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It has been reported that due to the effects of the pandemic on the UK high street, even tech giant Apple is trying to negotiate a 50 per cent rent cut with its retail landlords.
The reports, which appeared in the UK’s Sunday Times, allege that Apple has asked the landlords of its 38 UK store locations to reduce its rents by half in this most difficult period for the UK high street in exchange for extending leases on stores that still have several years left on those leases, meaning that landlords won’t be forced to make a quick decision.
Reports have also focused on the fact that requests for rent reductions for Apple’s UK stores have come at a time when Apple has reported an 11 per cent year-on-year increase in sales in the second quarter to a record-breaking £45.6 billion!
The high sales figures have led some commentators to note that although Apple appears to be asking to be treated in the same way as other high street businesses that have been offered a reduced or temporarily-free rent period, Apple appears to have been in a much stronger financial position than other bricks and mortar businesses through the pandemic.
One of the main reasons why Apple has been able to make such a pronounced increase in revenue is the positive reception that its $400 iPhone SE (released in April) received, which contributed to iPhone sales growing by 2 per cent in Q3 and enjoying strong demand in May and June. Also, Apple’s services revenue segment generated $13.1 billion, up from $11.5 billion in the same period last year, and Apple wearables performed strongly.
UK High Street
Even though Office for National Statistics (ONS) figures show a jump of nearly 14 per cent in high street sales for June compared to May, this is still just a small rise from no sales at all as high streets were completely shut down during April and May. The UK’s high street shops are still losing out to online retailers, a lack of consumer confidence and consumer job losses and tight finances, with many companies with bricks and mortar stores having to make decisions to close branches e.g. William Hill, Pizza Express, DW Sports (going into administration), Tui and now Hays Travel.
What Does This Mean For Your Business?
Apple is a huge global brand with a well-known electronic product range that has been in demand during the pandemic and has been boosted by a new product. Although Apple has high street stores, often in expensive areas, arguably these stores have not been necessary for sales of the kind of products that Apple makes to be sold and delivered over the last few months. In that sense, it appears highly unlikely that Apple has been hit in the same way as other retailers, especially those in sectors that have been heavily subject to restrictions whether though bricks and mortar or online sales (e.g. travel agents). It may be surprising and angering to other retailers, therefore, to hear that Apple may be negotiating rent decreases when it is a global giant that has been making record sales.