Apple sales inch higher despite coronavirus but CEO Tim Cook sees uncertain future

(Reuters) – Apple Inc reported sales and income that beat Wall Street expectations Thursday, with Chief Executive Officer Tim Cook saying China sales have been “headed in the right direction” as that nation reopens from the novel coronavirus.

FILE PHOTO: A municipal policeman sporting a protecting face masks walks previous the closed Apple retailer on the Champs-Elysees avenue in Paris as a lockdown is imposed to sluggish the speed of the coronavirus illness (COVID-19) in France, April 16, 2020. REUTERS/Charles Platiau/File Photo

But Cook mentioned it was unimaginable to forecast general outcomes for the present quarter due to uncertainty created by the virus.

With its international model, few American firms have been uncovered to the unfold of the coronavirus like Apple, whose iPhone sales declined within the March quarter as machine sales have been compelled to online-only in lots of locations. Sales of companies akin to streaming tv content material rose with billions of individuals locked of their properties. China, the place the virus was first detected, is each a significant marketplace for Apple, supplying a couple of sixth of its general sales, and can be house to most of Apple’s contract factories.

Apple noticed China sales of $9.46 billion, down lower than a $1 billion from a yr in the past, a possible signal of how the corporate will fare as different markets emerge from lockdowns.

“When the lockdown went into effect at the end of January, we saw a very steep falloff in demand for the month of February,” Cook informed Reuters. Apple slowly reopened Chinese shops, with all working once more by mid-March. “As compared to February, we saw a nice improvement in March and a further improvement in April. China is headed in the right direction.”

Apple reported sales of $58.three billion and earnings of $2.55 per share for its fiscal second quarter led to March, above year-ago outcomes of $58 billion and $2.46, and above analyst estimates of $54.5 billion and $2.27, based on IBES information from Refinitiv. Apple shares, which closed up over 2%, wavered after the outcomes, dropping 1.7% after an earlier slight rise in prolonged buying and selling.

Cook mentioned that through the first 5 weeks of the fiscal second quarter, “it was an incredible time where we were growing very fast and we were set to essentially come in at the high end of our guidance” of between $63 billion and $67 billion in sales. The quarter shortly modified when the virus unfold in China, hitting Apple’s provide chain and sales there, after which hit the remainder of the world as Apple’s shops and contract factories got here again on-line. Apple broke with its traditional observe of offering an estimated vary of sales for the present quarter.

“The question is: When do stores reopen, when do the shelter-in-places come off, when is it comfortable to go back to working in stores and having consumers come out?” Cook mentioned. “Rather than pretend we can project it, we’re being very straightforward and saying we lack the visibility to do it.”

In February, Apple warned buyers that it was unlikely to fulfill its monetary steering for the March quarter and will face iPhone shortages as lockdown orders in China saved factories closed and compelled Apple to shutter its shops there.

Apple reopened its shops in China in mid-March and factories resumed manufacturing – but by that point, the pandemic had unfold to Europe and the remainder of the world, which have left Apple shops exterior mainland China, Hong Kong, Taiwan and South Korea shuttered.

“Growth of 1% in this environment is impressive, particularly given some of the extent of Apple’s exposure to the earlier lockdowns in Asia,” mentioned eMarketer analyst Yoram Wurmser.

The closures, together with lockdown orders in lots of main Apple markets such because the United States and Europe, have compelled Apple and its largest sales companions within the retail and cellular provider industries to conduct most sales on-line or through curbside pickup, together with of the newly launched iPhone SE 2.

Cook declined to touch upon whether or not Apple faces provide chain disruptions for gadgets that might be launched later this yr, saying the corporate doesn’t touch upon future merchandise. He mentioned Apple’s provide chain was “back up and running at full-throttle at the end of March.”

Cook mentioned that he was happy with early sales of the brand new machine, together with new Macs and iPads launched through the fiscal second quarter, but that Apple can be topic to broader market forces within the coming months.

“We’re clearly not immune to the macroeconomic environment – I’m not sure hardly anybody is immune at this point,” Cook informed Reuters. “As compared to the last part of March and the beginning of April, we’ve seen a better second half of April.”

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Apple mentioned iPhone sales have been $ billion, down from $30.9 billion the yr earlier than in contrast with analyst estimates of $28.four billion, to information from FactSet.

Sales for Apple’s companies phase, which incorporates iCloud storage in addition to its streaming companies for music and tv exhibits, have been $13.four billion, in contrast with analyst estimates of $12.9 billion, based on FactSet information. Cook mentioned Apple had 515 million subscribers to apps and companies on Apple’s platform, up by 125 million from one yr earlier.

Apple’s wearables and equipment phase, which incorporates Apple’s AirPods and Apple Watch, have been $6.three billion, in contrast with analyst estimates of $6.7 billion, based on FactSet information.

Reporting by Stephen Nellis in San Francisco and Munsif Vengattil in Bengaluru; Editing by Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.

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