Why top retailers watch Apple in face of Covid-19 – Wall Street Journal

Apple is well known for its ability to stay ahead of the curve when it comes to business strategy and product development. In terms of its response to Covid-19, the tech giant has been just as innovative. In February, Apple warned investors that it would fail to meet its previous estimated revenue targets of $63bn to $67bn. It has also donated over $15m to help provide treatment for patients and to try and mitigate the economic impact of the pandemic. Siri can even help you figure out your symptoms, guiding you through a series of questions to determine whether you have the virus. In this compelling piece from the Wall Street Journal, we discover why Apple is the company to watch in the fight against Covid. – Claire Badenhorst.Why Apple store closures may tell us where Covid-19 will hit next.Let's begin in the US on March 14th, 2020..There are 1678 confirmed Covid-19 cases in the US that day, according to the World Health Organisation. That same day, Apple decides to close its stores across the country..___STEADY_PAYWALL___.A week later, on March 21st, cases in the US have gone up by over 800%. And in that week, dozens and dozens of more retailers close, including Nike, Sephora, IKEA, and the Gap. We tracked hundreds of store closures, global coronavirus case data, and official lockdown measures and found that as the virus spread across the world, Apple has been one of the first to close its stores, specifically in the United States. In most instances, Apple shutdowns proved to be an early indicator of the trajectory of individual cases, other retail closures, and government-mandated lockdowns.."One piece that's really surprised me most about the pandemic more broadly and how Apple has behaved is the number of companies that have either followed their lead or are looking for information from Apple," says Gene Munster, managing partner at Loup Ventures..Now, with states coming out of lockdown, Apple has reopened and reclosed some stores..That could be a signal of what's ahead. It's sort of like the Waffle House minus the waffles. See, the American restaurant chain changes its menu based on how severe it thinks a hurricane or storm may be; closing only when the damage is expected to be extreme. So, is Apple the Covid equivalent, or is Apple just more nimble than other retailers because of its business strategy and 200bn in the bank?.Apple was quick to respond.Apple wasn't always ahead on store shutdowns. Take its first closure in Qingdao, China, on January 28th. There were 5974 confirmed Covid-19 cases in China that day. Yet, other stores like Starbucks and the Gap had closed some of its China stores that same day or earlier. Within a week of Apple's first closure, Covid cases in China had grown 307%. On February 1st, Apple shut all 40+ of its mainland China locations..Jean-Emmanual Biondi is a principal at Deloitte and works with some of the world's top retailers.."We did not have any idea at that point in time of what was about to come. The discussion we had was related to the impact of Covid, not so much on the consumers and the market in the United States, but the disruption from a supply chain standpoint," Biondi explains..By March, with the virus spreading far beyond China, Apple moved a lot faster. More than a week before the UK went into lockdown, on March 14th, Apple closed its stores in the country, while others like Nike, Adidas, and Starbucks, stayed open for two to six days longer. Meanwhile, the rest of Apple's stores outside of China closed on the 14th too, including in the US, where it has 271 stores. That's more than any other country.."I would say that every retailer who was in Asia looked at the measures that were implemented in Asia and said, can I implement and to what extent can I implement some of these similar measures in the United States?" Biondi says..In the US, only Patagonia closed that same day. Over the next week, more than 50 major retailers closed. And then in May, stores began reopening. And in June, Apple hit the brakes and reclosed some, including in Texas, California and Florida. In Orlando, specifically, Apple reclosed its store at the Florida mall on June 26th. Two weeks later, cases in that county had more than doubled. Still, other retailers in the area, including Nike and Best Buy, remained open. Both companies declined to comment..Staying ahead of the curve.So how does Apple decide when and where to close? The company says it looks at the following data on the county level: case numbers; positivity rates; hospital, ICU and ventilator usage; asymptomatic testing; and more. If public info isn't available, the company says it calls public health departments to request data..But why Apple? Why has the company been quicker to close stores than others? It's not because Apple stores aren't money-makers, but rather they're not Apple's only way to make money. And Apple has the money to do it. Gene Munster has been researching Apple for nearly 20 years.."We estimate that their physical stores are somewhere between eight and 10% of total revenue. Online is an additional 10 to 12% of total revenue," he says..Munster and other analysts predict that large parts of the physical retail sales have shifted to online. During the second quarter of 2020, which included the months of January to March, Apple sold nearly $50bn worth of products, and CEO Tim Cook told CNBC its online growth was off the charts..The bigger cost to Apple and store closures…."In the March quarter, Apple paid out to its retail employees about $100m, even though they weren't actually in the stores working," says Munster. "In the June quarter, that number is going to be just under $200m. Keep in mind; brick and mortar retail businesses are close to a $30bn of your annual business. And so even though these numbers are large, they have the framework to continue to support and pay for employees throughout the pandemic.".Apple's free cash flow in the March quarter was $30.3bn, even as its stores were closing. Much of that came from online sales; that allowed it to pay its retail staff despite its stores being shut. And Apple can continue to do so because it has one of the biggest rainy day funds in business..When you factor in its debt, Apple has a little over $80bn of cash in the bank. Compare that with Nike's $8bn or Best Buy's nearly $4bn. Apple has so much cash on hand that it could run its operations for more than a year without cutting its costs or selling a single iPhone.."They have a lot of money," Munster remarks. "They have the ability to navigate this, unlike most companies. So, I would look for Apple to have more store closings than other retailers who are navigating a lot of the same information.".*This video first appeared on The Wall Street Journal.

Why top retailers watch Apple in face of Covid-19 – Wall Street Journal

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