Here’s How Much It’s Costing Apple to Keep Its Retail Stores Closed

Apple Store Miami Beach Credit: pisaphotography / Shutterstock
Text Size
- +

As Apple begins to slowly reopen its retail stores around the world, the company’s actions have become a barometer of sorts for the overall COVID-19 crisis, illuminating those areas in which the novel coronavirus is more under control and restrictions can more safely be eased, regardless of what other restrictions may be in place.

After all, Apple was actually the first major international retailer to take the rather bold move of closing all of its stores outside of China, in many cases days or even weeks before many local health authorities mandated such retail closures — if they did at all.

From March 13 until April 18, Apple kept every one of its 458 of its stores outside of Greater China completely shut down, even in places where other retailers were permitted to continue operating. Apple’s decision to shutter its stores wasn’t about government regulations, but rather about proactively ensuring the health and safety of its employees and customers, and on the opposite end the company has been fairly consistent about ensuring that its stores will only open when it considers it safe to do so. As CEO Tim Cook stated at the end of April, Apple most likely won’t be the first retailer to fully reopen in any given location, regardless of what other retailers are doing or what local health authorities say.

In fact, as Josh Centers of The Prepared noted last month (via Daring Fireball), Apple Stores have effectively become the new “Waffle House Index” — an informal metric used by the Federal Emergency Management Agency (FEMA) for measuring the severity of a disaster.

The Apple Index

As Centers explains, Apple’s decision to close its stores was made entirely by the company’s own executives, and not as a result of any government pressure, and by the same token there’s no government pressure that would force Apple to reopen stores before the company itself believes it’s ready to do so.

However, despite the fact that this decision came with a staggering loss of revenue — we’ll get to exactly how much in a moment — Apple not only did it anyway, but has continued to keep almost all of its stores closed, reopening only its single location in South Korea in April, leaving everything else shut down until early May, when locations in Australia began reopening — a country where other retailers had never been forced to close their doors in the first place. The Australian reopenings were joined by Apple’s Store in Vienna, Austria, and then Germany, Switzerland, and Italy the following week.

It wasn’t until last week — more than two months after the initial shut down — that Apple announced its first North American reopenings, with 25 stores in the U.S. and a dozen in Canada on the list.

Here’s What It Costs

To be clear, Apple is the largest retailer in the world when it comes to the amount of revenue it makes per square foot, which is the standard measuring rod for size, since it’s directly proportional to a retailer’s costs. According to industry analysts, Apple makes $5,546 per square foot per year, beating out Murphy USA and Tiffany & Co. by a pretty healthy margin.

As of 2015, which was the last time Apple broke out its retail floor space separately in its Annual 10-K filing, the company reported approximately 5.3 million square feet in total, divided among 463 retail stores, making the average size of an Apple retail store at that time 11,447 square feet — a number that has likely only grown even more in the past four years as Apple continues to expand its retail stores into even larger spaces (as an aside, it’s staggering how fast Apple’s Stores have been expanding year-over-year —the average size of an Apple Store in 2011 was only 8,400 square feet, and when Apple first opened, it had 6,000 square feet as the ideal size).

This puts Apple’s average revenue for each retail store at $63.5 million dollars per year or $5.29 million per month. If you multiply that by the 458 stores that Apple closed back on March 13, that means that Apple lost at least $2.4 billion in revenue in the first month alone as a result of closing its stores.

However, that number can almost be doubled, since only a single Apple Store in South Korea reopened in April, and as of today there are still well over 300 Apple Stores that remain closed, accounting for almost $1.6 billion in monthly revenue that Apple is still losing out on. It’s also worth keeping in mind that during this entire time, Apple has had to continue paying its leasing costs for its retail space and has continued to pay every one of its retail employees, so its operating costs haven’t changed all that much.

According to a statement made to 9to5Mac, Apple plans to open 100 more U.S. locations by the end of this week, although a great many of those will only be opened for curbside or storefront service so that customers can pick up orders or equipment that was previously brought in for service (which has been locked in the back rooms of Apple Stores for over two months in some cases), or make Genius Bar appointments. This means that while Apple will be able to return to making some revenue from these stores, it’s going to fall well short of the normal retail numbers.

Of course, Apple Stores would have probably been less trafficked during the ongoing pandemic, and at least some customers purchased products online that they may have otherwise bought in a physical store, but even if Apple only made half of its normal sales, that’s still well over a billion dollars in lost revenue.

As Centers notes, Apple made the decision entirely on its own to “burn millions, possibly billions of dollars in cash to keep people safe.” Of course, Apple also has many times that amount of cash sitting in the bank, but it’s still going to have to answer to investors for its decisions at the end of the day. However, even if you don’t believe Apple is being entirely altruistic here in looking after the well-being of its staff and customers, there’s still the matter of enlightened self-interest, as dead customers are bad for business.

Sponsored
Social Sharing