China, which overcame the impact of the epidemic earlier, was described as a “key haven” for many US companies. China’s economic recovery in the second quarter helped them hedge against sales losses in the US.
In reporting financial results for the second quarter of this year, presidents of some of the best-known US brands cited China’s business as helping them through what could have been a much worse period.
Skechers, the third-largest U.S. sneaker brand, revealed the company’s overall sales fell 42 percent in the second quarter from a year earlier, but were up 11.5 percent in China. Retail sales in China recovered faster than most expected from April to June, falling just 3.9 percent from a year earlier. US retail sales, on the other hand, were down 8.1 percent year-over-year in the second quarter.
Despite the current intensifying political tensions between the US and China, US branded retailers selling in China have been virtually unaffected and can benefit from China’s economic recovery.
Luxury sales are the area where the contrast between China and the world is greatest. LVMH revealed that the company’s luxury revenue fell 38 percent in the second quarter from last year, yet rebounded 65 percent in China. Consumers are mainly choosing to buy in the country because of travel restrictions.
Kering SA, the parent company of luxury brand Gucci, was in a similar situation, with luxury sales down 43 percent in the second quarter from a year earlier, and up 40 percent in China.
While the US and other Western countries are struggling to contain a new outbreak and restart their economies, China has the epidemic largely under control. Many analysts are predicting a return to positive retail sales growth in China in the third quarter. In April, the Economist Intelligence Unit (EIU) argued that China would not achieve positive retail sales growth until 2021. Now the agency is revising its forecast and sees year-on-year growth of 1 percent in the third quarter of this year and 2.4 percent in the fourth quarter.
US coffee shop chain Starbucks’ second-quarter retail sales in China were down 19% year-over-year, but still below the global revenue loss (-38%).
Yum China, which operates fast-food brand, KFC, also revealed that the recovery has been uneven, with the market performing better in eastern China than elsewhere. The company’s operating income fell 11 percent in the second quarter.
In the apparel and footwear sector, high-end brands fared relatively better, with Canadian athleisure brand Lulu Lemon doing better in the second quarter. Canadian athleisure wear brand Lululemon saw only single-digit sales growth in China in April this year, but has grown 20% year-over-year in recent weeks.
Nike Group’s sales in China also returned to positive growth in the year to May 31, up 1 percent from last year, helping to offset a 38 percent decline in the company’s global revenue. Nike’s chief financial officer revealed that retail sales in China saw strong double-digit growth in May.
Finally, while overall car sales in China have not fully recovered, Tesla doubled its China sales to 48,384 units in the first half of the year year year-over-year through the production of its Model 3 electric model in Shanghai. Although Tesla’s U.S. factory was forced to close at one point, the company still posted a $104 million profit in the second quarter, with the Chinese market playing a key role.
