Apple sales beat expectations but Tim Cook sees uncertainty ahead

Apple reported sales and profits that beat Wall Street expectations on Thursday, with Tim Cook saying China sales were “headed in the right direction” as that country reopens from the coronavirus.

But the CEO said it was impossible to forecast overall results for the current quarter because of uncertainty created by the virus.

With its global brand, few American companies have been exposed to the spread of the coronavirus like Apple, whose iPhone sales declined in the March quarter as device sales were forced to online-only in many places. Sales of services such as streaming television content rose with billions of people locked in their homes. China, where the virus was first detected, is a major market for Apple, supplying about a sixth of its overall sales, and home to most of Apple’s contract factories.

Apple saw China sales of $9.46bn, down less than a $1bn from a year ago, a potential sign of how the company will fare as other 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 told Reuters. Apple slowly reopened Chinese stores, with all running again 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 $58.3bn and earnings of $2.55 per share for its fiscal second quarter ended in March, above year-ago results of $58bn and $2.46, and above analyst estimates of $54.5bn and $2.27, according to IBES data from Refinitiv.

Cook said that during the first five 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 $63bn and $67bn in sales. The quarter quickly changed when the virus spread in China, hitting Apple’s supply chain and sales there, and then hit the rest of the world as Apple’s stores and contract factories came back online. Apple broke with its usual practice of providing an estimated range of sales for the current quarter.

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“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 said. “Rather than pretend we can project it, we’re being very straightforward and saying we lack the visibility to do it.“

In February, China kept factories closed and forced Apple to shut its stores there. Apple reopened its stores in China in mid-March and factories resumed production – but by that time, the pandemic had spread to Europe and the rest of the world, which has left Apple stores outside mainland China, Hong Kong, Taiwan and South Korea shuttered.

The closures, along with lockdown orders in many major Apple markets such as the United States and Europe, have forced Apple and its biggest sales partners in the retail and mobile carrier industries to conduct most sales online or via curbside pickup, including of the newly launched iPhone SE.

Apple said iPhone sales were $29bn, down from $30.9bn the year before, compared with analyst estimates of $28.4bn, according to data from FactSet.

Sales for Apple’s services segment, which includes iCloud storage as well as its streaming services for music and television shows, were $13.4bn, compared with analyst estimates of $12.9n, according to FactSet data. Cook said Apple had 515 million subscribers to apps and services, up by 125 million from one year earlier.

Apple’s wearables and accessories segment, which includes Apple’s AirPods and Apple Watch, were $6.3bn, compared with analyst estimates of $6.7 billion, according to FactSet data.

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