Consumer giants report steep China sales drop on lockdowns

SHANGHAI: Global consumer giants selling everything from jewellery to t-shirts saw sales in China tumble in their most recent quarter as zero-covid lockdowns hammered consumer demand in the world’s second-largest economy.

Starbucks Corp was particularly hard hit, reporting a more than 40% drop in sales in the quarter ended July 3.

The company began the period with about a quarter of its Chinese stores shut due to Covid policies, and its 940 locations in Shanghai were locked down for about twothirds of the financial quarter.

Luxury goods also bore the brunt of Covid chaos. Burberry Group, Richemont, Adidas AG each reported at least a 35% drop in their most recently reported quarterly results.

Kering SA, which owns Gucci, saw a more than 30% drop. Yum China Holdings Inc and Uniqlo fared slightly better, with declines of about 13% each.

For many brands, the most recent quarter captures the unprecedented two-month shutdown of the financial hub of Shanghai, which came to exemplify the lengths Chinese authorities would go to in order to stamp out the virus.

While there’s been some pick up in demand since the worst of the city’s curbs were eased, flare-ups in other parts of the country have been met with harsh containment measures, damping consumer sentiment and hurting retail sales.

It’s stoking concerns about the outlook for China’s economy, which is also facing a property crisis, record-high youth unemployment and a severe drought that’s led to power cuts.

Leadership has privately acknowledged the country’s annual growth target of about 5.5% is not achievable.

Starbucks’ chairwoman for China, Belinda Wong, described the recent quarter as “pretty difficult,” with mobility restrictions and lockdowns implemented faster and eased more slowly under zero-covid, and the company expects its recovery will be non-linear.

Still, the global giants insisted they had long-term confidence in the world’s biggest consumer market. Starbucks’ Wong said she’s “super confident” on China, where growth would accelerate once all Covid restrictions are lifted.

Adidas chief financial officer Harm Ohlmeyer said the company will continue to invest in the market as they “remain committed to China and convinced about its potential for the years to come”. — Bloomberg