On May 10, Japanese beauty giant Shiseido Company, Limited announced its financial results for the first quarter of the fiscal year 2024, ending March 31, 2024. The net sales increased by 3.9% year-on-year to ¥249.5 billion. After adjusting for exchange rate impacts and business transfers (including the acquisition of American skincare brand Dr. Dennis Gross), the adjusted year-on-year growth was 3.2%, but on a constant currency basis, it declined by 2.7%.
The total core operating profit was ¥11.3 billion, which, despite being ¥1.2 billion lower year-on-year, exceeded Shiseido Group’s quarterly target, marking a robust start to the fiscal year.
As of the market close on the report release date, Shiseido’s stock price was $28.97, a slight dip of 0.12% from the previous trading day. By the close on May 13, it rose by 2.83% to $29.79, with a market value of $11.91 billion.
Shiseido Group President and COO Kentaro Fujiwara highlighted the core achievements of the first quarter, including steady implementation of structural reforms, market recovery, and strategic marketing investments, which increased market share in Japan and China’s high-end markets, securing a solid recovery.
Focusing on the Chinese market, Fujiwara commented: “Even with moderate market growth, ongoing reforms and targeted investments in growth areas will ensure stable growth and profit creation. We are observing rapid changes in the Chinese market. Thus, I am pleased with our quick organizational optimization. Despite the turbulent and uncertain environment, we have maintained profitability through streamlined operations and prudent investments. Our key areas, such as the high-end market, saw high single-digit growth, with NARS achieving over 20% growth. Consequently, the Group increased its market share in the high-end segment in the first quarter.”
Shiseido Group attributed the overall sluggish sales growth to retailer inventory adjustments in the travel retail business and decreased inter-segment sales in travel retail and China business units, impacting the Group’s profitability. However, core operating profits in all other markets (including Japan, China, Asia Pacific, Americas, Europe, Middle East, and Africa) increased.
Net income attributable to owners decreased by ¥12 billion year-on-year, resulting in a loss of ¥3.3 billion. This was mainly due to reduced core operating profit and recognition of restructuring expenses related to early retirement incentive programs in non-recurring items in the Japanese business.
By brand, Drunk Elephant, fragrance business, and Clé de Peau Beauté led the growth for the quarter, increasing by 30%, 21%, and 7% respectively; IPSA and SHISEIDO declined by 21% and 5% respectively, while ANESSA remained flat year-on-year.
By market, net sales in Japan were ¥73.6 billion, a significant year-on-year increase of 19.3% at current exchange rates, and 19.6% at constant rates, accounting for 29.5% of the Group’s total net sales. Core operating profit reached ¥6.7 billion, a notable increase of ¥8.3 billion compared to the previous year, driven by increased gross profit from sales growth and improved cost efficiency.
In China, first-quarter net sales reached ¥55.5 billion, a year-on-year increase of 4.2% at current exchange rates, representing 22.2% of Shiseido’s total net sales. After adjusting for exchange rate impacts and business transfers, net sales declined by 3.2% at constant rates and 2.6% excluding these effects. Core operating profit increased significantly by ¥2.3 billion year-on-year to ¥1 billion, due to effective cost management strategies.
Shiseido announced strategic adjustments for its Chinese operations, moving away from heavy reliance on large-scale promotions towards a more sustainable model focused on value-based brand communication according to consumer preferences. In this quarter, Clé de Peau Beauté and NARS achieved sustained growth, while SHISEIDO faced negative growth due to Chinese consumer concerns about Japan’s nuclear contamination discharge.
During the International Women’s Day e-commerce campaign, expanded promotions on diversified platforms like TikTok resulted in steady sales growth.
Notably, on April 25, Shiseido’s American clean beauty brand Drunk Elephant launched in the Chinese market through Sephora’s exclusive omnichannel network.
Net sales in the Americas reached ¥31.8 billion, a significant year-on-year increase of 22.4%. After adjusting for foreign exchange impacts and business transfers, growth was 8.9% at constant rates and 9.4% excluding these factors. Core operating profit increased by ¥2.1 billion year-on-year to ¥3.6 billion, mainly due to increased gross profit from sales growth.
Travel retail net sales were ¥29.8 billion, a significant year-on-year decrease of 22.7% at current exchange rates. After adjusting for exchange rate impacts and business transfers, net sales decreased by 30.4% at constant rates, and 30.5% excluding these factors. Core operating profit decreased significantly by ¥4.5 billion year-on-year to ¥3 billion, primarily due to reduced gross profit from declining sales. However, the company noted growth in sales at Japanese duty-free shops as tourist flows began to return.
| Sources: Official financial report, financial report PPT, conference call records, Yahoo Finance
| Image Credit: Financial report PPT
| Editor: LeZhi
