© Reuters. FILE PHOTO: Pepsi bottles in a grocery store in Pasadena, California, US, July 11, 2017. REUTERS/Mario Anzoni/File Photo
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(Reuters) – Several US companies, including PepsiCo (NASDAQ:), Qualcomm (NASDAQ:), and Cummins (NYSE:), have issued a cautious note about growth prospects in China, blaming what they said was a slower-than-expected recovery after The country lifted COVID restrictions in December.
The Chinese economy grew faster than expected in the first quarter, but feedback from US companies with large operations in China suggests demand has not returned to pre-pandemic levels.
In April, China’s imports contracted sharply, confirming signs of weak domestic demand as the real estate market deteriorated, and concern about job stability and global economic uncertainty kept shoppers on edge.
“China is getting better, but slowly,” PepsiCo chief financial officer Hugh Johnston told Reuters late last month.
“It grew mid-single digits in China, which was previously a double-digit growth market for us before the pandemic. I think it’s going to take a few quarters before it really goes back to where it was before.”
Rival Coca-Cola (NYSE) echoed similar sentiments.
Starbucks (NASDAQ: ), the world’s largest coffee shop, reported a 3% increase in China comparable sales in the second quarter, but said growth in average weekly sales will be at a more moderate pace in the second half of the year.
Cosmetics manufacturer Estee Lauder (NYSE::Cos Inc) last week forecast weaker sales and profits for the year than previously expected, blaming a slow recovery in duty-free and travel destinations including China.
“Consumer confidence remains weak and shaky as many Chinese faced job and salary cuts in 2022 and Chinese New Year bonuses in 2023 were low,” said Xun Ren, managing director at China Market Research Group.
The result is the decline of the Chinese: think loken coffee (Outside the cabin 🙂 on Starbucks, Anta on Adidas (Outside the cabin:). (Consumers) are looking for good value, cheap product lines and parts for expensive items like cars and homes.”
However, a rapid recovery in demand for domestic travel supported hotel sales.
Marriott International (NASDAQ:) reported better-than-expected quarterly results last week as revenue per available room in mainland China recovered to 2019 levels.
The largest hotel group in Europe Accor (EPA:) also said that China saw a clear acceleration in the quarter, especially after the Lunar New Year holidays.
There is no sustainable improvement
Apple Inc (NASDAQ:) said in its latest quarterly report that sales in China fell 2.9%. “We haven’t seen evidence of a meaningful recovery (in China) and we don’t include improvements in our planning assumptions,” said chipmaker Qualcomm, which forecast results for the current quarter below estimates.
Truck engine maker Cummins said Chinese truckmakers are seeking to ramp up production to restock inventory, but the company “does not yet see signs of continued improvement.”
Automaker General Motors (NYSE: ), which faces stiff competition from homegrown brands in China’s crowded auto market, said it doesn’t expect an improvement in its income from the country until the second half.
“China will be a growth engine for many multinational companies, but it will not be at the high growth rates that many analysts expect,” said Ryan of China Market Research.