China sales help Starbucks, Yum, MGM, Disney, Tapestry

China is leaving behind pandemic lockdowns, and U.S. companies like Procter & Gamble, Starbucks and MGM Resorts International say the country’s recovery is boosting their overall sales as consumers in their home markets watch their wallets.

With its large population and swelling middle class, China is a desirable market for many multinational companies that have seen their U.S. businesses mature. But its zero-Covid policy, which imposed harsh restrictions to stop the spread of the virus, hurt the country’s economy — and revenue for the many U.S. companies that sell their goods or services there.

After rolling back the policy in December, China’s economy grew 4.5% in the first quarter. U.S. companies are reporting that demand in China is returning, boosting their sales at a time when many U.S. consumers are pulling back their spending.

However, the recovery hasn’t been as swift or dramatic as many investors hoped. Most companies are still waiting to surpass pre-pandemic sales in China. The travel retail segment is taking even longer to bounce back. And Apple’s sales fell in its China region, which includes the mainland, Hong Kong and the nearby self-governing island of Taiwan.

Morgan Stanley analyst Kelly Kim wrote in a research note that the firm’s China consumer team expects that recovery will come in three stages: a spring break in February through April, summer “revenge spending” in May through July, and a stable recovery starting in August.

U.S.-based restaurants were among the companies that saw demand return in China. But sales haven’t snapped back to 2019 levels just yet.

Starbucks reported that its same-store sales in China rose 3% in its latest quarter, reversing their declines. Some Wall Street analysts were still anticipating shrinking same-store sales for the company’s second-largest market.

A year earlier, the coffee giant suspended its outlook for the year, citing lockdowns in China as one of the reasons for the decision. That quarter, Starbucks’ same-store sales in China sank 23%.

Yum China, Yum Brands’ master franchisee in China, also said its same-store sales grew 8% in the first quarter. China is KFC’s largest market and Pizza Hut’s second largest.

“We benefited from increasing mobility and saw a 40%-plus growth at transportation and tourist levels. However, same-store sales at these locations in the first quarter were still 20% to 30% below 2019 levels,” Yum China CEO Joey Wat told analysts on the company’s conference call.

Chinese consumers also appear to be traveling again as restrictions lift, visiting theme parks and casinos….