Can Apple, Inc.'s Retail Stores Pick Up Steam Again?

Under new leadership, investors are hoping Apple's retail stores could return to growth.

Apr 28, 2014 at 2:05PM

CEO Tim Cook said last week in Apple's (NASDAQ:AAPL) second-quarter earnings call that former Burberry CEO Angela Ahrendts will begin her position as its new retail and online leader this week. The timing for new leadership over Apple's retail arm couldn't be better. With other tech giants introducing more Apple-like retail concepts and Apple's retail sales flattening out on a year-over-year basis, it's more important than ever for the company to find new ways to stand out.

Apple Store

Apple's retail arm today
It would be foolish to suggest Apple isn't running a successful retail business. The company has meaningfully higher retail sales per square foot than any other retailer in the U.S., according to Retail Sails. Apple handily beat luxury retailers like Tiffany and Michael Kors on the telling metric in 2013. In fact, there's a good chance Apple is the most successful retailer in the world.

But as the world's most valuable publicly traded company, Apple faces a unique challenge: large numbers. As the saying goes, "What goes up must come down." In 2013, Apple's successful retail stores seemed to hit a wall. Average revenue per store slipped slightly in 2013 to $50.2 million from $51.5 million the year before. A similar trend was evident in Apple's second quarter of 2014. Retail sales were basically flat from Q2 2013 to Q2 2014 despite more store openings and total revenue growth of 5% in the same period.

And beyond a face-off with large numbers, other tech companies are jumping in with their own Apple-like stores to connect with consumers and show off their brands. Microsoft, for instance, is already rolling out retail stores and Google is rumored to be planning some of its own.

Angela Ahrendts

Source: Burberry.

Enter Angela Ahrendts
Ahrendts has a tough job cut out for her. And the pressure is on. The role she has taken over has seen significant turnover in the last couple of years -- a very uncommon trend for Apple executive positions. After Ron Johnson left Apple in 2011, he was replaced by John Browett. Browett was then ousted less than a year later.

Not only will Ahrendts join Apple at a time when its retail arm seems to be slowing, but if rumors are true, she will also be leading Apple retail into a new category: wearable tech. If the company does launch the alleged iWatch, fashion may take a greater role in Apple's products and retail experience.

Will Ahrendts take all these challenges in stride? It's tough to say. But it's good news for investors to see fresh leadership during such a transitional time. And if Ahrendts' tenure at Burberry offers any glimpse into her potential at Apple, the tech giant's retail arm may be in for some positive changes. Perhaps an Ahrendts-led retail overhaul combined with some new product categories to boost store foot traffic will return Apple stores to sales growth in the coming years.

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Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Google (A shares). It owns shares of Apple, Google (C shares), Michael Kors Holdings, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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