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Shiseido Lifts Operating Profit, Sales Forecasts

The Japanese beauty giant said it is seeing a "moderate recovery" in economic sentiment in Japan.

TOKYO — Shiseido raised its full-year operating profit and sales forecasts as it cited a “moderate recovery” in economic sentiment but cut its net profit estimate on inventory costs.

The cosmetics giant said it now expects its operating profit for the year ending March 31 to grow 53.6 percent to 40 billion yen, or $406.97 million. That’s up from a previous forecast of 49.7 percent growth. Similarly, it upgraded its sales estimate, predicting that sales will grow 9.2 percent to 740 billion yen, or $7.53 billion. Previously it was expecting 7.3 percent growth. Broken down geographically, Shiseido is forecasting that full-year domestic sales will fall 1.7 percent to 367 billion yen, or $3.71 billion. It is predicting that overseas sales, however, will grow by 22.5 percent to 373 billion yen, or $3.77 billion. If the company achieves this, it will be the first time that its international sales have exceeded those in its home market of Japan.

The company did trim its net profit forecast to 15 billion yen, or $152.61 million, from a previous estimate of 20 billion yen, or $203.49 million. A spokesman said the company cut its net profit forecast due to second-quarter extraordinary losses on inventory adjustment, which the company flagged in a profit warning earlier this month. Shiseido posted a full-year loss the year before.

Shiseido chairman, president and chief executive officer Shinzo Maeda discussed the company’s strategy for the next fiscal year at an analysts’ briefing in Tokyo on Thursday. One of the company’s key objectives is to reduce the stock held by retailers. To combat this issue, Shiseido plans to release smaller quantities of products, reduce minimum-order units and be more selective in terms of sales points for product launches.

In Japan, Shiseido plans to introduce new lines of products targeting senior customers at some point next year. It will also be strengthening its advertising and publicity efforts, while adapting a double counter strategy in department stores, by offering the brands Shiseido and Clé de Peau Beauté at separate counters.

Maeda said that, in the Chinese market, the company will focus on expanding its locally produced brands, once again reiterating that Shiseido’s performance in the country has suffered due to a territorial dispute with Japan over a small group of islands. While the company plans to continue its expansion in large coastal cities, it also aims to add two additional provinces each year.

Shiseido has signed a letter of intent to establish a joint venture with Indonesia’s Sinar Mas Group in early 2014. The new company will be charged with introducing the Za brand to the Indonesian market, targeting middle-class consumers with products that are priced at an average of about $10. Shiseido is expected to hold a 65 percent stake in the joint venture.

As for the first half of the year through Sept. 30, Shiseido released figures in line with its guidance from two weeks ago. Net profit grew 7.1 percent to 5.38 billion yen, or $54.31 million at average rates for the period. Operating profit more than doubled to 20.39 billion yen, or $205.95 million. Sales increased 8.1 percent to 360.50 billion yen, or $3.64 billion.