Apple 2008 Annual Report Download - page 48

Table of Contents
Japan’s net sales declined by $129 million or 11% in 2007 compared to 2006. Total Mac unit sales in Japan declined 1% during 2007. The
decrease in the Japan segment’s overall net sales was attributable primarily to decreases in iPod and Mac desktop sales, partially offset by an
increase in revenue from MacBooks and sales of third-party content from the iTunes Store. The decline in net sales and Mac unit sales is
partially attributable to Japan’s declining consumer PC market, and the iPod sales decline is due primarily to lower average selling prices. The
Company is continuing to evaluate ways to improve the future results of its Japan segment.
Retail
Retail net sales grew by 53% during 2008 compared to 2007, due in large part to increased sales of Mac portable and desktop products, strong
demand for the iPhone and iPod touch, and new store openings. The Company opened 50 new retail stores during 2008, including a total of 19
international stores, bringing the total number of open stores to 247 as of September 27, 2008. This compares to 197 open stores as of
September 29, 2007 and 165 open stores as of September 30, 2006. With an average of 211 stores and 178 stores opened during 2008 and 2007,
respectively, average revenue per store increased to $29.9 million for 2008, compared to $23.1 million in 2007.
Retail Mac net sales and Mac unit sales grew by 42% and 47%, respectively, during 2008 compared to the 2007, due primarily to strong demand
for MacBook, iMac, and MacBook Air, introduced in January 2008. Net sales of iPods increased due to the popularity of the iPod touch, which
was upgraded in June 2008, and a higher average selling price compared to 2007. The higher iPod average selling price was due to strong
demand for the iPod touch.
The Retail segment’s net sales increased by 27% to $4.1 billion during 2007 compared to 2006. Retail segment Mac unit sales increased 56%
during 2007 as compared to 2006. With an average of 178 stores open during 2007, average revenue per store was $23.1 million, compared to
$22.9 million in 2006. The increase in Retail segment net sales during 2007 compared to 2006 was due primarily to stronger sales of Mac
portable products, iMacs, accessories and services. The increase was partially offset primarily by lower net sales of iPods and other music related
products due to the expanded availability of those products through third-party resellers.
As measured by the Company’s operating segment reporting, the Retail segment reported operating income of $1.3 billion during 2008 as
compared to operating income of $875 million and $600 million during 2007 and 2006, respectively. This improvement in 2008 was attributable
primarily to the significant Retail net sales growth of 53% as compared to 2007.
Expansion of the Retail segment has required and will continue to require a substantial investment in fixed assets and related infrastructure,
operating lease commitments, personnel, and other operating expenses. Capital asset purchases associated with the Retail segment were $389
million in 2008, bringing the total capital asset purchases since inception of the Retail segment to $1.4 billion. As of September 27, 2008, the
Retail segment had approximately 15,900 full-time equivalent employees and had outstanding operating lease commitments associated with
retail store space and related facilities of $1.4 billion. The Company would incur substantial costs if it were to close multiple retail stores. Such
costs could adversely affect the Company’s financial condition and operating results.
Other Segments
The Company’s Other Segments, which consist of its Asia Pacific and FileMaker operations, experienced an increase in net sales of $707
million, or 40% during 2008 as compared to 2007. These increases are related primarily to strong growth in sales of all Mac portable systems,
iPods, the iMac, and content from the iTunes Store in the Company’s Asia Pacific region. Sales from the iTunes Store in the Company’s Asia
Pacific region grew significantly by 109% over 2007. Mac net sales and unit sales grew by 52% and 50%, respectively, due to increased sales of
the iMac and all Mac portables.
The Company’s Other Segments experienced an increase in net sales of $406 million, or 30% during 2007 compared to 2006. This increase
related primarily to a 58% increase in sales of Mac portable products and strong iPod sales in the Company’s Asia Pacific region.
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