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Shiseido Weathers Its Rocky Q1 2014

Posted: July 31, 2014

Shiseido announced its consolidated settlement of accounts for its first quarter of the fiscal year ending March 31, 2015 (from April 1–June 30, 2014). The company saw net sales of ¥168.3 billion, a 3.7% increase from the same time period for the previous year. Operating income was down 80.2% to ¥1.3 billion, while ordinary income was ¥1.4 billion (-80.9%) and net income was ¥1.7 billion.

In the first quarter under review (the three-month period from April 1 to June 30, 2014), the economic sentiment in Japan was characterized by moderate recovery underpinned by government economic measures. Despite the remaining effects of a recoil following a rush in demand ahead of the consumption tax hike, personal consumption showed signs of a turnaround. The domestic cosmetics market was impacted by similar factors, with the growth rate falling below previous-year levels, although the situation appears to be recovering with each passing month. Overseas cosmetics markets are closely linked with economic conditions in their respective countries. In Europe, there was negative growth, while the Americas and Asia continued enjoying moderate growth. (For overseas subsidiaries, the first quarter refers to the period from January 1 to March 31, 2014.)

In this environment, the Shiseido Group positioned fiscal 2014 as a year of preparing for drastic reforms. In addition to formulating a new long-term vision and a medium-term business plan due to start in the next fiscal period, the company is targeting three major priorities: strengthening marketing execution and brand attractiveness from the customer’s perspective, reforming its organization and corporate culture, and reinforcing its operational foundation.

As a result, the company posted consolidated net sales of ¥168.4 billion, up 3.7% from the previous corresponding period. In the domestic cosmetics business segment, Shiseido increased shipments to the address shortage of market inventories at the end of the previous fiscal year. Due to the major impact of the recoil in demand associated with the consumption tax hike, however, segment sales declined 3.3% year on year, to ¥73.3 billion. With respect to over-the-counter sales, the trend of negative differential vis-à-vis the previous corresponding month has been improving with each passing month. In the global business segment, the company posted year-on-year sales growth in its Chinese business, with a solid performance by the Aupres brand. In the Americas and Europe, however, the makeup artist brand Nars performed well, but sales of fragrances and the BareMinerals brand declined year on year.

Accordingly, the global business segment posted a 1.8% decline in sales in local-currency terms. After translation into yen, however, segment sales increased 9.8%, to ¥92.6 billion. Sales in the others segment rose 10.7%, to ¥2.5 billion, thanks largely to a healthy performance by the Frontier Science division.

Operating income fell 80.2% year on year, to ¥1.4 billion, due mainly to an increase in personnel expenses stemming from higher bonus payments. The company posted a net loss of ¥1.8 billion for the period. This was because tax expenses increased due to smaller tax benefit related to elimination of unrealized earnings.

Learn additional information from this financial report from Shiseido here.