From Nestle to Procter & Gamble, and then to Starbucks, the entire consumer industry is showing signs of weakness, and the performance of consumer giants in the Chinese market is generally declining. As disposable income is constrained, consumers are increasingly focused on reducing consumption or turning to lower-priced commodities.
Consumer slowdown is sweeping through the entire industry. American consumer giants have collectively performed poorly and have been generally defeated in the Chinese market.
From Starbucks to Nestle, and even to beauty behemoths like Procter & Gamble and L'Oreal, second-quarter revenue growth has declined and is generally below expectations. Starbucks' same-store sales fell by 3%, L'Oreal's same-store sales growth slowed to 5.3%, and both Nestle and Procter & Gamble's revenue growth were lower than expected.
Among them, consumer giants have generally performed poorly in the Chinese market. Starbucks' same-store sales in China fell sharply by 14%, L'Oreal's revenue declined by more than 2% in China and other North Asian regions, and Procter & Gamble's sales in Greater China fell by 9%.
Behind the poor performance, the overall consumer industry is showing signs of weakness. As disposable income for consumers is restrained, more and more people focus on reducing consumption or turning to lower-priced goods.
Poor performance has led to a collective defeat in the Chinese market.
This U.S. earnings season has seen generally poor results for consumer stocks.
The world's largest coffee chain, Starbucks, saw revenue decline by 1% year-on-year to $9.11 billion, less than the expected $9.24 billion. Same-store sales fell by 3%, including a 2% decline in same-store sales in the United States for the second consecutive quarter, and a 14% decline in same-store sales in China.
The world's largest beauty giant, L'Oreal, performed poorly, with same-store sales growth of 5.3%, significantly below the expected growth of 9.4% for the first quarter. Same-store sales in North Asia, including China, fell by 2.4%, four times the expected decline as predicted by analysts.
Procter & Gamble is also struggling, with organic sales growth of only 2%, far below the market's expected 3.4%, the slowest growth since 2018, and organic sales in Greater China fell by 9%.
In terms of food, global food giant Nestle reported organic revenue growth of 2.1% in the first half of the year, lower than expected growth of 2.52%, with organic revenue growth in the Chinese market at 1.6%, lower than expected growth of 3.51%, and even a negative growth of 0.1% in the North American market.
Signs of weak consumer demand are evident.
Poor performance by restaurant and consumer giants is largely due to consumers' restrained disposable income.
Last Friday, the University of Michigan's Consumer Sentiment Index for July fell to 66.4, the lowest since November last year. Some analysts point out that high prices continue to weaken people's consumption power, especially for low-income groups.
Mark Schneider, CEO of Nestle, said in a conference call:
"Consumer moods are relatively low now, and the company has observed consumers seeking discounts in the US, Europe, and China."
Lamb Weston, a supplier of potatoes to restaurants such as McDonald's and Chick-fil-A, warned:
"Demand has accelerated in recent months and may continue into the next fiscal year."
Max Gokhman, Senior Vice President of Franklin Templeton Investment, pointed out that the data shows that consumers are beginning to slow down, with loans for low-income consumers increasing and expenditures decreasing. Goldman Sachs analyst Natasha Dragicevich previously warned clients that consumer earnings season started poorly, with little positive surprise so far, and both high-end and low-income consumer spending has been weak.