Struggling company pleads with landlords to slash rents as COVID-19 batters UK high street. The firm's name? Apple
- Reference: 1596452896
- News link: https://www.theregister.co.uk/2020/08/03/apple_uk_retail_rents_negotiation/
- Source link:
According to [1]The Sunday Times , Apple has asked owners of a portion of its 38-store UK network for a reduction and temporary forbearance of rents in exchange for it extending leases.
On one hand, you can understand Apple's dilemma. Like other non-essential retailers, the government forced Apple to close its retail outlets between 23 March and 15 June. Furthermore, its Scottish stores remained closed until 29 June as Holyrood took a more cautious approach to reopening the economy.
Apple's retail strategy is fundamentally different to, say, a clothing shop like Primark, where stock is placed close together and every square foot of floorspace is used.
The Apple Store is a showroom first, and a shop second. They're airy, open places, with large tables showcasing the latest wares from Cupertino. With the exception of accessories, stock is largely kept in storerooms away from punters. In practice, this means that larger outlets are well suited for social distancing, but nonetheless hugely expensive to rent.
And then there's the biggest factor: location, location, location.
Without fail, Apple situates its outlets on busy thoroughfares and prestigious shopping centres, like the Manchester Trafford Centre and Kent's Bluewater Shopping Centre. The jewel in its crown is the flagship Regent Street store in London. Along with Oxford Street and Bond Street, Regent Street has some of the most expensive commercial rents in the world.
In short, Apple is paying a decent amount of coin for its UK retail operation. Given that it wasn't able to trade for nearly three months, it makes sense that it'd try to stem its losses, particularly while footfall is down and future consumer buying trends remain uncertain.
Then again, this is Apple we're talking about. By the end of [2]Q2 2020 , it had $192.8bn cash on hand – or roughly the combined GDPs of Belarus and Ukraine. The following quarter also saw Apple break company revenue Q3 records, with [3]revenues of $59.7bn fuelled by heightened demand for wearables and Macs, with cash on hand rising to $193.8.
It is also the world's most valuable publicly traded company, ahead of Saudi Aramco. It can withstand a few losses from its retail operation, while its commercial landlords are likely being squeezed across the board.
It's not a good look. The Register has asked Apple to comment. ®
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[1] https://www.thetimes.co.uk/article/apple-demands-50-rent-cuts-for-uk-stores-k7klxmj8h
[2] https://www.theregister.com/2020/05/01/apple_q2_2020/
[3] https://www.theregister.com/2020/07/31/apple_q3_fy2020/
[4] https://whitepapers.theregister.com/
Re: My heart bleeds
Proving the fact that Apple can be petty and selfish. It would cost waaaay more to relocate than the few months diminished income via shops. It takes lots of moohlah to build an Apple Store. Just accept you have been told "No" and move on.
Re: My heart bleeds
I'm amazed Apple hadn't done this already.
I've read a few pieces about big retailers demanding rent cuts from their landlords - and smaller ones like Apple ought to find it even easier - because they can clearly move a few tens of stores to new (cheaper) locations with a lot less hassle than a retail chain with 700 branches.
My medium sized market town in the South East got a new in-town shopping centre 15 years ago. And it killed the High Street almost instantly, because it meant we had more retail space than we had shops. It did bring some out-of-town shoppers in, so we did get some extra shops - and footfall. But it also coincided with the massive rise of online shopping - and so even before lock-down the shopping centre had long-term empty spaces - let alone the charity shops and empty windows of the high street.
From what I can see, landlords haven't wanted to lower rents, because a few empty shops and big legacy rents (especially for those stuck on long-term contracts) was the more profitable option. Now that's going to have to change, or we're going to have to start converting shops into flats.
Obviously you'd expect Apple to take advantage of this. Neither they, or the landlords are charities. And actually I'm not sure it isn't a good thing. Our High Street looks awful, and has for years now. But it's not a sign of doom and recession, it's because people are buying online. So we either need rents to get cheaper so we can have small restaurants and nice interesting small shops to compete with shopping online (though that means allowing people to park) - or for landlords to sell up and have those places turned into flats, or something else useful.
Re: My heart bleeds
"It is a buyer's market for retail space at the moment and landlords will be very aware of that."
If Apple want all the prime slots/only prime slots then their choices are more limited. But who will really lose out if they were to close every single store anyway (other than the poor souls who work there)? Those who think the company can do no wrong will continue buying the latest iShiny as it comes along. Those who don't like the company still won't buy anything from Apple.
A longer term commitment from Apple is possibly an enticing prospect, but I can't help thinking that if the landlords give in once, Apple will take advantage and threaten to pull out every time rents go up - which means all the other clients will end up making up the shortfall because Apple would ever agree an increase if they can get out of it (to be fair, neither would anyone else. But few people/organisations have the power - and financial safety net - that Apple have. So they would have to eat the increase while Apple continue making money hand over fist).
Greed knows no ends
Everyday I just hate this company a little bit more.
There are many independent sole-trader shops on the high street that are perilously close to financial ruin (Both for the business and the owners) who should be getting every break possible to keep them alive.
Mega corps such as Apple should suck it up as part of their social responsibility.
Upvoted because I needed a laugh today.
(Cough, cough!)
... as part of their social responsibility.
Cheeky SOBs ...
They don't have the slightest clue as to what social responsibility is or what it means.
And Apple is not the only one.
As long as they keep getting away with paying taxes of cents on each million made they will get greedier and greedier, this is just the tip of the iceberg.
Not long ago we saw first Ireland and then the EU General Court fuck up a chance to start setting things straight as ruled by the European Commission to the tune of 13 billion euros.
13 billion euros which Ireland or the EU obviously do not seem to need. (!)
So that's how the world spins these days, to the tune of these greedy bastards.
Interesting times.
O.
Req: pls wikipedia page:
https://en.wikipedia.org/wiki/Criticism_of_Apple_Inc.
My heart bleeds
not!
On the other hand, landlords may need to decide whether they want a longer term commitment from Apple or face the likely prospect that Apple may terminate leases at the earliest opportunity if landlords don't show flexibility and move elsewhere.
It is a buyer's market for retail space at the moment and landlords will be very aware of that.