TOKYO — Shiseido and Kao have slashed their full-year net profit forecasts by 17 percent and 13 percent, respectively, warning that market conditions are deteriorating.
This story first appeared in the January 30, 2009 issue of WWD. Subscribe Today.
Shiseido’s net profit for the nine months ended Dec. 31 dropped 18.7 percent to 21.3 billion yen, or $207.3 million. Sales slid 3.4 percent to 518.5 billion yen, or $5.04 billion.
“Both Japanese and overseas economies showed clear signs of retreat, while conditions surrounding markets for consumable goods became more difficult,” stated Shiseido. The company posted extraordinary losses of 6.9 billion yen, or $67.1 million, due to restructuring expenses and other costs related to the closure of its fashion retailing chain The Ginza.
Nine-month sales in Shiseido’s core Japanese market dropped 5.9 percent to 325.1 billion yen, or $3.17 billion, while international sales increased 1.1 percent in yen terms and 5.9 percent in local currency terms to 193.4 billion yen, or $1.88 billion.
The company said its recently revamped skin care line sold well in China and helped propel double-digit growth for the cosmetics business in Asia but conditions were more challenging elsewhere.
“Overseas, the cosmetics markets in industrialized countries felt the effects of the worldwide economic slowdown,” the company said. Shiseido cut its forecasts for the fiscal year ending March 31. The group now sees profit coming in at 30 billion yen, or $333.8 million, compared with an earlier forecast of 36 billion yen, or $400.6 million. Sales are seen coming in at 700 billion yen, or $7.8 billion, compared with an earlier forecast of 720 billion yen, or $8 billion.
Meanwhile, Kao said net profit for the nine months ended Dec. 31 rose 0.9 percent to 54.2 billion yen, or $527.1 million, thanks in part to a decision to defer some income tax payments.
Sales inched up 0.4 percent to 1 billion yen, or $ 9.77 billion. On a constant-currency basis, they would have risen 2.4 percent.
Despite cost-cutting measures, the rising prices of raw materials including natural oils, fats and petrochemicals bit into margins, the company said. Operating profit dropped 4.9 percent to 91.4 billion yen, or $888.9 million.
Kao cut its forecasts for the year ending March 31. Net profit is now seen coming in at 60 billion yen, or $667.6 million, compared with an earlier forecast of 69 billion yen, or $767.8 million. Sales are expected to come in at 1.29 trillion yen, or $14.3 billion, compared with a previous forecast of 1.33 trillion yen, or $14.8 billion.