Goldman Sachs: Divergence between domestic and overseas sales of Chinese consumer durables widened in the third quarter as costs squeezed gross margins

Why did third-quarter performance weaken further?

For Chinese consumer durables companies covered by Goldman Sachs, weighted-average revenue and profit fell year over year by 5% and 11%, respectively, in the third quarter of 2026; in the second quarter, revenue was flat and profit fell 6%. Domestic demand weakened and input costs rose, while weak demand also limited companies’ ability to pass costs on to consumers.
The covered companies’ gross margin fell by an average of 2 percentage points year over year in the third quarter, compared with a year-over-year increase of 0.6 percentage points in the second quarter. The decline for custom furniture reached 5.7 percentage points, the largest among subsectors.

Overseas revenue growth continued to outpace domestic growth in the third quarter, and the gap widened further. Overseas growth was especially strong for robot vacuums and consumer energy storage: as product penetration rose, Chinese companies also gained market share.
Goldman Sachs believes that Roborock and Anker benefited from globally competitive products and the ability to adjust manufacturing costs and selling prices quickly. By contrast, Ninebot faced greater gross-margin pressure because of its longer product cycles, while Ecovacs faced greater pressure because of lower supply-chain flexibility.
Custom furniture, which is closely tied to the domestic new-home market, performed weakly. Among major white-goods manufacturers, Midea had the smallest declines in revenue and operating profit, supported by growth in overseas and business-customer operations; cost and competitive pressures on Gree and Hisense Home Appliances exceeded Goldman Sachs’ expectations.

Goldman Sachs expects the lower base in the same period last year to support a moderate improvement in domestic demand in the fourth quarter, though trends will vary by category. The bank also noted that demand in September had previously declined despite a lower comparison base, contrary to its expectations.
The bank expects robot vacuums, which still have room for greater penetration, to outperform the more mature air-conditioning category; demand for the latter had previously been boosted by the trade-in policy.
In overseas markets, the holiday season in developed markets typically makes the fourth quarter the strongest quarter for Roborock and Anker. Goldman Sachs expects both companies to benefit as the timing distortion from Amazon Prime Day being brought forward to the third quarter gradually fades; it is also monitoring the potential impact of recent social unrest in Europe on brick-and-mortar retail.

Goldman Sachs expects copper and some electronic-component prices to remain high, with cost-inflation pressures broadly persisting in the fourth quarter. However, most companies increased raw-material procurement in the third quarter, and some management teams expect costs to remain broadly stable until existing inventories are depleted in 2027. Stockpiling also pushed up third-quarter inventories and weakened operating cash flow year over year.
New products are typically launched with adjusted pricing and cost structures for “Double Eleven,” which Goldman Sachs believes helps ease gross-margin pressure. More companies are also focusing on profitability: management at Midea, Haier and Hisense, for example, proposed reducing low-priced products and increasing higher-margin products.
Goldman Sachs expects pricing and promotions to become more disciplined in industries with high or rising concentration, such as white goods and robot vacuums. Competition may remain intense in more fragmented traditional small-appliance and custom-furniture industries, even under cost pressure.