Xiaomi says China sales are close to a full recovery
The smartphone maker is confident it will weather the stormBy Adrian Potoroaca
In brief: While every company out there is battling a sea of uncertainties with slowing economies around the world, Xiaomi is confident its long-term investments will still pay off. The smartphone maker posted good financial results for 2019, and says the Chinese market is quickly returning back to normal.
With the entire world battling the Coronavirus pandemic, it wouldn't be a surprise if Chinese smartphone makers experienced a disappointing first quarter this year, but it looks like the country is now quickly recovering to normal levels of consumption.
During an earnings call with investors, Xiaomi CFO Shou Zi Chew told everyone the Chinese market will soon look the same as it did before the Coronavirus.
Chew explained that sales of smartphones, watches, and accessories took a significant hit during the first three months of this year, but he doesn't seem to be worried about a potential decrease in demand. The executive believes global smartphone demand will mirror China's experience, meaning that people will soon start buying new devices at the same rate as last year.
Overall, Xiaomi's fourth quarter in 2019 was above expectations, with a 27 percent jump in profit to 2.3 billion yuan ($324.75 million). The company saw a similar 27 percent increase in sales to 56.47 billion yuan ($7.79 billion).
This means that Xiaomi remains China's second largest smartphone maker by revenue after Huawei, who is now in between a rock and a hard place. Still, we'll get a clear picture of the impact of Covid-19 on the two companies in the second quarter at the earliest.
It's easy to see why Xiaomi is so confident in its ability to weather the storm. For that, you only need to look at the company's focus on online retail despite also operating 1,800 physical stores. Smartphones like the Mi Note 10 make up 60 percent of the company's annual revenue, which increased to 205.8 billion yuan (around $29 billion) in 2019.
That doesn't mean the company doesn't have a few more headaches to deal with. First, its factories in India won't be able to operate until mid-April at the earliest. Then you have to take into account that Europe, one of its biggest target markets, will likely have a lower appetite for gadgets until the end of the year.