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Shiseido Grows While Fighting Increased Competition

Posted: April 27, 2012

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.