Apple Retail Stores: Trouble in Paradise

By Paul Ausick Published Aug 28, 11:50AM EDT

As with everything related to Apple Inc. (NASDAQ: AAPL), the recent kerfuffle over a change at the company’s highly successful retails stores has generated a significant amount of sound and fury. And it is neither a tale told by an idiot nor does it signify nothing.

The company’s new senior vice-president for retail made changes to employee hours and staffing levels, cutting service levels and chopping hours for some employees. After a few weeks, Apple declared that, “We messed up,” and reverted to the time-tested formula that had served it well for 10 years.

But the hurt feelings remain and there continue to be reports that Apple did lay off staff and cut hours, contrary to what the company claims. From the ifoAppleStore blog:

[A]ll [our] sources … were unanimous that employees had indeed been laid off, fired, assigned no hours or otherwise made unemployed by Apple. The sources also say they’ve not heard one word from Browett about the incident, not even an acknowledgement of Apple’s public statement.

John Browett, Apple’s senior v-p for retail, replaced Ron Johnson in the role after Johnson left Apple to become CEO at J.C. Penney Co. Inc. (NYSE: JCP). Johnson had apparently been encouraged by Tim Cook to pay more attention to costs and profits at the Apple stores even before Cook was named to replace Steve Jobs.

Johnson and Jobs apparently believed that the primary goal of the Apple stores was to provide a unique experience for visitors and customers at the store. Cook wanted Johnson to pay more attention to both the top and bottom lines, and when Cook did take over the pressure on Johnson increased:

According to accounts, Cook pushed Johnson “quite hard” about how other channels were selling more Mac’s per-capita than the retail stores. Without Jobs’ support, Johnson found it was nearly impossible to keep Cook and [CFO Peter] Oppenheimer from switching the chain’s primary purpose from a superior experience to revenues.

So who “messed up” and when? Did Browett make the mess or did Johnson? It’s at least arguable that Johnson presided over the beginning of the slide in the Apple retail experience. Browett only took the next step. That was, however, one step too far.

Whether ifoAppleStore’s sources are correct or just passing along hearsay or expressing sour grapes, Apple’s got a problem at its retail operations. How the company fixes the problem will have a lot to say about Tim Cook and the post-Steve Jobs Apple.

Paul Ausick

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.