Consumer giants collectively disappoint in performance!

The slowdown in consumption has swept through the entire industry, with American consumer giants collectively disappointing in performance, experiencing a widespread "defeat" in the Chinese market.

From Starbucks, Nestlé, Procter & Gamble to L'Oréal and other beauty giants, revenue growth in the second quarter has declined and generally fallen short of expectations. Starbucks' same-store sales dropped by 3%, L'Oréal's same-store sales growth slowed to 5.3%, while Nestlé and Procter & Gamble's revenue growth were below expectations.

Among them, consumer giants have generally seen a decline in performance in the Chinese market, with Starbucks China's same-store sales plunging by 14%, L'Oréal's revenue in China and other North Asian regions dropping by over 2%, and Procter & Gamble's sales in Greater China declining by 9%.

Behind the poor performance, the overall consumer industry shows signs of weakness, as consumer discretionary spending is restrained, leading to a growing focus on reducing consumption or turning to lower-priced goods.

Collective Disappointment in Performance, Widespread "Defeat" in the Chinese Market

This earnings season in the U.S. stock market, consumer stocks have generally performed poorly.

The world's largest coffee chain Starbucks saw its revenue decline by 1% year-on-year to $9.11 billion, falling short of the expected $9.24 billion. Same-store sales dropped by 3%, with same-store sales in the U.S. declining by 2% for two consecutive quarters, and same-store sales in China plummeting by 14%.

The largest global beauty giant L'Oréal performed poorly, with same-store sales growth of 5.3%, slowing down from the 9.4% growth in the first quarter, and same-store sales in North Asia, including China, dropping by 2.4%, about four times the analysts' expectations.

Procter & Gamble is also struggling, with organic sales growth of only 2%, far below the market's expected 3.4%, marking the slowest growth rate since 2018, and organic sales in Greater China declining by 9%.

In the food sector, the global food giant Nestlé saw organic revenue growth of 2.1% in the first half of the year, lower than the expected 2.52%, with organic revenue growth in the Chinese market at 1.6%, below the expected 3.51%, and even negative growth of 0.1% in the North American market.

Signs of Weak Consumer Demand Evident

Behind the poor performance of restaurants and consumer giants lies largely the restraint on consumers' discretionary spending.

Last Friday, the University of Michigan's Consumer Sentiment Index for July fell to 66.4, hitting the lowest level since November last year, with some analysts pointing out that high prices continue to weaken people's purchasing power, especially for low-income groups.

Mark Schneider, CEO of Nestlé, said in a conference call:

"Currently, consumer sentiment is relatively low, and the company observes consumers seeking discounts in the U.S., Europe, and China."

Lamb Weston, one of the potato suppliers for restaurants like McDonald's and Chick-fil-A, warned:

"Demand has 'accelerated' downward in recent months and may continue into the next fiscal year."

Max Gokhman, Senior Vice President at Franklin Templeton Investments, pointed out that data shows consumers are starting to slow down, with low-income consumers increasing loans and reducing spending. Goldman Sachs analyst Natasha Dragicevich had previously warned clients that the consumer earnings season started poorly, with few positive surprises so far, and both high-end and low-income consumption are weak. **