Apple Sales, Profit Surge in China
October 28 2015 - 7:07PM
Dow Jones News
By Daisuke Wakabayashi
Apple Inc.'s sales in China surged 84% in the past fiscal year,
but profits grew even faster.
In its annual securities filing for the fiscal year ended Sept.
26, Apple said it generated operating income of $23 billion in
greater China--a region that includes Taiwan and Hong Kong--more
than double its profit of $11.04 billion in the prior year. Apple's
operating margin from Greater China jumped to 39% in the past
fiscal year from 35% in fiscal 2014 and 31% in fiscal 2013.
Apple didn't provide a reason for the profitability gains. The
iPhone, Apple's most profitable product, is doing extremely well in
China. What's more, many Chinese consumers buy models with
additional storage, which tend to have better profit margins than
those with less storage.
China is now a major growth engine for Apple, propelled by an
emerging middle class with increasing disposable income and a deal
last year with the country's biggest wireless carrier, China Mobile
Ltd. In the past fiscal year, Apple's Greater China revenue grew by
roughly $27 billion, which is more than all but 113 members of the
Fortune 500.
China has become so important to Apple that the company's stock
plunged last month amid concerns that a slowing Chinese economy
could dampen demand for its products. Apple Chief Executive Tim
Cook, who has said in the past that China will eventually become
the company's biggest market, issued a statement to calm the waters
and say Apple's growth in the country was as strong as ever.
Mr. Cook reiterated his optimism for China on Tuesday in an
interview. "We saw no signs of a slowdown in China," said Mr. Cook,
suggesting there may be differences in export markets versus
domestic demand.
Apple said it plans to increase the number of Apple stores in
China to 40 by mid-2016 from 25 currently.
In the same filing, Apple said 96% of Greater China sales are
derived from China alone. China sales are up 85%, while sales in
the rest of the region are up 78%.
Apple also said it plans a 34% increase in capital expenditures
in the current fiscal year, which ends in September, to $15
billion. Apple said it plans to use the funds for manufacturing
equipment, data centers, facilities, hardware and software
enhancements, and its retail stores.
Apple's estimates for capital spending often vary from how much
it actually spends. Last October, it estimated that it would spend
$13 billion for capital expenditure in the year just ended; it
actually spent $11.2 billion.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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(END) Dow Jones Newswires
October 28, 2015 18:52 ET (22:52 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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