Mall owner lays blame at Apple's door for dragging down sales

How does a halo actually help you drive down rents?


One of the US’s major mall operators blamed Apple for dragging down the performance of its high end properties, potentially compounding the discomfort for the i company.

Last month Apple reported results that were - for the tech juggernaut - slightly lacklustre, precipitating a share slide that made it the former most valuable company in the world.

If that was painful enough, Sandeep Mathrani, CEO at General Growth Properties, which operates malls across the US, fingered the fruit-flingers for undermining performance in his Q4 earnings call.

According to a transcript of the earnings call on Seeking Alpha, Mathrani said that across its operations, which include 97 of the US’s top end malls, “Comparable rent sales were up 3 per cent on a square foot basis.”

But, he continued, “A point to be noted is if you back out Apple sales, growth include(s) 4.5 per cent for sales of retailers less than 10,000 square feet and over 4 per cent for all retailers excluding department stores.

“Passing the portfolio by quality grade, we experienced sales increases throughout the country. Nearly every major retail category was up with the exception of electronics, primarily due to Apple.”

It should be noted that GGP hosts around 17 per cent of Apple’s US stores.

More importantly, it should be noted that Mathrani is talking about his company’s performance, and as a mall operator we’re going to assume that he’s talking about the rents and other charges it levels on its tenants.

So, if GGP is complaining about its income from Apple, we should assume it’s talking about the rent it makes from stores it is renting to the vendor. Which presumably suggests Tim Cook and his retail lieutenant have been able to drive some hard deals with him and other mall operators – in the past at least. (See bootnote.)

Which it can do because of its “halo” effect - it’s a sign of quality, of aspiration the same as British mall operators and High Street landlords being desperate to attract a John Lewis, or Waitrose.

Of course, that shiny halo might lose some of its lustre if it looks like people are going off Apple’s high priced consumer bits and pieces. Which might mean the likes of GGP demanding higher rents from Apple in future if it wants to be sited near other high-end brands like Tiffany and, er, LuluLemon. Which might mean...well, we all know that one goes.

Still, if Apple was feeling any discomfort about Mathrani’s consigning of its eponymous stores to the mall’s naughty step, it could only have gotten worse when he said of rumours that Amazon is planning its own stores, “their goal is to open as I understand 300 to 400 book stores, and it should sit back and say that the last mile is all important.”

Another company peddling content and portable devices looking for space in America’s malls? That’s the sort of thing that could be expected to drive up rents, surely. ®

Bootnote

Commenters have pointed out that US mall operators take a proportion of rent based on their tenants' turnovers. However, it has also been previously reported that Apple has been very successful in striking hard bargains with its landlords, as the Wall Street Journal points out here. Apologies for the confusion.

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