Michael Coombs, CFO of Shiseido, said during the company’s third quarter presentation that the company was anticipating sales to dip by 25 to 30 billion yen from its previous forecast citing the weak market conditions in Hong Kong, South Korea and the US.
“External challenges that we have identified include FX, growing market uncertainties stemming from US-China trade friction, and sales decreases in Hong Kong and South Korea. Our Japan Business has also been adversely affected by unfavourable weather and other factors.”
However, Coombs noted that the company is still working towards its original target.
“We have not given up on achieving our original target of 120 billion yen in operating profit. We will strengthen our long-term marketing investments, but at the same time we will coordinate with each region to improve cost efficiency in response to the business environment and strive to improve marketing ROI.”
Banking on prestige skin care
Coombs said Shiseido will continue to bank on its prestige and skin care categories to increase its profitability.
“We still see great growth potential for these brands given their market penetration. We view our portfolio of prestige brands, mainly skin care, as a key component of our profitability and the source of our competitiveness. Even in a challenging business context, we will maintain our focus on these brands,” said Coombs.
He added that the company is aiming for SHISEIDO to become the first 200-billion-yen ($1.8bn) band “in the near future”.
Overall, Shiseido reported stable performance for the third quarter despite external challenges, with operating profit growing by 13.3% while net sales increased 8.6%.
The company attributed this to the strong performance of its prestige brands, which saw sales grow by 11% supported by its key product launches and relaunches.
Prestige brands SHISEIDO, Clé de Peau Beauté and IPSA all recorded double-digit growth in the quarter.
This was attributed to successful launches of SHISEIDO ULTIMUNE eye serum and its new Synchro Skin Self-Refreshing Foundation, as well as Clé de Peau Beauté’s new skin care line. IPSA achieved robust sales in Japan and performed well in Asia’s travel retail space.
Boosting sales in China
In China, SHISEIDO, Clé de Peau Beauté, and NARS continued to grow over 40%, despite the market being relatively quiet, noted Coombs.
“Our prestige brands were able to achieve high growth rates by leveraging promotion events, such as Clé de Peau Beauté Super Brand Day,” said Coombs.
He added that the company will continue to pursue long-term sustainable growth in China by strengthening its brands. For instance, the company plans to offer exclusive SHISEIDO and Clé de Peau Beauté products through Tmall to secure strong demand during the 11.11 shopping festival.
“We are actively developing cross-border marketing to make this year’s [11.11] more successful. We understand that some products have already been sold out in advance, so we are off to a good start.”