2023-05-10 17:45:59
© Reuters. Pepsi bottles in a store in Pasadena, California, USA 7/11/2017 REUTERS/Mario Anzuoni
(Reuters) – Several U.S. companies, including PepsiCo (NASDAQ:), Qualcomm and Cummins (NYSE:), struck a cautious tone on growth prospects in China, blaming what they said was a slower-than-expected recovery after that the country lifted health restrictions in December.
China’s economy grew more than expected in the first quarter, but comments from US companies with substantial operations in China suggest that demand has not returned to pre-pandemic levels.
In April, imports from China contracted sharply, underscoring signs of sluggish domestic demand, as a shaky housing market, concerns over job stability and global economic uncertainty kept buyers cautious.
“China is improving, but slowly,” PepsiCo chief financial officer Hugh Johnston told Reuters late last month.
“We grew below single digits in China, which was previously a double digit growth market for us before the pandemic. I think it will take a few quarters before it really gets back to where it was before,” said Johnston.
Rival Coca-Cola echoed the sentiment.
Starbucks, the world’s biggest coffee chain, reported a 3% increase in comparable sales in China in its second quarter, but said growth in average weekly sales will be more moderate in the second half of the year.
“Consumer confidence remains weak and shaken as many Chinese faced job and wage cuts in 2022 and 2023 Chinese New Year bonuses were low,” said Shaun Rein, managing director of China Market Research Group.
“The result is that Chinese are flocking to cheaper alternatives: think Luckin Coffee over Starbucks, Anta over Adidas. houses.”
Still, a quick recovery in domestic travel demand supported hotel sales. Marriott International reported better-than-expected quarterly results last week, as revenue per available room in China rebounded to 2019 levels.
A Accor (EPA:), Europe’s largest hotel group, also said that China saw a clear pick-up in the quarter, especially after the Lunar New Year holidays.
Apple (NASDAQ:) said in its latest quarterly report that sales in China were down 2.9%. Chipmaker Qualcomm, which predicts results for the current quarter below estimates, said: “We have not seen evidence of a significant recovery (in China) and we are not incorporating improvements into our planning assumptions.”
Cummins said truck makers in China are ramping up production to replenish inventories, but the company “is not yet seeing signs of sustained improvement”.
GM, which faces stiff competition in China’s crowded auto market, said it doesn’t expect its revenue in the country to improve until the second half.
“China will be a growth engine for many multinational companies, but it will not have the high growth rates that many analysts predict,” said Rein of China Market Research.
(Por Aishwarya Venugopal, em Bengaluru)
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