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Japanese Market Drags Shiseido to Loss

The beauty giant's sales in the first quarter declined 5 percent compared with the same period last year.

TOKYO — Shiseido posted a first-quarter loss on declining sales, most notably in its home market of Japan.

Japan’s largest beauty company said Tuesday it had a net loss of 1.27 billion yen, or $15.9 million, at average exchange rates for the three months ended June 30. That compares to a loss of 277 million yen, or $3.4 million, at exchange rates for that period a year ago.

The company attributed the loss to declining sales as well as increased marketing expenses, particularly for international markets.

Shiseido’s operating loss was 3.02 billion yen, or $37.7 million, which compares with an operating profit of 9.06 billion yen, or $111.4 million, the year before.

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Shiseido’s net sales for the quarter declined 5 percent compared with the same period last year, totaling 149.45 billion yen, or $1.87 billion.

Particularly hard hit were sales in the company’s home market of Japan, where cosmetics sales dropped 9.6 percent on the year to 75.51 billion yen, or $942.4 million. Shiseido blamed the drop on a high comparative base when there was a spike in sales immediately after last year’s earthquake.

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“Amid solid restoration-related demand following the [March 2011 earthquake], however, the economy adopted a moderate recovery tone, and the cosmetics market also showed signs of a slight turnaround. Overseas, despite apprehension about the effects of the debt crisis in Europe and slower economic growth in China, the cosmetics markets in the Americas continued growing, albeit moderately, while cosmetics markets in China and elsewhere in Asia also continued expanding,” the company said.

Overseas sales fell 0.1 percent to 71.73 billion yen, or $895.2 million, due to the strength of the yen. In local currency terms, global sales increased 4.1 percent.

“The global business segment benefited from healthy results in China, as well as solid performances by the makeup brand Nars in the Americas and the fragrance business in Europe,” the company said.

Shiseido cut its sales target for the year ending March 31 but left its net and operating profits forecast intact.

Shiseido now expects sales for the fiscal year to grow by 4 percent to 710 billion yen, or $9.07 billion. This has been revised downward from a previous sales forecast of 720 billion yen, or $9.19 billion.

The company expects net income for the year to increase by 51.6 percent to 22 billion yen, or $280.9 million at current exchange rates. It forecasts operating income will rise 11.2 percent to 43.5 billion yen, or $555.5 million.