China: Apple Expands While Nokia Sees Sales Collapse

By Sterling Wong  OCT 19, 2012 3:00 PM

Yum Brands also makes the news.

 


MINYANVILLE ORIGINAL The worst of China’s slowdown appears to be over, at least according to the latest economic data. In the third quarter, China recorded GDP growth of 7.4% compared to a year ago, meeting analysts’ expectations, although that was the slowest rate of growth since 2009.
 
Importantly, however, quarter-on-quarter growth was a robust 9%, with industrial production, retail sales, and export data all beating estimates.
 
“September’s figures suggest China’s economy will once again defy its doubters, who have long expected a dramatic investment bust,” wrote The Economist, adding that “growth is unlikely to slow further in this cycle.”
 
According to China’s National Bureau of Statistics ("NBS"), economic growth for the first nine months of 2012 was 7.7%, which gives the agency confidence that the country can meet its official 7.5% 2012 growth target.

"We have 7.7% growth in September, which laid a solid foundation for achieving the full-year growth target. So we are confident that we can achieve 7.5% full-year growth or above," said NBS spokesperson, Sheng Laiyun, in a news conference, reported Reuters.

Here’s the rest of this week’s business news:
 
Apple (NASDAQ:AAPL): Apple will be opening two new stores in China as it slowly but surely expands its presence in the mainland. One store, scheduled to open on Oct. 20 in Beijing, will become the largest Apple retail store in Asia. A second in the southern city of Shenzhen is “just about to open,” John Browett, Apple's senior vice president of retail, told Xinhua, adding that "more stores are coming across China," though he cautioned that the expansion will be gradual.
 
"We are looking foward to serving every Chinese customer in every city," Browett said. "But that's going to take us some time."
 
With the two new stores, Apple now has a total of nine retail outlets in Greater China, with three in Shanghai, two in Hong Kong and two more in Beijing.
 
The next likely location for a new China Apple location could be Chengdu, the capital city of Sichuan province, wrote Topeka Capital Markets analyst Brian White in a report after a visit to China, noted Businessweek.
 
Nokia (NYSE:NOK): It was a story of good, bad, and ugly for Nokia’s third quarter earnings. The good was that the Finnish telecommunications giant saw operating margins improve to 1.1% from the prior quarters -4.3%, thanks in large part to its Nokia Siemens Networks division, which achieved an operating margin of 9.2%.
 
The bad was that the company still recorded a $0.09-per-share loss on  revenue of $9.48 billion, though that did beat Wall Street expectations of a $0.13-per-share loss on revenue of $9.03 billion
 
And the ugly? That was results from China, where mobile volume collapsed 64% to 5.8 million from 15.9 million, thanks to the poor performance of its Lumia series. Worse was net sales, which plunged 74% from the quarter a year ago.
 
“Net sales in China decreased sequentially primarily due to lower net sales of our Lumia and Symbian devices, primarily reflecting competitive pressures. Volumes in China decreased sequentially primarily due to lower volumes of our Symbian devices, primarily reflecting competitive pressures,” said the company, according to the Financial Times.
 
Yum Brands (NYSE:YUM): Yum continued to deliver solid results from its China operations in the third quarter, with same store sales meeting expectations in rising 6% in spite of the economic slowdown there. Though wages jumped 8% and commodity prices increased 2% in the quarter, Yum still managed to improve China restaurant margins 0.1% to 21.4%.

"China is going to have its inevitable ups and downs," said David Novak, Yum's chairman and CEO, in a conference call with analysts on Wednesday, according to Reuters. "Our annual performance has been pretty consistent and I expect this to continue.”

Jim Grant, editor of Grant’s Interest Rate Observer, was not as optimistic about Yum’s prospects in China, however. Grant said that Yum is too exposed to China, with the country contributing 44% of the company’s revenue as of 2011.
 
“As the Chinese macroeconomy sneezes, we think, even Yum will catch a cold.” Grant wrote, according to Businessweek. Grant highlighted that 90% of Yum restaurants in China are company-owned, so the risk level shareholders face is high.
 
Twitter: @sterlingwong
No positions in stocks mentioned.

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