After reporting a slight increase in sales following news of a MacBook Pro upgrade, Apple Inc. (NASDAQ:AAPL) seemed poised for a comeback. But alas, Target Corporation (NYSE:TGT) reported that the demand for iPads, iPhones, and other Apple devices is waning, with sale dropping to 20% during the second quarter of 2016. Worse, the weak demand for Apple products is starting to hurt Target’s revenue, leaving executives scrambling for answers.
According to Target CEO Brian Cornell, the decline may be due to the lack of “newness” and “innovation.” Cornell revealed that Target’s electronic sales have decreased, leading to a disappointing Q2 earnings. Target’s shares closed down 6.4% at $70.63 after dropping as much as 7.4%.
“Our guests come to us looking for those products,” Cornell said on a conference call to discuss earnings. “They’re looking for the newness and the innovation. We’re putting together plans with Apple and our merchandising teams to make sure we’re ready to take advantage of that in the back half of the year.” Cornell blamed Apple for playing a “significant role” in Target’s dipping same-store sales.
In April, the Cupertino tech giant reported its first-ever decline in iPhone sales as well as its first revenue drop in 13 years due to stiff competition in the smartphone segment.
The waning demand for the iPhone sent Apple’s stock into a downward spiral and there seems to be no sign that the company’s prospects will improve anytime soon. According to a forecast, Apple will experience a third consecutive decline in revenue on the third quarter of 2016.
As reported by MacRumors, the iPhone maker is expecting “revenue of $45.5 billion to $47.5 billion in the third calendar quarter of 2016, up to 12 percent lower than the $51.5 billion in revenue it saw in the third calendar quarter of 2015.”
In an effort to turn the situation around, Cornell said newly-appointed Chief Merchandising Officer Mark Tritton is set to spend time with Apple to ensure that “they are putting the right plans together for the back half of the year, that we’re ready to capitalize on their new innovation that they will be bringing to the market.”
Apple did not immediately respond to a request for comment.
iPhone sales are expected to increase following the release of Apple’s flagship smartphones, the iPhone 7 and iPhone 7 Plus, this September. However, rumors suggest that the software and hardware upgrade of the two new devices are moderate and if they turned out to be a disappointment, Apple’s downward spiral will continue into 2017.
Apple is rumored to be betting big on virtual reality with the development of VR-supported products in the works. This project is rumored to include an iPhone 8 with VR-support, edge-to-edge OLED screen, all-glass form factor, and wireless charging, which will be released in September 2017. Insiders believe that the release of iPhone 8 will be timed with the line’s 10th anniversary.
Apple stock is up $0.16 to $109.38 in pre-market trading today. The company has a market cap of $588.53 billion and a median Street price target of $120 with a high target of $185.
AAPL currently prints a one year loss of about 4%, and a year-to-date return of around 5.5%.