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Shiseido to Take Extraordinary Loss to Address Bare Escentuals Issues

Posted: April 25, 2013

Shiseido announced it expects to register an extraordinary loss for the fourth quarter of the fiscal year ended March 31, 2013. Since the March 2010 acquisition of U.S. cosmetics company Bare Escentuals as a subsidiary, the company has engaged in concerted efforts with Bare Escentuals to integrate and strengthen the functions of Shiseido's manufacturing and logistics bases and back-office divisions in the Americas with those of Bare Escentuals, utilize Shiseido's marketing infrastructures outside of the U.S. and promote measures in the areas of R&D and product development in accordance with its schedule, which has gradually been producing a synergistic effect.

While Bare Escentuals' business has grown year over year, its sales have remained lower than expected. Given these circumstances, since fiscal year 2011 (January 1, 2011 through December 31, 2011), Bare Escentuals has made substantial media investment including TV advertising in the U.S., where it generates the majority of its sales, to strengthen its retail business, which has greater market potential. However, while this has successfully raised its brand awareness and interest among consumers, Bare Escentuals has taken longer than initially envisioned to grow its retail business. The gap between its sales budget and sales performance has been widening during recent months. Bare Escentuals, in consideration of these circumstances comprehensively, reviewed its long-term plan and the company conducted an impairment test again in April 2013, which has resulted in an extraordinary loss incurred for the fiscal year 2012 (April 1, 2012 through March 31, 2013).

With the long-term plan reviewed, Bare Escentuals will streamline business operations, including the strategic closure of selected company-owned stores, for the fiscal year 2013 (January 1, 2013 through December 31, 2013) as well as expand marketing investment to establish a basis for growth from the fiscal year 2014 (January 1, 2014 through December 31, 2014) and beyond. To spur growth, Bare Escentuals will reinforce its direct-to-customer business, such as sales through QVC and infomercial, and in its retail business, shift from its previous media investment to investment in consumer-facing promotions with top priority on reinforcing sales at existing stores.

Through these steps, Bare Escentuals will refine its unique business model, which is its original forte and create synergy between retail and direct-to-customer businesses, and grow sales of its main brand "bareMinerals" as one of the global megabrands of Shiseido.

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