retail industry

From condoms to cosmetics, China sales grow as lockdowns end

Reuters

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From condoms to cosmetics, China sales grow as lockdowns end

SHOPPING. People wait in line to enter a store at the Sanya International Duty-Free shopping complex in Sanya, Hainan province, China, January 25, 2023.

Alessandro Diviggiano/Reuters

Resilient sales in China would be a relief for companies struggling with higher energy and wage costs, particularly in Europe

The world’s top consumer and luxury goods companies have seen sales of everything from cosmetics to condoms grow in China since Beijing ended strict COVID-19 curbs, another sign that the world’s No. 2 economy is reviving after the pandemic.

Upbeat comments on Wednesday, March 1, from Reckitt Benckiser, Nivea maker Beiersdorf, Moncler, and Puma came after data showing China’s factory sector grew in February at the fastest pace in more than a decade.

Beiersdorf chief executive Vincent Warnery said the company had seen the first signs of recovery in China and the global travel retail business, fueled by the country’s reopening.

“After a very volatile January, with traffic still heavily impacted by the release of COVID restrictions in December, we see a clear turnaround in retail sales starting in February,” he said in a briefing for analysts.

“China is back to growth, not only online but also in brick and mortar.”

US toothpaste maker Colgate-Palmolive executives said last week at an industry conference that travel in China is back to pre-pandemic levels and that it expects strong improvement in coming months. Colgate recently introduced new premium whitening toothpastes in China targeting affluent city dwellers.

“The second half of the year will be far better,” said Yves Briantais, a marketing executive for Colgate’s Asia-Pacific region.

Procter & Gamble, whose second largest market is China, is carefully watching its high-end SK-II skincare line as China reopens, said finance chief Andre Schulten at the conference.

Beiersdorf’s Warnery said growth in its premium La Prairie and cheaper Eucerin and Nivea skincare ranges was likely to be driven by Chinese demand. Tourism from China was helping sales in neighboring Macau, Hong Kong, Taiwan, and even Japan, he added.

Reckitt Benckiser, which makes Nurofen tablets, cold remedy Lemsip, and Durex, saw a pickup in China after a decline in volumes because of lockdowns.

“I have no doubt that the intimate wellness [business] in China is going to perform well,” said interim chief executive Nicandro Durante, referring to the division which includes KY Jelly and Durex condoms.

The upbeat comments echo those of other executives during earnings season, particularly from luxury labels which are banking on a strong rebound fueled by Chinese shoppers drawing on savings built up during pandemic lockdowns.

Upmarket US companies including Coach handbag maker Tapestry and Ralph Lauren last month said demand had started picking up in China.

“We certainly have seen a meaningful trend change in Greater China,” Tapestry chief financial officer Scott Roe said last month, while Ralph Lauren executives said they were seeing traffic at its brick-and-mortar stores surge.

“We expect China to come back resiliently in the quarter,” Ralph Lauren’s operating chief Jane Nielsen said.

Resilient sales in China would be a relief for companies struggling with higher energy and wage costs, particularly in Europe, at the same time as rising prices of food, energy, and rents are forcing consumers to be pickier about what they buy.

Stronger signs that Chinese factories are rebounding after COVID restrictions were lifted late last year could also temper an expected downturn in the global economy, as the US Federal Reserve stays on its higher-for-longer interest rate path.

US retailer Walmart, which operates nearly 400 retail and wholesale stores in China, reported strong traffic in its stores since reopening.

“We have seen people returning more to stores, which is what you would expect, and also wanting to celebrate events,” Judith McKenna, CEO of Walmart International, said on a call last week.

Growing confidence

Retailer shares rose across global equity markets on Wednesday, even as broader indexes gave back gains on more concerns about inflation.

Reckitt shares rose 1.5% in London, while shares in Moncler rose 3.3% after the Italian luxury group, known for its warm puffer jackets, reported a strong start to the year.

Chief marketing and operating officer Roberto Eggs told a call with analysts on Tuesday evening, February 28, the company saw double-digit sales growth in China before and after the Lunar New Year holiday in January.

“We always look at the results two weeks before and one week after the Chinese New Year and the impact is really positive,” he said.

Adding to growing confidence in the luxury sector, the company said it had seen no adverse effects on demand from a 10% price increase at the start of the winter season.

Reuters reported in February LVMH’s top fashion brand Louis Vuitton was expected to increase prices in China by as much as 20%. – Rappler.com

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