The company’s net profit more than doubled since the previous year totalling at ¥61.4bn ($559m), up from ¥22.7bn ($206m) the previous year “due to higher operating profits and absence of an impairment loss associated with Bare Escentuals recorded last year.”
However, net profit fell short of ¥5.6bn ($51m) against the forecast announced at its first-half results briefing in August.
Net sales increased 8.9% to reach ¥1.09tn ($9.9bn) and operating profit grew 34.7% to ¥108.4bn ($986m). Operating profit did not reach the August forecast by ¥1.6bn ($15m).
Drivers of growth
Norio Tadakawa, corporate executive officer of Shiseido, attributed the results to the accelerated growth of prestige brands, and the ‘dramatic’ growth of its cosmetics brands such as ELIXIR and ANESSA.
In Shiseido’s prestige category, its core brands achieved growth of 20%, which contributed significantly to the company’s total sales and profits, said Tadakawa.
Sales of Shiseido’s eight key brands – Shiseido, Clé de Peau Beauté, NARS, IPDA, Laura Mericer, ELIXIR, ANESSA and Dolce&Gabbana – grew by approximately ¥115bn and accounted for 90% of total sales growth.
Tadakawa also highlighted the company’s success with cross-bordering marketing in Japan, China and Travel Retail businesses.
For instance, he said that ELIXIR and ANESSA, achieved rapid growth in Japan and in China and other parts of Asia, thanks to strong cross-border marketing.
In Japan, store sales grew 11% against the market growth of 1%, indicating “a significant expansion of market share”, said Tadakawa.
Tadakawa concluded: “As there are many brands in Japan, further clarification of the brand portfolio considering Asia as a single market is required.”
Americas and EMEA
The Americas and EMEA posted 4% and 5% growth respectively. Tadakawa highlighted that the Americas grew despite the impact from unprofitable boutique closures.
“The Americas moved out of the declining trend until last year and is now on a growth path,” he assured.
“We are taking steps to improve the profitability in the Americas and EMEA. While reductions in fixed costs and other expenses have started to be effective, ROIs for marketing and global brand holders were insufficient”
China the ‘highest priority’
Shiseido sales in China increased by 32%, prompting the company to highlight the country’s significant to the company’s future growth.
Despite talk of an economic slowdown in China, Shiseido stresses that the Chinese market remains a priority.
“To expand our top line, what is critical is the growth coming from Japan and China. In China, market trends in general is showing a down trend. Cosmetics sector is also decelerating, but demand for our brands remain strong with store sales increasing out share significantly,” said Tadakawa.
“China growth will be the highest priority for us and we will continue to drive this momentum,” he added.
President and CEO, Masahiko Uotani said that Shiseido had “humble confidence” in its performance in China because it is currently outpacing all its peers.
“In a nutshell, we are quite strong in China. In January and February we are continuing this strength. Prestige is growing 40%, Travel Retail growing 28%, and in-bound sales growing at mid-single digit. I assume we are achieving 30% growth all in all,” said Uotnai.
