What's the Word on China?

There’s been significant doubt cast from various corners on China’s reported coronavirus infections and deaths, and how instructive they can be for the U.S. or other countries' recovery paths. China's resumption of economic activity in recent weeks might be a better guide for what awaits the U.S.

To observe that, investors needn’t look to potentially suspect figures. Multinational companies reporting in recent weeks have been commenting on their Chinese operations, and how supply and demand in the world’s second-largest economy has bounced back from several weeks of lockdown.

The general sentiment has been that industrial companies and various forms of manufacturing are returning faster than consumer-facing businesses such as retail--but the recovery isn't done yet.

Here are a few recent highlights from companies first-quarter earnings calls:

Starbucks President & CEO Kevin Johnson: "Today, almost 100% of our stores in China are open, many with limited seating, reduced hours, and other safety protocols in place. Starbucks stores that remain closed in China are primarily located in cinemas and enclosed entertainment venues, along with international travel hubs and certain tourist zones, where restrictions are still in effect...For the month of April, comparable store sales in China were down approximately 35%, marking strong improvement from a weekly low of minus 90% in mid-February...We believe, barring any new disruptions, that our business in China is on a path to substantial recovery by the end of [the third quarter]."

Apple CEO Tim Cook: "If you look at what happened in China, we were having a really good January. The lockdown started there toward the end of January. February, we saw a steep decline in demand. We closed our stores in February. As the lockdown completed in mid-February toward the second half of February, we began to open stores. We opened them on a staggered basis. That took about 30 days until mid-March. And from a demand point of view, we saw an improvement in March over February. And if you look at kind of where we are today, we've seen further improvement in April as compared to March."

Cummins CEO Tom Linebarger: "First-quarter revenues in China...were $1.1 billion, a decrease of 19% and were significantly impacted by COVID-19-related shutdown. The pandemic started to impact industry production of equipment in early February, and the majority of our facilities experienced shutdowns of four to six weeks in length. All of our manufacturing facilities in China were fully operational by the end of the first quarter, and we have experienced high levels of demand since reopening as OEMs prepare for a rebound in demand."

Estée Lauder President and CEO Fabrizio Freda: "Our business in Mainland China is further improving as retail stores began to reopen with shortened hours in March. By mid-April, virtually every door had reopened. We are encouraged by China efforts in containing the virus and the initial signs of recovery. We expect to return to double-digit sales growth in Mainland China in the [current] quarter. More recently, sales in Korea have begun to grow and stores have started to reopen. However, Japan, Australia, and markets in Southeast Asia are still in the containment phase, with most retail stores closed as we speak."

Honeywell International CEO and President Darius Adamczyk: "As you can imagine, in China January and February were extraordinarily slow--there wasn't really much of anything happening. March was better, we saw a bounce back which was encouraging. But April has been not horrible, but soft...So I think the assumption that China is back to normal, at least based only on the April data point, may not be correct."

Colgate-Palmolive Chief Investor Relations Officer John Faucher: "The first quarter was a difficult one for the Asia Pacific division. We saw a significant impact on China from the Covid-19 pandemic throughout the quarter, while India was impacted by a country-wide shutdown that began in late March. In China, we have begun to see the country open back up and trends are improving in Q2, but we caution that the country still is not back to pre-crisis levels.

DuPont CEO Edward Breen: "In the first quarter in China, our sales were down organically 1%, which actually surprised me that it was that good considering we were shut down for a few extra weeks. But in April, our sales are up 6% to 7% in China. So we're clearly seeing the comeback there. And again, things aren't totally back to normal over there, but from a minus 1% to a plus 6% or 7%, it's pretty impressive."

McDonald's Chief Financial Officer Kevin Ozan: "In China, approximately 25% of restaurants were closed in early February. By the end of March, substantially all restaurants had reopened. However, the market continues to experience a reduced level of demand as consumers have not fully returned to their pre-Covid routines."