Apple to Double Retail Outlets in China as Growth Slows

Apple Inc. (AAPL) will double the number of retail stores it operates in China during the next two years as Chief Executive Officer Tim Cook looks for ways to counter slowing growth.

Apple’s sales in the greater China region, the world’s largest market for computers and handsets, rose 11 percent to a record $8.8 billion during the fiscal second quarter, Cook said on a conference call yesterday. That was down from the 67 percent pace of growth in the three months ended Dec. 29, the first period Apple officially broke out results for its largest market outside the U.S.

Concerns that Apple’s growth is slowing globally were reinforced by a forecast for sales this quarter that may miss analysts’ predictions by as much as $4.9 billion. In China, where Apple has 11 outlets, the company has been criticized in state-run media over the quality of its after-sales service compared to that provided in the U.S.

“Doubling stores over two years is simply not enough,” said Shaun Rein, managing director of China Market Research Group in Shanghai. “Their sales growth is really collapsing.”

Apple is facing “serious political headwinds” that may make it more difficult to get permits to open new stores, Rein said. Cook’s plan is well off the pace set by former head of retail operations Ron Johnson, who set a target of 25 stores by February 2012.

Apple opened its first Chinese store in Beijing’s Sanlitun district in 2008. Johnson left Apple in 2011 to become J.C. Penney Co. (JCP)’s CEO, a role he was ousted from this month.

Apple’s iPhone also is available in China through third- party retailers, and two of the nation’s wireless carriers — China Unicom (Hong Kong) Ltd. (762) and China Telecom Corp. Apple has added about 8,000 iPhone sales points for a total of 19,000 currently, Cook said. That is “obviously too low, currently,” he said.

“Going forward we still see a significant opportunity in China,” Cook said. “It’s a great market.”


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