Apple highest grossing retailer on Fifth Avenue as crowds swell

As vacancies increase and retail sales throughout the US remain a shadow of the decade’s boom, Apple Inc’s stores are defying the recession. 

At Fifth Avenue and Fifty-Ninth Street, the noon-day line on August 11 snaked out the front door. More than a dozen people waited to buy an iPhone, which runs from $99 to $299, plus at least another $70 a month for a service plan. Every computer, seat and station was occupied by a visitor to midtown Manhattan. 

Apple, based in Cupertino, California, increased revenue at its stores by 2.5 per cent in the first six months of the year to $3 billion as the rest of the retail industry suffered. During the same period, sales at all US retailers fell 9.2 per cent compared with the first half of 2008, according to the US Commerce Department. 

 

Retail sales in New York City have fallen 8 per cent to 10 per cent from comparable 2008 levels, according to the Federal Reserve’s Beige Book business survey published July 29. 

“Even if they are not spending money elsewhere, people are still spending money on technology gadgets,” said Patricia Edwards, a retail analyst and founder of Storehouse Partners LLC in Bellevue, Washington. “It’s both a need and a want. It fulfills that retail-therapy component.” 

Apple’s store performance in the last year has been driven by the iPhone, according to Charlie Wolf, an analyst who covers Apple at Needham & Co in New York. The retail operation saw a 22 per cent increase in traffic during the quarter ended June 27, hosting a total of 38.6 million visitors, Chief Financial Officer Peter Oppenheimer said on a conference call in July. 

Apple’s shares have almost doubled this year. The stock climbed $2.89, or 1.7 per cent, to $169.22 on August 21 in Nasdaq Stock Market trading. 

Apple’s Fifth Avenue emporium probably has annual sales of more than $350 million, topping any of the chain’s other outlets, said Jeffrey Roseman, executive vice president of real- estate broker Newmark Knight Frank Retail in New York. The location is 10,000 square feet, putting its sales per square foot at a minimum of $35,000, based on Roseman’s estimate. 

That’s the equivalent of selling one Mercedes-Benz C300 sedan per square foot. Apple may be the highest grossing retailer ever on Fifth Avenue, said Faith Hope Consolo, chairman of the retail leasing and sales division at Manhattan-based Prudential Douglas Elliman Real Estate. Apple doesn’t disclose store-specific revenue, said Amy Bessette, a spokeswoman at the company. 

By comparison, the sales floor at Tiffany & Co sells as much as $18,000 per square foot, Consolo said. Another famous Fifth Avenue jeweler, Harry Winston Diamond Corp, sells between $12,000 and $13,000, she said. When asked to comment on Consolo’s estimate, a spokesman at New York-based Tiffany said the number was too high. Toronto-based Harry Winston doesn’t provide individual-store performance figures, said a company spokesman. 

Tiffany’s companywide sales slumped 22 per cent in the first quarter. The world’s second-largest luxury-jewelry retailer is scheduled to report second-quarter results on August 28. 

First- quarter retail revenue for Harry Winston, which plans to report second-quarter results on September 10, fell 30 per cent. 

Sales at Abercrombie & Fitch Co, the US teen retailer with a store on Fifth Avenue, dropped 23 per cent in its first two fiscal quarters of this year. Revenue at Saks Inc, the US luxury department-store chain, declined 22 per cent. 

New store openings have helped increase Apple’s sales. Ron Johnson, Apple’s retail chief, said in a telephone interview that the company was so “thrilled” with the performance of its three Manhattan operations —the others are in SoHo and the Meatpacking district — it will open a fourth on the Upper West Side later this year. 

Apple’s store layout puts every item for sale on display, which encourages shoppers to sample the gadgetry, said Edwards of Storehouse Partners. 

According to a survey conducted by Interbrand Corp in December 2008, mobile phones are one of the household budget items consumers are least willing to cut back on. 

Respondents said they’d sooner skimp on housing, clothing, groceries and tobacco products. The only items they’re more reluctant to cut spending on than mobile service are prescription and over-the- counter medicines. 

Wolf credits the stores for being as much about service as shopping. He said Apple overstaffs its outlets so that customers get help quickly. He said the store workers and the classes they run on how to use Apple products help establish “a community- like” atmosphere. 

“They create what I call an infectious sort of environment,” Wolf said. 

Apple opened its first retail outlet in May 2001 to boost visibility of the Macintosh computer, which generates about 40 per cent of its sales. Apple had 258 stores worldwide as of June 27. The Fifth Avenue location, which opened in May 2006, employs 500 workers. Visitors enter a 32-foot glass cube and descend a translucent spiral staircase into the store, which is built under what used to be known as GM Plaza. 

Apple sells iPods on one side of the white-washed space and Macs on the other. 

One of the shoppers interviewed by Bloomberg this month at the Fifth Avenue store was Richard Granier, 55, chief executive officer of holding company Hestiun in Marbella, Spain. He bought a $99.95 Sony clock radio that uses Apple music players, three $29 iPhone chargers and several video games. 

“I come here whenever I am in New York,” said Granier. 

MaryAnn Davidson, 36, snapped a photo of the Apple store with her iPhone before entering. 

“Very cool store, lots of light, lots of people,” said the homemaker, who is from Helmond, Netherlands. She said she had set aside ¤400 ($570) to spend at the store on iPods and headphones. 

It is the only Apple store that’s open 24 hours a day, seven days a week. Tourists dominate during the day and New Yorkers tend to visit at night, Johnson said. 

“The middle of the night is a really interesting time,” said Johnson, who was an executive at Target Corp before Apple Chief Executive Officer Steve Jobs hired him in 2000. “It’s the waiters in the restaurants, it’s the actors on the stage. When they’re off work, they may not want to go off to a club or want to go home.” 

At 1.45 am on August 15, there were about 30 people in the store. A display of iPhones doubled as a free, international calling center as shoppers dialed friends in California, Antigua and London. Manhattan resident Marie Perez, 15, and her two teenage friends each positioned themselves in front of an iPod Nano and stood motionless for an hour as they listened to music. 

Antonio Delgado, 41, a dump truck operator from Queens, was there to buy an iTouch with hopes of using it as mobile phone. He said he had $250 to spend, and that the money was worth it because of the touch-screen capability. 

“I’m not married, so I don’t have to worry about it,” he said of his pending purchase and his late night hours. 

Some people even use the Fifth Avenue store as a “pick-up place,” said Consolo, who passes the location every day on her way to work. Tourists used to ask how to find Bloomingdale’s, Saks and Louis Vuitton, she said. 

“Now they say Apple store, Apple store,” Consolo said in a telephone interview. “It’s the main event.”