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Shiseido Net Sales Down 0.7%

Posted: April 29, 2013

Shiseido reported its consolidated settlement of accounts for the fiscal year ending March 31, 2013, recording a 0.7% drop in net sales (¥677.7 billion vs. ¥682.38 billion the prior year) and a net income drop of 33.4% (¥26 billion vs. ¥39 billion). Domestic sales (in Japan) declined 1.8%, but overseas sales edged up 0.7%.

In China, despite making significant marketing investments, the impact of anti-Japanese sentiment had a greater impact on revenue than expected. Due also to an increase in expenditures related to bareMinerals and a decline in marginal gain stemming from lower domestic sales, operating income fell 33.4% to ¥26 billion, and the group posted a net loss of ¥14.7 billion for the year. In addition to the decline in operating income, this resulted from extraordinary losses totaling ¥36.3 million, which included an impairment loss of ¥28.6 billion on goodwill related to Bare Escentuals, Inc.

In its domestic cosmetics business segment, Shiseido saw sales down 2.2% to ¥345.9 billion. Within this segment, sales in the cosmetics business category declined to intensification of the competitive environment, and sales in the health care business category were down as core brands were impacted by overall market contraction. In the cosmetics business category, Shiseido continued from the previous year to hone down the number of new product releases, launching only products chosen meticulously to garner strong support from customers. Overall, the domestic cosmetics business segment posted a 6.6% decline in operating income, to ¥27.5 billion. This was mainly due to a marginal decrease stemming from the fall in revenue.

In April 2012, the company launched a new business model designed to generate new customer interaction opportunities by linking web to retail stores. This was the first change of Shiseido’s business model since introducing the voluntary chain store system in 1923. In addition, it sought to build frameworks aimed at reflecting consumer opinions and refining its store-level responses.

In other domestic cosmetics-related businesses, various subsidiaries that do not bear the Shiseido name continued performing well. These included Ettusais Co., Ltd., which introduced Za, a skin care and makeup brand in Asia, to Japan; as well as D’icila Co., Ltd. and Ipsa Co., Ltd.

Sales for Shiseido’s global business segment edged up 0.8% to ¥322.3 billion and grew 2.5% on local currency basis. Both the cosmetics business and professional business categories posted year-on-year sales increases. At the prestige end of the cosmetics business, the global brand Shiseido achieved strong sales growth, and the Nars makeup artist brand generated a significant sales increase, especially in North America. Moreover, the company’s designer fragrances posted healthy sales growth, and the travel retail business also continued performing well.

In the top-priority Chinese market, sales remained unchanged on a local currency basis but increased slightly in yen terms. In the Asian masstige market, the company posted higher sales of Za, especially in Thailand, and it also introduced the Senka brand in Thailand, Singapore and Malaysia. In regard to newly emerging nations, Shiseido introduced the bareMinerals and Nars brands in Brazil, and in India, it opened a representative office and studied ways to pursue a full-fledged market entry. The company also expanded its business in new markets, launching sales in Tunisia and Argentina.

For the year, the global business segment posted an operating loss of ¥3.3 billion, down ¥11.5 billion from the previous year. This was due to several factors, such as aggressive marketing expenditures in growth markets (centered on China) and in the bareMinerals brand.

In the year ending March 2014, Shiseido expects a rise in domestic sales, together with revenue growth in Europe, North America, China and newly emerging markets. It also projects a year-on-year increase in operating income after factoring in a marginal gain stemming from higher net sales, as well as the impact of cost structural reforms and business structural reforms. For the year, the company forecasts consolidated net sales of ¥710 billion.

For more specific information on Shiseido’s fiscal results ending March 31, 2013, as well as more detail information on its 2013–2014 forecasting, visit the company’s website.