The Middle East crisis has limited short-term impact on Chinese consumer discretionary companies, but cost and supply chain risks require delayed observation

Overview

This report is part of Goldman Sachs' Greater China team's CHINA TRACKER series, focusing on feedback from Chinese consumer discretionary companies on demand, operations, and supply chains amid the Middle East crisis. Survey targets cover sportswear brands, footwear and apparel OEM companies, and diversified retail companies, and the report also incorporates regional industry associations, news reports, raw material prices, and container freight data to assess potential impacts. The overall conclusion is that direct short-term impact is limited, but cost inflation, shipping disruptions, and regional energy supply risks may gradually feed through to margins and order visibility in 2H26 through 2027.

Core views

The main judgment of sportswear brands is that the impact on the remainder of 2026 is low, because wholesale orders have mostly been confirmed, and companies can buffer cost pressure through self-absorption, renegotiation with suppliers, selective price increases on new products, and improved discounting. Short-term raw material supply for footwear and apparel OEM companies is relatively stable, with raw materials required for 2Q26 orders already locked in ahead of time, but there is still a timing gap in the cost-plus model, and some companies may bear costs temporarily. Diversified retail companies are currently showing relatively resilient demand and operations, with limited direct exposure to the Middle East market, but consumer sentiment, the macro environment, and FY26 margin guidance remain key investor concerns.

Analysis framework

The report adopts a combination of company interviews, sector case breakdowns, regional cross-verification, and cost sensitivity analysis. Company interviews cover four sportswear brands, five OEM companies, and major companies in the diversified retail sector; regional cross-verification cites industry association or news information from Bangladesh, Vietnam, Indonesia, India, and Cambodia; and the quantitative section estimates changes in operating profit and operating margin under different cost increase scenarios based on the share of oil-related raw materials, transportation, and energy costs in revenue.

Methodology notes

• Industry researchCompany interview tracking

  Identify the impact of the crisis on demand, orders, production, procurement, and shipments through management commentary and operating feedback from companies.

  The report separately interviewed sportswear brands, footwear and apparel OEM companies, and diversified retail companies, comparing short-term order lock-in, raw material inventory, regional production capacity, and cost pass-through capability.

• Scenario analysisOil price cost sensitivity analysis

  Estimate the potential impact on operating profit and operating margin when oil-related raw material costs rise by 5%, 10%, 30%, and 50%.

  Based on cost structure assumptions, Goldman Sachs separately evaluates the margin impact of changes in petrochemical raw materials, freight, and utility costs for brands and OEM companies; for Shenzhou and Yue Yuen, it assumes OEMs temporarily bear additional raw material costs during the lag before price renegotiation.

• Cross-verificationCross-reading of regional industry associations and news

  Use regional production, transportation, and cost information to validate supply chain risks reflected in company feedback.

  The report cites textile and apparel industry information from Bangladesh, Vietnam, Indonesia, India, and Cambodia to supplement energy, shipping, and order risks that may not yet be fully reflected at the company level.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 2020.HK Anta

  Sportswear brand, with low to moderate sensitivity to oil-related material costs.

  Strengths

  Its high gross margin structure, DTC mix, and premium brand portfolio help buffer cost shocks.

  Weaknesses

  Rising materials such as polyester and nylon may still affect footwear and apparel costs.

  Comparison

  Compared with some peers, the report believes its high margins and brand portfolio provide stronger resilience.

  Risks

  If costs remain elevated in 2027 and end-market pricing power is limited, margins may come under pressure.

• 2331.HK Li Ning

  Sportswear brand, affected by footwear materials such as EVA and rubber.

  Strengths

  The brand side can buffer part of the impact through supplier negotiations, discount management, and new product pricing.

  Weaknesses

  Under the current competitive environment, room for ASP improvement is limited, constraining cost pass-through ability.

  Comparison

  Compared with brands that are more premium or have a higher DTC mix, cost pass-through flexibility may be weaker.

  Risks

  If raw materials continue to rise, GPM and OPM will be more sensitive to cost shocks.

• 2313.HK Shenzhou

  Apparel OEM, where the cost-plus model should theoretically allow costs to be passed through.

  Strengths

  The cost-plus mechanism and cooperation with major clients help pass through raw material costs over the long term.

  Weaknesses

  There is a lag between price renegotiation and raw material procurement, so it may bear part of the additional cost in the short term.

  Comparison

  Compared with brand companies, OEMs directly face client price renegotiation and changes in order visibility.

  Risks

  If brand clients reduce orders due to concerns over demand and costs, capacity utilization and margins may be affected.

• 0551.HK Yue Yuen OEM segment

  Footwear OEM, mainly affected by materials such as rubber, PU, Phylon, and EVA.

  Strengths

  The cost-plus model theoretically supports a relatively high pass-through rate.

  Weaknesses

  It may bear part of the cost for brand clients when competition is intense.

  Comparison

  Compared with sports brands, OEMs are more prone to margin volatility during short-term negotiation lags.

  Risks

  Cautious brand procurement, material procurement lags, and regional shipment delays may jointly affect performance.

• 9992.HK Pop Mart

  Diversified retail, with major oil-related materials including ABS, PVC, and PET.

  Strengths

  A robust supply chain, inventory buffers, and brand pricing power help resist short-term shocks.

  Weaknesses

  If elevated raw material prices persist, costs for toys and lifestyle products may rise.

  Comparison

  Diversified retail companies overall have lower direct Middle East exposure than export-oriented OEMs.

  Risks

  FY26 margin guidance is the key for investors to judge cost absorption capability.

• MNSO Miniso

  Diversified retail, with relatively high cost exposure to materials such as ABS, PVC, and PET.

  Strengths

  Scale procurement and supplier bargaining power can buffer short-term cost shocks.

  Weaknesses

  If rising costs cannot be fully passed through, operating margins may come under pressure.

  Comparison

  Compared with food and beverage consumption companies, lifestyle retail is more sensitive to petrochemical material costs.

  Risks

  Risks from disruption to Middle East store sales, macro consumer sentiment, and product mix adjustments.

• YUMC / 6862.HK Haidilao / 2097.HK MIXUE / 1364.HK Guming

  Food and beverage consumption companies, with oil-related materials mainly being PET and PP packaging materials.

  Strengths

  The share of related raw materials in revenue is relatively low, and sensitivity analysis shows the margin impact is relatively limited.

  Weaknesses

  Some companies are still affected by freight, utility, and packaging costs.

  Comparison

  Compared with sportswear and diversified retail, food and beverage companies have lower direct sensitivity to petrochemical material prices.

  Risks

  Weak macro consumption, rising energy costs, and regional supply chain disruptions may still have indirect impacts.

Key data

• Number of sportswear interviews4 companiesFeedback suggests low impact on the remainder of 2026, with potential impacts possibly starting from 2027.
• Number of OEM interviews5 companies2Q26 raw materials have been locked in, but 2H26 margins may be affected by the lag in price renegotiation.
• Impact on COGS of sports brands under the worst-case scenarioApproximately 3%-5% increaseA leading Chinese sportswear company said that if oil and petrochemical prices remain elevated, footwear would be more affected, while apparel would be relatively more insulated.
• Inventory buffer for diversified retailApproximately 4 months at the group level, approximately 7 months overseasLeading companies have strong inventory buffers and supply chain resilience.
• Raw material price changesPET/PP/polyester/nylon vs. 2025 average approximately +43%/+28%/+31%/+26%As of April 15, 2026, prices of oil-related petrochemical and textile raw materials have risen significantly.
• SCFI composite freight rate$1,891/TEUAs of April 10, 2026, up 2% from the previous week.
• Vietnam Red Sea route delivery timeExtended by 14-20 daysVinatex said orders are covered through July, but reliance on imported raw materials and cautious buyer sentiment still exist.
• Impact on same-store sales growth in the Middle EastMSD% negative impactA diversified retail company said Middle East SSSG has recently been negatively affected by a mid-single-digit percentage, but overall sales have still maintained growth year to date.

Impact & implications

The investment implication is that the market should not overstate the direct impact of the Middle East crisis on Chinese consumer discretionary companies in the short term, because most companies do not have significant production exposure to the Middle East and have already locked in near-term orders and some raw materials. However, if oil-related raw materials and shipping costs remain elevated, cost pressure will gradually be reflected through orders, price negotiations, discount policies, and margin guidance in 2H26 and 2027. Brands or retail companies with high gross margins, strong supplier bargaining power, inventory buffers, and cost pass-through capability are relatively more defensive; OEM companies facing intense competition, declining order visibility, or the need to temporarily absorb costs have greater profit elasticity.

Risks

• Sustained elevated oil prices and petrochemical raw material prices, driving up costs for footwear, apparel, toys, and household goods.
• There is a lag between OEM price renegotiation and raw material procurement, which may compress margins in the short term.
• Brand clients may lower forward order visibility due to rising costs and demand uncertainty.
• Bangladesh fuel shortages, power disruptions, and Gulf airline cancellations may affect factory operations and shipments.
• Rising utility costs in India, air freight disruptions, longer shipping routes, and higher surcharges may raise export costs.
• Same-store sales in the Middle East market may come under short-term pressure, and combined with weak macro consumer sentiment may affect retail performance.
• If companies find it difficult to pass through costs through price increases, supplier negotiations, or product mix adjustments, FY26 margins may come in below expectations.

What to watch

• FY26 margin guidance from diversified retail companies to be released in May 2026.
• The trend of raw material prices in 2H26 and the progress of OEM price renegotiation.
• Whether 2027 sportswear ordering fairs and new product pricing can reflect cost pressure.
• Power, fuel, freight, and shipment conditions in Bangladesh, India, Vietnam, Indonesia, and Cambodia.
• Changes in the SCFI composite index and freight rates on Europe, Mediterranean, and U.S. East and West Coast routes.
• Price trends for PET, PP, polyester, nylon, EVA, BR, SBR, ABS, and PVC.
• Whether brand clients shorten contract terms, reduce orders, or become more cautious in procurement.