Struggling company pleads with landlords to slash rents as COVID-19 batters UK high street. The firm's name? Apple
Yes, the one with a $193.8bn cash pile
Apple is reportedly trying to negotiate a 50 per cent rent cut with its UK retail landlords as it wrestles with the high-street turmoil caused by the COVID-19 pandemic.
According to 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 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 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. ®