Consumer giants from Starbucks to General Mills have one big sales problem: China
BEIJING — A theme emerging in the latest slew of U.S. companies' earnings reports is a drag from the China market.
The Chinese economy — home to more than four times the population of the U.S. — has attracted multinational corporations for decades given its large, fast-growing market. But slower growth and intense local competition, amid tensions with the U.S., are now weighing on corporate earnings.
«Consumer sentiment in China is quite weak,» McDonald's chairman, CEO and director Christopher Kempczinski, said of the quarter ended June 30.
«You're seeing both in our industry and across a broad range of consumer industries, the consumer being very, very much deals seeking,» he added. «In fact, we're seeing a lot of switching behavior in terms of just consumers, whatever is the best deal, that's where they end up going.»
McDonald's said sales for its international developmental licensed markets segment declined 1.3% from a year ago. The unit includes China, for which the company indicated sales declined but did not specify by how much.
Chinese companies have also struggled. Nationwide retail sales grew by just 2% in June from a year ago.
In the mainland China stock market, known as A shares, earnings likely hit a bottom in the first quarter and may «pick up mildly» in the second half of the year, Lei Meng, China equity strategist at UBS Securities, said in a July 23 note.
Several U.S. consumer giants echoed the downward trend in their latest earnings reports.
Apple said Greater China sales fell by 6.5% year-on-year in the quarter ended June 29. Johnson and Johnson said China is a «very volatile market» and a major business segment that's performed below expectations.
After a «strong start» to the year, General Mills CFO
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