Chinese electronics giant Xiaomi reported its first quarterly drop in revenue on record on Thursday.
What does this mean?
The entire smartphone industry is already being pummeled by a lethal mix of shortages, European war, and dwindling consumer confidence. But China’s smartphone makers have had another challenge to contend with in the form of Covid lockdowns, which have reduced both production and demand to rubble. That led Xiaomi to ship 18% fewer smartphones last quarter than the same time in 2021, and its sales to fall around 5%. Not ideal, given that it’s now lost even more ground to market leaders Samsung and Apple. And even if lockdowns do ease up, analysts think higher costs could leave the company struggling to get profitability anywhere near last year’s lofty heights. Investors said thanks, but no thanks: they sent its stock down 5%.
Why should I care?
The bigger picture: Xiaomi needs a breath of fresh air.
Xiaomi’s smartphone business makes up around 60% of its total sales, so it follows that this slowdown has it looking to other segments to pick up the slack. It’s been putting more emphasis on smart TVs, tablets, and laptops, which have long been staples on its shelves. But it’s also trying to boost sales of its digitally connected devices: think doorbells and obnoxiously expensive air conditioners.
Zooming out: Does Xiaomi dream of electric vehicles?
Xiaomi has irons in the EV fire too: the company committed last year to investing $10 billion in the space, and announced plans to launch its first vehicle by 2024. If that happens, Xiaomi will be going head to head with established carmakers like Hyundai. That’s no mean feat: the carmaker said this week that it’ll be spending nearly $17 billion to boost production in South Korea, taking it from 350,000 EVs a year to 1.4 million by 2030.
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EasyJet Gave An Upbeat Update
EasyJet announced on Thursday that its sales more than quintupled in the first half of its financial year, even as the discount airline runs short on crew.
What does this mean?
You have had itchy feet: EasyJet flew more than five times as many passengers in the last six months as it did the same time the year before, and its revenue rose in kind. And while the airline was reluctant to commit to a forecast since customers are delaying bookings till closer to departure, it did say that it’s expecting a strong summer. In fact, the company said it’s aiming to operate 90% of its 2019 capacity this quarter. It’s made a good start: sales over the past 10 weeks were 6% ahead of pre-pandemic levels, giving it some breathing room if the backdrop starts to turn.
Why should I care?
Zooming in: Petty vandalism is the answer.
EasyJet’s bumper comeback might’ve been even better too, if it hadn’t been forced to cancel a bunch of flights on the back of staff shortages. And for once they’re not just Covid’s fault: the company’s been struggling to recruit enough workers to keep up with resurgent demand. Its solution: rip seats out of its planes, so fewer members of cabin crew are needed to meet code.
The bigger picture: Customers will make sacrifices.
You’d think that the prospect of an economic slowdown would put a damper on airlines’ spirits, but Ryanair – which posted similarly strong results on Monday – is actually looking forward to it. The Irish carrier’s theory is that people don’t actually stop flying when there’s a recession: they just want to save more. And if the only way to do that is to spend 90 minutes with their nose pressed up against the seat in front of them, so be it.
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