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Shiseido Grows While Fighting Increased Competition

For the fiscal year ended March 31, 2012, Shiseido reported consolidated net sales of ¥682.4 billion, up 1.7% from the previous year. Domestic sales edged down 0.8%, to ¥380.0 billion, due to several factors. By contrast, overseas sales increased 5.1%, to ¥302.4 billion, bolstered by sustained growth in Europe and the United States, together with continued high growth rates in Asia, especially in China. This was despite the impact of the strong yen. 

Although the company worked hard to improve the cost of sales ratio and emphasize efficient expenditure allocations, operating income declined 12%, to ¥39.1 billion. This was due aggressive marketing investments targeting growth in Japan and overseas. Ordinary income fell 11.3%, to ¥39.4 billion. Despite the decrease in operating income, net income rose 13.5%, to ¥14.5 billion, owing mainly to a significant decline in the previous year caused by extraordinary losses.

In the domestic cosmetics segment, sales were down 1.3%, to ¥353.8 billion. In the cosmetics business category, sales declined year-on-year, but the decrease was slight. In the cosmetics business, Shiseido stepped up efforts centered on new products and worked exhaustively to raise product value and refine our customer-oriented proposals activities. From the perspective of raising product value, the company reduced the number of new product launches to around half, while releasing only carefully selected products deemed to be highly supported by customers. It also focused on nurturing current mainstay products. With respect to customer-oriented proposals activities, the company concentrated on customers’ lifestyle changes and latent needs, and proposed solutions to help customers lead comfortable lives, free of displeasure and dissatisfaction. Shiseido deployed its products and product lineups, complemented by information and hands-on communication, to propose solutions geared to season-specific life realities via all possible channels. As a result, a number of offerings performed well during the year. These included clé de Peau Beauté,  a top-end prestige brand; the  MaquillAge makeup mega line, promoted as a long-seller by honing the number of core products; the  Integrate self makeup line, which  benefited from continued popularity of its mascaras and eye liners; and the Tsubaki hair care brand, which underwent renewals of both content and communication strategy. 

The company also developed a new business model that combines the Internet with brick-and-mortar stores to create new customer interface opportunities. In the health care business category, we maintained sales on a par with the previous year. Amid intensifying competition in the market for collagen-related foods, in addition to the mainstay of The Collagenline of skin rejuvenation food, the company launched Bénéfique Collagen Royal Rich as part of the Bénéfique line, sold exclusively to cosmetics specialty stores. 

Sales in the Global Business segment rose 5.6%, to ¥319.7 billion, thanks to various factors. These included continued strong growth in Europe and North America, sustained high growth rates in Asia, including China, and a healthy performance by the professional business. Sales in local currency terms increased 12.2%. At the prestige end of the cosmetics business, the global brand Shiseido achieved sales growth in various world countries. Key performers here included the Shiseido Benefiance anti-aging line and the Shiseido Future Solution LX premium skin care line. In addition, the Nars makeup artist brand generated a significant sales increase, especially in North America.

In addition, the designer fragrances sold by Beauté Prestige International posted healthy sales growth, highlighted by the launch of the Elie Saab fragrance in July 2011, and the travel retail business also performed well. Moreover, the company made a solid start to its online sales business in the United States. During the year, its strengthened sales in existing North American stores of Bare Mineral, a mineral-based makeup brand of Bare Escentuals, Inc., acquired in 2010. It also launched Ready, a new solid-type makeup, which contributed to continued growth.

In the top-priority Chinese market, Shiseido faced intensifying competition from European, North American, and other companies. In the department store channel, Aupres, a dedicated brand for the Chinese market, maintained a healthy performance, benefiting from a renewal of its complexion-lightening skin care line. Other highlights included continued solid performances by Urara,  a dedicated brand for Chinese cosmetics specialty stores, and Pure & Mild. Overall, therefore, the company achieved sales growth well in excess of overall Chinese market growth. In addition, we made a solid start to our online sales business in that nation. In the Asian masstige market, we posted higher sales of Za, a comprehensive skin care and makeup brand targeting middle-income earners. It also undertook a full-scale rollout of the Tsuaki brand in China, and introduced Senka, a highly functional skin care brand in the low-price segment, in Taiwan, Hong Kong, and elsewhere.

In newly emerging nations, Shiseido continued expanding sales in Russia. It also enjoyed business growth in new markets, launching sales in Panama, Armenia, Belarus and other nations. As of December 31, 2011, the global brand Shiseido had a presence in 87 nations. In the professional division, the company enjoyed a major market hit in Japan with The Hair Care Adenovital, a next-generation hair-growth treatment incorporating “adenosine,” an active medicinal ingredient. Overseas, the company reported a sales increase in China, where the market growth has been significant. Three other group companies also recorded higher sales: Carita and Decléor, which sell products to esthetic and beauty salons, mainly in Europe; and Zotos International, which sells products to beauty salons, mainly in North America. Accordingly, the professional division enjoyed steady year-on-year sales growth.  

More information on this financial report is available here.

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