From Estee Lauder to Apple, Big Companies Say China's Covid Restrictions Are Hitting Business

5/5/2022 11:01:00 AM

Several international corporations warned in the last week the drag from China's Covid controls will hit their entire business.

Business

Several international corporations warned in the last week the drag from China's Covid controls will hit their entire business.

Across industries, companies say China’s Covid controls are taking a toll — so much so that some executives warn of more unpredictable performance ahead.

Apple also blamed Covid disruptions for affecting consumer demand in China., which sells multi-industry specialty products such as adhesives and construction materials, announced second-quarter guidance Tuesday below analysts' expectations.The company expects revenue of $3.2 billion to $3.3 billion in the second quarter, slightly below the $3.33 billion forecast by FactSet. Earnings per share of 70 cents to 80 cents in the second quarter is also below FactSet's estimated 84 cents a share.

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International? You mean American 🇺🇸 corporations?

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Estee Lauder: Cosmetics rebound outside of ChinaThe makeup giant cut its sales forecast due to Covid restrictions in China.

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sales in the current quarter by $4 billion to $8 billion —"substantially" more than in the last quarter.New evidence has emerged that China's uncompromising battle against the coronavirus, believed to have emerged in a market in the city of Wuhan in late 2019, is undermining its growth and hurting the international companies invested there.reported record quarterly sales, however higher costs put a dent in profits.Axios on linkedin Axios on email Evan Ryan and Antony Blinken attend the 2022 White House Correspondents' Association Dinner on April 30.

The other factor is the ongoing chip shortage, management said on an April 28 earnings call. "Covid is difficult to predict," CEO Tim Cook said after describing those estimated costs, according to an earnings call transcript from StreetAccount. The central city of Zhengzhou, home to 12. Apple also blamed Covid disruptions for affecting consumer demand in China.6 billion, which matched Wall Street’s estimates. DuPont: Second-quarter lockdown impact DuPont , which sells multi-industry specialty products such as adhesives and construction materials, announced second-quarter guidance Tuesday below analysts' expectations. Register now for FREE unlimited access to Reuters. "We anticipate key external uncertainties in the macro environment, namely COVID-related shutdowns in China, will further tighten supply chains resulting in slower volume growth and sequential margin contraction in the second quarter 2022," Lori Koch, Chief Financial Officer of DuPont, said in a release, noting that"underlying demand continues to remain solid. Blinken has not seen President Biden for several days and is not considered a "close contact" of the president, Price added.

" Two DuPont sites in China"went into full lockdown mode in March" and are expected to be fully reopened by mid-May, Koch said. Most of the suspended stations and routes are in the Chaoyang district, the epicentre of Beijing's outbreak. Comparable sales in China declined 23%, overshadowing 12% growth in North America. She also said that within the electronics business, inability to get raw materials from China forced some factories to run at lower rates, affecting margin in the second quarter. The company expects revenue of $3. The city of 22 million people has closed schools as well as some businesses and residential buildings in high-risk areas, and many people are stocking up in case a full lockdown does come.2 billion to $3. Howard Schultz, Interim CEO of Starbucks.3 billion in the second quarter, slightly below the $3. In Shanghai, there's no end in sight for the lockdown. Just as soon as we can," Price said during the briefing.

33 billion forecast by FactSet. Earnings per share of 70 cents to 80 cents in the second quarter is also below FactSet's estimated 84 cents a share. Some of Shanghai's 25 million people have benefited from a tentative easing of precautions since Sunday, with usually just one member of a household allowed out for a quick stroll, some fresh air and a bit of shopping at supermarkets.," Chief Executive Officer Howard Schultz said in a call with investors. Full-year guidance for the year ending in December remained in line with FactSet expectations. Estee Lauder: Cutting fiscal year outlook Despite a strong fiscal third quarter, makeup company Estee Lauder cut its full-year outlook due to Covid controls in China and inflation. Authorities say the zero-COVID policy aims to save as many lives as possible, pointing to the millions of COVID deaths outside China, where many countries are throwing off precautions to "live with COVID" even as infections spread. "The resurgence of COVID-19 cases in many Chinese provinces led to restrictions late in the fiscal 2022 third quarter to prevent further spread of the virus," the company said in a release Tuesday.

Mohamed El-Erian: 'Full-scale stagflation worries' on China Covid concerns slammed global stocks "Consequently, retail traffic, travel, and distribution capabilities were temporarily curtailed," it added."The Company's distribution facilities in Shanghai operated with limited capacity to fulfill brick-and-mortar and online orders beginning in mid-March 2022." The new guidance for the fiscal year, which ends June 30, anticipates revenue growth of between 7% to 9%, well below FactSet expectations for a 14.5% increase. Estee Lauder's forecast of $7.

05 to $7.15 earnings per share is also below the $7.57 a share analysts expected. Yum China: Upcoming quarterly loss While analysts generally expect second-quarter profit of 29 cents a share, CFO Andy Yeung warned that"unless the COVID-19 situation improves significantly in May and June, we expect to incur an operating loss in the second quarter." The company operates fast food brands KFC and Pizza Hut in China, and is the majority stakeholder in a joint venture with Italian coffee company Lavazza , which has opened cafes in China in the last year.

Yum China said Tuesday that same-store sales plunged by 20% year-on-year in March, and likely maintained the same pace of decline in April. The company said it still intended to achieve its full-year target of 1,000 to 1,200 net new store openings. Chinese companies cut earnings forecasts For the first quarter, roughly half of MSCI China mainland stocks, excluding financials, missed first-quarter earnings expectations, with only about a quarter beating expectations, Morgan Stanley analysts said in a note Tuesday. The quarterly results were the worst since the first quarter of 2020, the analysts said. That's when the pandemic initially shocked the economy and GDP contracted.

Downward earnings revisions are likely to continue for another two to four weeks, the Morgan Stanley report said, noting all of the mainland traded stocks known as A shares have all reported first-quarter results as of April 30. Overall decline in corporate sentiment As U.S. businesses face a number of domestic challenges as well, Bank of America's proprietary measure of corporate sentiment for S&P 500 stocks fell sharply in the first quarter to the lowest level since the second quarter of 2020, the firm said in a report Sunday. The latest sentiment score points to a sharp drop in earnings ahead, although that is not BofA's base case, the report said.

Several major corporate earnings are still ahead, including .