cent and 22.5 per cent to $13.3bn and $6.3bn, respectively. Services, the unit encompassing the App Store, warranties and licensing deals, accounted for 23 per cent of all revenue.

Mac sales were relatively steady at $5.4bn, as were iPad sales at $4.4bn.

Apple declared a dividend of $0.82, an increase of 6 per cent, and the board authorised the purchase of an additional $50bn of shares, less than the $75bn and $100bn authorised in the two previous years.

Mr Maestri told the FT that Apple still has “another $40bn that is outstanding from last year, so when you think about the firepower that we have . . . we think that’s a good amount that we can allocate to the buybacks”.

Source: Financial Times 

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