Bloomberg News

Apple Names Browett to Lead Retail Business in Global Expansion

February 01, 2012

Jan. 31 (Bloomberg) -- Apple Inc.’s Tim Cook, in his first major hire since becoming chief executive officer, picked the head of the largest U.K. consumer-electronics retailer to run the iPhone maker’s chain of stores and oversee global expansion.

John Browett, 48, will start at Apple in April as a senior vice president, reporting to Cook, the Cupertino, California- based company said in a statement today. The appointment ends a more than seven-month search to replace former retail head Ron Johnson, who last year left what is now the world’s most valuable company to lead JC Penney Co.

Browett has been CEO of Dixons Retail Plc since 2007 and previously helped turn U.K. grocery-store chain Tesco Plc into a leading online food seller. He will head Apple’s 361-store business as it focuses on growth outside the U.S, including the fastest-growing market of China. Of Apple’s 40 locations opening this year, 30 will be abroad.

“International growth is a key component of their strategy going forward,” said Robert Gregory, research director of Planet Retail, an industry research company based in London. “He’ll be spending quite a bit of time in the Asian markets because long term that’s where there is going to significant growth for Apple’s retail stores.”

Apple Ties

Dixons, which is similar to U.S. retailer Best Buy Co., sells Apple products, along with televisions, cameras and video- game systems. As the CEO, Browett forged a close relationship with Apple, including striking a deal to be able to sell the iPad ahead of rival electronics retailers in the U.K. He also implemented new store formats and added customer service areas similar to the Genius Bar at Apple stores to provide technical support and help with repairs and upgrades.

“Our retail stores are all about customer service, and John shares that commitment like no one else we’ve met,” Cook, who succeeded Apple co-founder Steve Jobs as CEO in August, said in the statement. “We are thrilled to have him join our team and bring his incredible retail experience to Apple.”

Dixons, which operates the PC World and Currys stores, said in a separate statement that Browett would be replaced by Sebastian James, who has been with the company since 2008, most recently as group operations director. Browett will leave Dixons on April 20, according to the company.

Before joining Dixons, Browett had been at Tesco for almost a decade, including time running the supermarket’s online operations and expanding into markets such as South Korea with groceries, consumer electronics, books and CDs. As the CEO of Tesco.com, he built a grocery-delivery service that fought off rivals inspired by web startups such as Webvan Group Inc., which later went out of business.

‘Rising Star’

Browett is a graduate of the University of Cambridge in the UK and has an MBA degree from the University of Pennsylvania’s Wharton School in Philadelphia, according to Apple’s statement. Browett, who also previously worked for the Boston Consulting Group, had been touted as a possible Tesco CEO, analysts at Teather & Greenwood said at the time.

“He was well regarded at Tesco,” said Nick Coulter, a food analyst at Nomura, calling him a “rising star.”

Dixons’ shares have dropped 81 percent since Browett became CEO, including a 57 percent decline in 2011. Apple has more than doubled in that period. Dixons had gained 55 percent this year until yesterday, after the retailer said profitability improved as it sold more products at full price during the Christmas period.

Today’s announcement sent Dixons’ shares down 7.5 percent to 14.10 pence in London. Apple rose 0.6 percent to $455.80 at 2:53 p.m. in New York.

Outside Hire

In selecting Browett as Apple’s second retail head in more than a decade, Cook decided to go outside Apple’s ranks. A team of Johnson’s main deputies had helped run Apple’s stores during the holiday rush, including Jerry McDougal, the vice president of retail, and Steve Cano, the global head of store personnel. Jobs also went outside the company when he hired Johnson from Target Corp. to build the first stores.

More than a decade later, Apple generates more sales per square foot than luxury chains such as Tiffany & Co. The stores had $6.1 billion in sales in the quarter ended Dec. 31, up 59 percent from the year-earlier period. Mickey Drexler, the chairman and CEO of J. Crew Group Inc., serves on Apple’s board.

“Retail is very important to Apple as a large proportion of their shipments, especially the iPad, is going through their own retail stores,” said Tim Coulling, an analyst at U.K. researcher Canalys.

China Expansion

Apple is using the stores to fuel an expansion in China, where outlets in Shanghai, Beijing and Hong Kong are among the company’s most trafficked locations.

“It’s not surprising that they found someone from outside the U.S., given that they’re going for quite significant growth in Europe and Asia-Pacific,” said James Cordwell, an analyst at Atlantic Equities Service in London. Apple’s said last week that sales in the Asia-Pacific region rose 54 percent to $7.7 billion in the quarter ended Dec. 31.

Part of Apple’s strategy in expanding outside the U.S. will be to keep putting stores in heavily trafficked areas, even if it means paying the highest real-estate prices. Its stores on Fifth Avenue in New York, near the Louvre in Paris and on Regent Street in London attract hundreds of people who line up for introductions of new iPads or iPhones.

Store Traffic

Store traffic reached 110 million visitors in the holiday period -- almost equivalent to the population of Mexico.

The success can have its drawbacks. Apple faced angry crowds at one of its Beijing locations after shoppers grew restless waiting for the new iPhone 4S to go on sale. Some people threw eggs at the store when it didn’t open.

Apple reported quarterly profit last week that more than doubled to $13.1 billion, boosted by record holiday sales of the iPhone, iPad and Mac. The results helped push the stock to a record.

Cook has been making his mark on other parts of the management team. He promoted Eddy Cue to senior vice president last year. The executive oversees iTunes and the App Store. The company also hired Todd Teresi to lead its iAd mobile- advertising network and report to Cue.

--With assistance from Amy Thomson and Sarah Shannon in London and Cornelius Rahn in Frankfurt. Editors: Nick Turner, Anand Krishnamoorthy, Jeffrey Tannenbaum.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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