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Sales Drop for Shiseido

Posted: October 31, 2012

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The outlook for the domestic economy remains unclear amid further worldwide economic slowdown and other factors, and the Japanese cosmetics market is also expected to remain mostly unchanged from the previous fiscal year’s level. Facing these challenges, in the second half of the fiscal year the Shiseido Group will continue working to expand over-the-counter sales. Specifically, it will develop carefully selected, highly competitive products, foster current mainstay products, and advance measures using its new business model. In department stores, the company will continue entrenching fundamental initiatives. In drugstores, it will continue rejuvenating over-the-counter sales by introducing new sales display cases, while stepping up collaborative efforts to match the needs of each retailer. In cosmetics specialty stores, it will deploy watashi+ as part of measures to expand its base of loyal customers, while working to expand sales through introduction of new products among dedicated brands for such stores. In addition, Shiseido will strive to reinforce its skin foundation category, which has been struggling, while advancing strategies aimed at tapping the seniors market, which is expected to become more and more important in the future.

Reflecting the aforementioned initiatives, Shiseido expects year-on-year increases in segment sales in the both the second half and the entire year. With respect to operating income, the company looks forward to an increase in the second half, boosted by a marginal gain stemming from higher net sales, as well as rigorous cost-cutting activities, although full-year operating income is expected to remain mostly unchanged.

In Europe, where the economy is languishing due to the financial crisis, the company expects growth in the cosmetics market to remain weak. In the Americas, there are various risks, including the possibility of delayed improvement in the employment environment. Nevertheless, Shiseido anticipates a moderate recovery trend and look forward to continued steady growth in the cosmetics market. In China, the growth rate for the cosmetics market is on a downtrend for the time being, amid a slowdown in economic growth. In addition, the outlook is very unclear due to uncertainty about customer purchasing attitudes towards Japanese products. Elsewhere in Asia, the company anticipates continued growth in the cosmetics market, thanks to moderate economic expansion.

Under these circumstances, in the second half of the year the Shiseido Group will continue fostering the six brands covered in its global mega brand strategy. At the same time, it will target further sales growth in various ways. These include stepped-up promotion of its designer fragrances and makeup artist brands, as well as reinforcement of masstige brands in ASEAN nations, where future market expansion is predicted. Despite unclear business conditions in the short term, Shiseido looks forward to significant market expansion in China in the medium and long terms, reflecting the rising population of cosmetics users. Moreover, Shiseido has promoted its business in China for more than 30 years while maintaining close local ties. This policy will remain unchanged as it continues prioritizing managerial resources as a corporation that is well-liked by Chinese customers. Thanks to these efforts, the company looks forward to continued overall sales growth its global business segment, with year-on-year increases in both the second half and the entire year. Regarding earnings, it expects operating income to increase in the second half but remain mostly unchanged for the entire year.

More on this financial report from Shiseido can be found here.