Apple Shutters All Its Stores in China
In a move that reflects the near panic about the spread of a new coronavirus that began in China, Apple Inc. (NASDAQ: AAPL) has closed every one of its stores there. Presumably, consumers in the world’s most populous country can still order Apple products online. The store closures show the seriousness with which American companies take the potential spread of the disease. It is too early to say how much it will affect bottom lines.
Apple’s statement about the decision read, “Out of an abundance of caution and based on the latest advice from leading health experts, we’re closing all our corporate offices, stores, and contact centers in mainland China through February 9.” February 9 is not a magical date. If the spread of the disease worsens, it is a safe assumption that Apple will stay closed, perhaps indefinitely.
Investors assume that most news from China will be bad news for Apple. Its stock dropped 4% on Friday. That is still barely a dip for shares that have risen 85% over the past year to very near an all-time high. The direction of the disease probably will determine the direction of the stock next week.
None of the news from China can entirely overshadow Apple’s recent quarterly results, which include the holiday period. Revenue for the quarter that ended December 28 was a record $91.8 billion. Earnings reached $4.99 per share, also a record. Luca Maestri, Apple’s chief financial officer, commented, “Our very strong business performance drove an all-time net income record of $22.2 billion and generated operating cash flow of $30.5 billion.” Among Apple’s current assets is $107 billion in cash and marketable securities.
The importance of China for Apple cannot be understated. It remains the world’s largest cell phone market. Apple’s revenue from what it calls “Greater China” was $13.6 billion in the most recent quarter. That was a very modest improvement from $13.2 billion in the same period a year ago. Since Apple is barely moving forward in China, it will not take much to force a step back.
Apple’s trouble in China reflects that of a number of other companies. When will it be safe just to walk the streets of the country’s biggest cities?