Wrapup 1: Big companies see no China recovery soon, adding to trade tensions gloom

Canada Goose Holdings

06/02/2025 16:07

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      Companies say consumer demand still weak in China 
    

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      Carlsberg sees Chinese beer market 4-5% smaller in 2024
    

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      Pernod says Chinese New Year demand disappointing
    

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      China weakness, trade war worries cloud outlook 
    

  
    By Dominique Patton and Emma Rumney
       PARIS/LONDON, Feb 6 (Reuters) - Pernod Ricard and
Carlsberg warned on Thursday they see few signs of a pick-up in
consumer demand in China, the world's second-biggest economy,
adding to a gloomy outlook for 2025 as executives try to
navigate growing global trade tensions.     
    Weak consumer spending in China, which is grappling with
youth unemployment and a real-estate crisis, has been a major
concern for industries including luxury goods, consumer products
and clothes manufacturers over the past year.
    In the second half of 2024, Beijing rolled out multiple
rounds of stimulus to lift the property sector from a prolonged
slump, but executives see no significant recovery.
    Carlsberg  CARLb.CO  CEO Jacob Aarup-Andersen said demand in
its largest market remained subdued last year, driving down
volumes, and that challenges were expected to continue.
    "We don't expect a marked change in the (Chinese) economy.
That's too early to say," he told analysts on a call.
    The Danish brewer estimated the Chinese beer market shrank
between 4-5% in 2024, with sales very weak in restaurants, bars
and other venues there and in other Asian markets.
    The prolonged downturn in China adds to the challenges
facing companies around the world as they assess the potential
impact of U.S. President Donald Trump's trade measures. 
    He has imposed tariffs of 10% on imports of Chinese goods,
threatened import tariffs on Mexican and Canadian goods of 25%
from March 1 and put Europe on notice, stirring worries that a
trade conflict will fuel inflation and harm the global economy.
    Carlsberg's Aarup-Andersen said wholesalers and retailers
had stocked up ahead of the Chinese Lunar New Year holiday,
which was encouraging. The eight-day holiday ended on Tuesday.
    "Let's see how sell-out goes," he said referring to consumer
sales.
    But Pernod Ricard  PERP.PA  said early signs pointed to a
very soft Chinese New Year and a significant drop in gifting.
    The second-largest western spirits maker pulled forward its
half-year results to report steep sales declines of 25% in China
and 7% in the United States, warning of a low single-digit sales
decline this year when it had previously expected modest growth.
    Pernod's deteriorating outlook was largely attributed to
Chinese duties on cognac, which Beijing imposed in response to
European Union tariffs on electric vehicle imports. Weakness in
Asian travel and retail exacerbated by the political situation
in South Korea was also cited as a factor. 
    The company now also faces the threat of U.S. tariffs on
Mexico, Canada and the EU, which would affect products ranging
from Irish and Canadian whiskies like Jameson to tequila and
agave brands like Codigo 1530. 
    Pernod said such intense geopolitical uncertainties had
forced it to revisit its guidance.
    
    CHOPPY CHINA
    Cosmetics giant L'Oreal  OREP.PA  is due to report results
later on Thursday. 
    Canada Goose Holdings  GOOS.TO   GOOS.N  also blamed choppy
sales in key luxury goods market China for weaker-than-expected
quarterly revenue. Its U.S.-listed shares were down 3% in early
trade.
    Executives at companies making everything from chocolate to
toothpaste have given a downbeat assessment of the business
outlook for China on conference calls to discuss fourth-quarter
earnings over the past week.
    John Idol, CEO of Michael Kors-owner Capri Holdings
 CPRI.N , warned of a "significant" decline in China in its
financial year. The company also owns luxury brands Versace and
Jimmy Choo.
    "And I don't think we see the recovery yet on the horizon,"
he said on a call on Wednesday.
    Toothpaste maker Colgate-Palmolive  CL.N  expects China to
be "difficult" in the short to medium term, its CEO Noel Wallace
told a call on Friday after missing quarterly sales estimates.
    Companies are more optimistic about long-term growth in
China given its burgeoning middle class.
    But for now the prolonged downturn means Carlsberg will
direct resources elsewhere.
    "We cannot have significant sales and marketing resources
going into restaurants, bar chains, karaoke chains in Asia where
there are no customers," Aarup-Andersen said.

 (Reporting by Dominique Patton in Paris and Emma Rumney in
London; Writing by Josephine Mason; Editing by Catherine Evans)
 ((sudip.kargupta@thomsonreuters.com;))