Asia-Pacific market sees doubling in revenues

The extraordinary growth of the market in China and the Asia-Pacific region in general is helping keep the Apple retail business profitable despite aggressive expansion and renovation costs, and the company plans to take advantage of this by leveraging that growth both in out of that region. In addition to more stores and what CEO Tim Cook referred to as "other things" to expand Apple's presence in China, the company plans to invest in other emerging regions.

China individually has been a special focus of the last two analyst conference calls with Apple, and with good reason: the country has grown from two percent of Apple's annual revenues in 2009 to 16 percent in the most recent quarter, and now accounts for $13 billion in annual revenues with much more growth expected in 2012. Sales in China alone grew 270 percent year over year, and the Asia-Pacific region overall jumped 139 percent.

Cook remarked that China had more people entering the middle-class in terms of earning power faster than he had seen in China, and that the growing wealth there was creating customers who are "buying what Apple makes." Even though China is already the second-largest country in terms of revenues for Apple, it is still "an area of enormous opportunity," Cook said, pointing to iPhone volumes in the whole Asia-Pacific region that have more than doubled over the last quarter.

The company feels that iPad sales in China are still nascent, and that this again represents another large opportunity for the company as it comes into the market with clear dominance in terms of tablets. "The sky's the limit" for growth there, Cook told analysts. He added that although China was doing remarkably well for the company, it was not alone: Brazil, now home to some iPad and iPhone production, is up 118 percent in sales year-over-year. The Russian Confederacy and the Middle East are also showing signs of promise, with Russia approaching the $1B mark in annual revenues.

In all three regions and other countries, the introduction of the iPhone has made it possible for Apple to get other products into the market, generating additional interest and a smaller version of the "halo effect" often seen in North America. Of the planned 40 stores that will open in the next quarter, 75 percent of them will be outside the US. Cook said that Apple will use variations of the same strategy that was used in China to gain share in the other countries

The Asia-Pacific market saw 18 percent sequential growth from the previous quarter, but 61 percent growth year-over-year and 139 percent growth in revenues year-over-year, highlighting the popularity of the high-margin iPhones and iPads in the region. The Hong Kong store led the charge as the store with the highest revenue.

Retail managed at 25 percent growth rate in units sold, but only a one percent tick in revenues year-over-year, though some of that can be accounted for by the costs of expansion and in some cases renovation, such as the $6.7 million replacement of the glass cube at the Fifth Avenue store in New York City. Other high-volume stores in the US will be renovated or replaced with larger spaces over the coming year as well. For the quarter, 336 stores were open out of a total now of 357 stores, with an operating profit of $679 million.

by MacNN Staff