China’s reopening boosts sales for US companies, but not nearly as fast as hoped
Cold Brew spring in Beijing… After years of strict zero-Covid policies and lockdowns, China is again open for business. Last quarter consumers returned to spots like China's 6.2K Starbucks and Shanghai Disney Resort, boosting sales for US corporations. Lots of companies — including MGM Resorts, Procter & Gamble, KFC parent Yum Brands, Starbucks, and Disney — said that the China rebound lifted their latest earnings. But it didn’t help everyone:
iDidn’t benefit: Apple's China sales shrank last quarter from a year earlier, foiling hopes that demand would bounce back after restrictions were lifted.
Mascara tears: Estée Lauder stock plunged this month after the beauty behemoth gave a weak outlook, saying Asia demand didn’t come back as strong as expected.
Travel light: Though international Chinese tourism is back, it’s still much lower than prepandemic levels. Many are traveling closer to home (think: MGM’s Macau casinos).
Not so snappy… So far China’s recovery has been meh. April economic data released this week disappointed, with industrial production and retail sales growing less than forecast. Meanwhile, the youth-unemployment rate last month surpassed 20% for the first time. That’s far from inspiring, since younger consumers are key to fueling spending. Five months into the reopening, most companies are still waiting to reach prepandemic sales levels.
The Chinese consumer is key… As the second-most-populous country with a growing middle class, China holds a lot of weight for multinational corps. Spending there is even more important to US companies now that Americans are tightening their budgets. The highly anticipated rebound has underwhelmed so far, yet some analysts predict a summer of “revenge spending.”