What’s Going On Here?Nestlé announced better-than-expected first-quarter sales on Thursday, as the world’s gradual economic recovery finally gave the Swiss giant the break it’s been craving. What Does This Mean?Get yourself a consumer goods company that can do both: the household snacks that stuck-at-home folks needed to endure their fifteenth lockdown in a row, and the supplies that Asian bars, restaurants, and shops needed to fling their doors open once again. That one-two punch drove Nestlé’s underlying sales – i.e. disregarding currency swings and new mergers and acquisitions – almost 8% higher than the same time last year. That was more than twice the growth analysts were expecting, and investors were cool with it: they sent Nestlé’s stock 3% higher. Why Should I Care?For markets: Extravagance is the new in-travagance. Nestlé’s uptick in sales is just one of several signs that a consumer spending boom is in full swing. Here’s another one: professional investors have been noticing a trend toward more upscale products as shoppers spend the cash they’ve been saving over the last year, particularly among things like cosmetics, spirits, and clothing. Case in point: luxury brand Hermès and spirits firm Pernod Ricard reported an uplift in sales on Thursday.
The bigger picture: Chinese customers are spending big. Strong results aren’t the only thing Nestlé, Hermès, and Pernod Ricard have in common: all three seriously benefited from robust consumer spending in China (tweet this). That’ll happen when Chinese consumers are given the freedom to shop as they please – a luxury that still isn’t being afforded to many Europeans and Americans. Companies that aren’t big in China, then, might be feeling a pang of regret. Or regrette, in Renault’s case: the French carmaker reported worse-than-expected earnings on Thursday, even as other carmakers like BMW and Daimler – both of which have big businesses in China – beat expectations. |