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Shiseido Forecasts 45.3% Gain in Net

Profits for current fiscal year is to include extraordinary gains due to sale of two brands.

TOKYO — Shiseido Co. Ltd. said it expects its net profit for its current fiscal year ending Mar. 31, 2015 to grow 45.3 percent on extraordinary gains associated with the sale of two brands, Carita and Decléor, to L’Oréal. That deal is expected to conclude at the end of this month.

 

However, the company’s president and chief operating officer Masahiko Uotani said that increasing costs will cut into its operating profit for the year.

 

Japan’s largest cosmetics company said it is expecting yearly net income to total 38 billion yen, or $371.1 million at current exchange rates.

 

The company is forecasting a 15.4 percent drop in operating profit, to 42 billion yen, or $410.2 million. At an analyst briefing in Tokyo on Friday, Uotani said the main reasons for the drop would be increased marketing expenses and increased labor costs, which will outweigh gains in operating profit due to higher sales and structural reforms.

RELATED STORY: Shiseido Lifts FY Outlook >>

 

Shiseido is expecting net sales for the year to grow 2.4 percent to 780 billion yen, or $7.62 billion.

 

Uotani, who worked as a marketing consultant to Shiseido since last April before taking the helm of the company on the first of this month, laid out his plans to strengthen its brand value by establishing a global marketing model. Particularly in Japan, consumers have become confused as to the identity of Shiseido as a brand, since the name appears on a variety of product lines across a range of prices and categories, he said.

 

Uotani also said that Shiseido would focus its efforts on the brands that perform best, namely Shiseido, Elixir and Maquillage in Japan.

 

“It’s not simply that we have too many brands, but we have a lot of brands in the same target or price range; a lot of similar brands,” he said. “I think that’s the problem.”

 

Internationally, Uotani said Shiseido would focus on strengthening the presence of its key brands in each market. For the United States, these brands include Shiseido, Bare Minerals and Nars. Uotani said that while each market differs and therefore needs a local strategy, Shiseido also needs a more unified global marketing plan that will give it the recognition it seeks around the world.

 

Last week, Shiseido lifted its outlook for the 12 months ended March 31, the results for which it released today.

 

Net profit for the year totaled 26.15 billion yen, or $261.23 million at average exchange rates for the period. In the previous fiscal year, the company posted a loss of 14.69 billion yen, or $177.69 million.

 

The company’s yearly operating income grew 90.6 percent to 49.64 billion yen, or $495.94 million.

 

Shiseido said it posted net sales growth of 12.4 percent for a total of 762.05 billion yen, or $7.61 billion.

 

The company said that the better-than-expected performance was due largely to the effects of currency translation. For example, sales in its global business segment increased 24.8 percent on the year, but in local currency terms the increase was just 1.4 percent.