Apple product sales form a major portion of Target’s sales, and this can work both ways. On Wednesday, Target released its June quarter results, posting earnings that were slightly higher than expectations, but the company lowered its overall guidance for the full year.
Apple blamed for sales drop
A double-digit decline was seen in sales of electronics on a year over year basis. What makes this interesting is the fact that Target believes the drop in sales of Apple products is to be blamed for this decline. The company reported that sales of Apple products fell by 20% for the same quarter last year.
Target CEO Brian Cornell added that sales of all Apple products dropped, meaning customers were not flocking to Target to buy any of Apple’s products, be it the iPhone, MacBook or any others. A decline of 10% was seen in Target’s electronics sales on a same-store basis, and weak Apple sales attributed one-third of it.
Cornell said on the earnings call, “Our guests come to us looking for those products. They’re looking for the newness and the innovation. We’re putting together plans with Apple and our merchandising teams to make sure we’re ready to take advantage of that in the back half of the year.”
A point worth noting is that a decline of about 2.2% on year over year basis has been seen in foot traffic at Target stores, adding another layer to the lower-than-anticipated sales of electronic devices in general and Apple products in particular.
How does Target plan to fix it?
Target recently appointed Mark Tritton as chief merchandising officer, and one of his first tasks is to spend time with Apple to make sure “we’re putting the right plans together for the back half of the year, that we’re ready to capitalize on their new innovation that they will be bringing to the market,” said Cornell.
This sales drop-off is not unique to Target. For the first time in history, Apple experienced an annual decline in iPhone sales this year. Additionally, a downward trend has been seen in iPad sales for quite a few years now.
Apple expects weak sales of its top-selling product, the iPhone, and thus forecasts a drop in revenues for a third consecutive quarter. China has several homegrown phone makers that are giving tough competition to Apple. Another reason for weak sales is that there are many consumers waiting (or holding off on new electronics purchases) for the next iPhone and a revamped MacBook Pro.