Shiseido Group’s Net Sales Decline by 8% in 2023, China Business Shifts to a “More Sustainable Model”

2月 20, 2024

On February 9, the Japanese beauty giant Shiseido Company, Limited announced its financial results for the fiscal year ending December 31, 2023: the annual net sales amounted to 973 billion yen, a decrease of 8.8% from the previous year, with a 12.2% decline on a constant currency basis, and a 1.8% increase on a comparable basis (excluding the impact of foreign exchange fluctuations and business transfers).

Shiseido Group stated that against the backdrop of increased geopolitical risks and rising inflation, consumer spending in all markets continued to recover at a moderate pace throughout the reporting period, although the recovery trend and pace varied by region.

In mainland China, despite strong market growth in the first half of the year, partly due to a lower comparison base caused by the pandemic in 2022, Shiseido Group’s performance in the Chinese market lost momentum in the second half of the year, affected by the Fukushima nuclear wastewater discharge incident and the challenging macroeconomic environment that weakened overall economic confidence. Additionally, since last year, with stricter regulations introduced in China and Korea, retailers have been adjusting inventories under tighter regulation. As a result, the Asian travel retail industry has been weak, impacting the sales of products in duty-free shops, such as China’s “duty-free paradise” Hainan Island, leading to Shiseido Group’s continued poor performance in the duty-free retail markets in Korea and Hainan Island, China.

The management indicated that for the business in mainland China, in the fiscal year 2023, the Group is shifting from a growth model primarily driven by large promotions to a more sustainable growth model, focusing on value-based brand and product communication to meet consumer needs. SHISEIDO and Clé de Peau Beauté continued to be the main drivers of growth in this market in the first half of the year.

As of the close on February 9, Shiseido Group’s stock price rose 1.46% to 4245 yen per share, with a latest market capitalization of 1.707 trillion yen.

Looking ahead, Shiseido Group stated that with the corporate mission of “BEAUTY INNOVATIONS FOR A BETTER WORLD”, it is actively promoting innovations aimed at solving issues of diversity, equity, and inclusion, as well as environmental problems, striving to achieve its vision for 2030, “a sustainable world where everyone can enjoy happiness through the power of beauty”.

Under the three-year mid-term strategy framework “SHIFT 2025 and Beyond” covering 2023 to 2025, the Group is increasing investment to drive mid- to long-term growth in the three key areas of brands, innovation, and talent:

In the current highly volatile external environment, the Group’s business is undergoing a transformation to achieve the goals of “improving gross margin”, “significantly reducing costs, and increasing employee productivity”, and is advancing its strategic efforts to drive long-term profitability and corporate value, “To optimize our cost structure in line with our long-term market outlook, we are fully committed to achieving our cost reduction goals globally”.

Additionally, Shiseido Group will optimize its regional footprint and rebuild its business model to cope with the uncertain and dynamic business environment. Furthermore, the Group will make strategic marketing investments based on market trends, leveraging its global brand portfolio to drive sustainable growth. The Group stated that 2023 is the first year of the “SHIFT 2025 and Beyond” mid-term strategy, “We continue to strive to address various market challenges (especially in the Chinese market) and have successfully launched innovative products across multiple brand portfolios, continuing to commit to enhancing brand assets through strategic marketing investments”.

Looking forward, specifically, Shiseido Group expects a 1.1% increase in net profit to 22 billion yen and a 2.8% increase in net sales to 1 trillion yen for the fiscal year 2024.

Moreover, the Group anticipates that sales in China will recover and achieve a 5% growth from the fiscal year 2024 onwards. On August 24, 2023, the Japanese government carried out the first discharge of nuclear wastewater from the Fukushima Daiichi Nuclear Power Plant into the sea, with the total discharge duration expected to last for decades. This decision led to a boycott of Japanese products, especially cosmetics, by Chinese consumers. Recently, the fourth discharge of nuclear-contaminated water is about to start. In response, Shiseido Group expects that the negative impact of the nuclear wastewater discharge on its business in China will continue into the first quarter of 2024, but the severity will be less than in the second half of 2023, and its sales in China will start to grow again in the second quarter.

| Source: Shiseido Group Official Website and Official Financial Reports

| Image Credit: Shiseido Group Official Website

| Editor: Liu Jun