Report: China is still a growth story for retailers

Dive Brief:

Reuters has taken a close look at 34 publicly traded companies that have apprised investors of their operations in China and found that retail and food companies continue to thrive there despite concerns of a slowdown.
Of the 34, 18 are consumer-focused companies, and 13 of them said Q4 and/or full-year China sales grew, while three said sales fell and two said sales were flat.
Six of the eight industrial companies fared less well, with six reporting falling sales or other weakness.

Dive Insight:

This Reuters report is further evidence that China’s economy is shifting from a manufacturing based one to one fueled more by consumption. Food companies like Starbucks and McDonald’s appear to be shrugging off the jitters found in the markets, as sales increase and expansions are on track.

Retail sales are not seeing the growth they once did, but remain steady. Reuters calls December retail sales in China “disappointing” yet still “strong” at 11.1%.

Apple CFO Luca Maestri had told Reuters earlier that the economic softness in China is “something that we have not seen before,” but CEO Tim Cook said he is confident in the Chinese consumer because the country’s middle class population is still growing.

And while there’s much talk of marketplace giants like Alibaba and JD.com expanding into rural areas, where income remains low but retail penetration is also low, it’s China’s second-tier cities that may provide the most growth for retailers there.

Savvy retailers aren’t likely taken off guard by the major upheaval in the markets like those last month or in August, Keith Anderson, VP of strategy & insight at Profitero, told Retail Dive earlier this year. That’s in part because, like many economists and businesspeople, retailers familiar with the reality there don’t buy the Chinese government’s official growth estimates or other statistics, he says.

Certainly, growth has tempered. The fast-moving consumer goods (FMCG) retail market, for example, grew 5.4% in 2014 compared with 11.8% in 2011, according to Bain’s China Shopper Report released last October. And luxury retailers were reporting slower spending by Chinese consumers last year, well before last week's freak show.

But, says Anderson, “there definitely is a rising middle class, so there’s a definite growth story there.”