Actually, what they’ll do is refurbish the damaged watch and turn around and sell it back at a discount while still making a profit. Assuming the customer buys another watch following the return, they get to record revenue for three watches (two new, one refurbished).
Yeah, I mean obviously they’re not just gonna throw out the returned watches. They will refurbish them and sell them at a discount or use them as warranty or AppleCare+ replacements. Processing the return and replacing the damaged components still costs money. And costs are always going to be passed on to the consumer so the business can stay profitable. That’s just how business works.