Sweet Spot

Image source: DenisMArt, Yourweekendphotographer, s-ts - Shutterstock

What's going on?

Nestl announced better-than-expected first-quarter sales on Thursday, as the worlds gradual economic recovery finally gave the Swiss giant the break its been craving.

What does this mean?

Get yourself a consumer goods company that can do both: the household snacks that stuck-at-home folks needed to endure their fifteenth lockdown in a row, and the supplies that Asian bars, restaurants, and shops needed to fling their doors open once again. That one-two punch drove Nestls underlying sales i.e. disregarding currency swings and new mergers and acquisitions almost 8% higher than the same time last year. That was more than twice the growth analysts were expecting, and investors were cool with it: they sent Nestls stock 3% higher.

Why should I care?

For markets: Extravagance is the new in-travagance.


Nestls uptick in sales is just one of several signs that a consumer spending boom is in full swing. Heres another one: professional investors have been noticing a trend toward more upscale products as shoppers spend the cash theyve been saving over the last year, particularly among things like cosmetics, spirits, and clothing. Case in point: luxury brand Herms and spirits firm Pernod Ricard reported an uplift in sales on Thursday.



The bigger picture: Chinese customers are spending big.


Strong results arent the only thing Nestl, Herms, and Pernod Ricard have in common: all three seriously benefited from robust consumer spending in China (tweet this). Thatll happen when Chinese consumers are given the freedom to shop as they please a luxury that still isnt being afforded to many Europeans and Americans. Companies that arent big in China, then, might be feeling a pang of regret. Or regrette, in Renaults case: the French carmaker reported worse-than-expected earnings on Thursday, even as other carmakers like BMW and Daimler both of which have big businesses in China beat expectations.

Originally posted as part of the Finimize daily email.

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