China’s COVID turmoil is showing in corporate earnings
Any company doing business in China has had a rough quarter.
Throughout September and November, Chinese authorities imposed strict lockdowns and other COVID control measures in a futile attempt to contain outbreaks across the country.
Then, in December, the Chinese government fast roll closures and other social distancing measures. Those policy changes were then followed by a record COVID-19 outbreak as the disease spread through Chinese cities, with some officials estimating daily case count in the tens of millions.
Now, the economic damage of that COVID chaos is showing in earnings reports, whether from production disruptions from shuttered factories or falling sales as consumers. Use at home to recover or protect yourself. However, companies are hoping that the reopening of China means the worst is over for their revenue.
China’s COVID-19 outbreak may be easing, though health officials are still waiting to see if cases can rebound after the Lunar New Year holiday. The Chinese Center for Disease Control and Prevention said on Wednesday that number of severe cases of COVID among hospitalized patients is down 89% from its peak in early January.
Official Chinese data puts the total number of deaths from COVID at just over 84,000, but that is likely a low number. A model from UK-based research firm Airfinity estimate The total number of deaths from COVID as of December 1 is 1.19 million.
On Thursday, Apple reported its first quarterly revenue decline since 2019. The US-based tech giant has reported quarterly revenue of $117.2 billion in the most recent quarter, the annual decline was 5%.
on a earnings call, Apple CEO Tim Cook blame COVID as sales fell, falling short of analysts’ expectations. Cook said “COVID-19 related challenges” disrupted supply of the iPhone 14 Pro and iPhone 14 Pro Max for most of December, resulting in extended delivery times.
Last November, Foxconn, Apple’s main supplier, impose mobile control in their iPhone factory in Zhengzhou to prevent a new outbreak. Factory workers, which can number up to 300,000, are prohibited from leaving the site and eating in common areas. Many workers run away again to their homeland, while those who stay was frustrated with COVID measures and feared getting infected. At the time, Apple warned that factory interruption may affect shipping of the latest iPhone models during the holidays.
Today, Apple thinks these disruptions are over. “Production is now back where we want it to be,” Cook said on Thursday.
The company also said Beijing’s COVID control measures have affected sales in China, one of the company’s most important consumer markets. However, the company is optimistic that demand will recover as the country reopens. Cook told analysts that Apple stores reported increased traffic in early December, after China lifted COVID controls. “That also entails demand,” Cook told analysts.
Shares of Apple fell 3.7% in after-market trading.
Starbucks reported $8.7 billion on quarterly revenue on Thursday, a record for the coffee company and up 8% year-over-year. But the company’s results were dragged down by slumping demand in China, Starbucks’ second-biggest market.
Coffee company report 5% increase in total global store sales. But sales in China fell 29% as consumers stayed home. The drop was even more severe in December — the start of China’s record COVID-19 surge — with sales down 42% compared to December 2021.
China’s decline was so great that it offset strong growth elsewhere in the world. on the company earnings callStarbucks CEO Howard Schultz noted that the company has seen strong sales growth in all international markets “except China” and that the company will report sales International sales double-digit growth if China is excluded.
However, the coffee company also believes the worst is behind. The country’s reopening, Schultz said, “places the country to restore economic, social and consumption growth to pre-COVID”. “The huge consumer demand in China is waiting to be unleashed,” he said.
Shares of Starbucks fell 1.8 percent in after-market trading.
Companies Estee Lauder reported $4.62 billion sales in the most recent quarter, down 17% year over year. The company blames both the COVID-19 lockdown and rising infections in China for denting its retail sales, especially in China’s tourist hotspot Hainan.
The company said these COVID-related disruptions “resulted in prolonged store closures” and “caused a tight inventory of some retailers who had placed orders before in anticipation of a return to travel.” was then delayed.”
However, the cosmetics company hopes that the return of Chinese tourists will aid the company’s recovery. Fabrizio Freda, CEO of the company, said: earnings call.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter that examines what leaders need to succeed. Sign up here.