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Apple Store Sales Continue to Fall, but That's Not a Bad Thing

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Growth is still expected in China, and the Apple Store is still important as a face for the company, as well as a means for converting Windows users.

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At Apple (NASDAQ:AAPL), retail sales are continuing to decrease, with same-store sales at Apple Stores down 3.3% year-over-year in the third quarter. This however, was less of a loss than the company experienced in the second quarter (9.6%). Decreasing sales are likely most attributable to the expansion of distribution for iPhones and iPads: Consumers can now buy their Apple devices in an increasing number of third-party outlets, such as the stores of carrier partners like AT&T (NYSE:T) and Verizon (NYSE:V), as well as big-box retailers like Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT).

On Monday, Charlie Wolf, an analyst at investment banking and asset management firm Needham & Company, said in a quarterly report that he expects Apple's store will continue to not keep pace with Apple's continuing overall growth. Apple has hired Burberry CEO Angela Ahrendts to take the reins of Apple's retail and give it a stylish kick-start, but Wolf says he believes it will be difficult for her to turn around the trend because Apple Stores "have become increasingly hostage to Apple's overall distribution and product strategies."

Wolf does foresee growth in one area: China, where the company has fallen behind initial projections for the opening of new Apple Stores. Once those retail operations start opening though, they should drive solid Apple sales in the country.

So Apple's retail is not keeping up with the company in general, isn't that a problem? Not really.

Wolf believes Apple's stores are a crucial component of the company's business, serving as the "face" of its brand. Through an array of post-sale services, the stores have also become a kind of magnet for Microsoft (NASDAQ:MSFT) Windows users ready to switch to the Mac platform, he says. Almost half of the estimated 1 million Mac computers sold in Apple Stores during the third quarter were to former users of Windows.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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