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A hot potato: Apple has asked the landlords of some UK stores to cut rents by 50 percent and offer a “rent-free period” in exchange for extending leases by several years. The request comes after Cupertino’s second-quarter sales put it above Saudi Aramco (Saudi Arabia’s national oil company) as the world’s most profitable company.
As reported by The Sunday Times, Apple is only proposing the deal to stores that still have a number of years left on their lease, allowing landlords plenty of time to make a decision. The publication writes that the 38 outlets Apple has in the UK are extremely profitable, so the site owners are likely to accept the deals to keep a favored tenant.
Despite temporary store closures during the Coronavirus lockdowns, Apple reported that its Q2 sales increased 11 percent to $59.7 billion. It became the first $1.5 trillion US company in June, and after shares jumped on Friday, the iPhone-maker’s market cap has now reached a record $1.84 trillion.
A UK Apple store (taken before social distancing)
With Apple performing so well, why is it asking for a rent reduction? The Times states it’s to bring the stores in line with other retail outlets that have seen landlords cut rents to lessen the impact of reduced customer numbers. Several UK companies have gone into administration—a British procedure similar to bankruptcy—as pandemic-related financial hardships bite.
The Times writes that Apple’s request has been met with “consternation” from landlords, unsurprisingly. It appears that the company is taking advantage of a situation designed to help firms in real danger of going under, which doesn’t look good for a near $2 trillion tech giant.