Robust consumer spending helped China’s economy grow by the fastest rate in a year last quarter — a development we’ve long been preparing the Club portfolio to capitalize on. Estee Lauder (EL), Starbucks (SBUX) and Wynn Resorts (WYNN) are the Club’s consumer discretionary stocks with the greatest exposure to the Chinese market. We’ve been gradually building out our position in each on the expectation they’ll ultimately soar in the long term, as China’s economy continues to reopen after roughly three years of Covid-19 lockdowns. Beijing late last year started to unwind its strict zero-Covid policy, paving the way for an economic rebound. And in the first quarter of 2023, gross domestic product (GDP) grew by 4.5% year-over-year , China’s National Bureau of Statistics reported Tuesday, ahead of the 4% predicted by economists. That compares with 2.9% annual growth in the fourth quarter of last year. GDP growth was bolstered in part by a resurgent Chinese consumer, particularly last month. Separate Chinese government data Tuesday showed retail sales climbed by 10.6% in March on an annual basis, ahead of 3.5% growth in January and February. Shares of Estee Lauder, Starbucks and Wynn — up roughly 3.5%, 9.2% and 37.5% year-to-date, respectively — edged up on the news Tuesday. For Estee Lauder, a leader in luxury skin care, makeup and fragrances, China accounts for about a third of total revenue. As pent-up demand from duty-free shops in airports across China is unleashed, the company’s sales should only climb higher. A positive readthrough came last week when French luxury goods maker LVMH Moët Hennessy Louis Vuitton reported a quarterly earnings beat that was driven by Chinese shoppers . Starbucks is making a huge bet on China , as it continues to open stores every nine hours in the country. It’s growth potential there led Evercore ISI on Tuesday to initiate coverage of the coffeemaker with a tactical outperform, or buy, rating and price target of $120 per share. Evercore analysts cited Starbucks’ “exposure to a faster-than-anticipated China recovery.” Casino giant Wynn Resorts operates two properties in China’s special administrative region of Macao, which had generated roughly 75% of the company’s total profits pre-Covid-19. That compares with a loss of $221 million from its Macao operations in 2022. But as big-spending gamblers return to Macao flush with savings after years of Covid restrictions, profits should continue to bounce back this year. The Club’s take China’s latest economic data highlights our investment case for our three big consumer companies doing business in the country. Heading into 2023, there were market concerns over the pace of recovery and how that could impact corporate earnings. However, we’re pleased to see a robust rebound in consumer activity in the world’s second largest economy, signifying a positive growth outlook for Estee Lauder, Starbucks and Wynn Resorts. (Jim Cramer’s Charitable Trust is long EL, SBUX,…
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