Shiseido Sales Drop 5.4% in 1st Qtr.

Shiseido Co. Ltd. reported Thursday its operating profits and net sales were down in the first-quarter '08-'09, due to sluggish domestic business.

Shinzo Maeda, president and chief executive officer of Shiseido.

TOKYO — Shiseido Co. Ltd. reported Thursday its operating profits and net sales were down in the first-quarter ’08-’09, due to sluggish domestic business.

This story first appeared in the August 1, 2008 issue of WWD.  Subscribe Today.

Its operating income in that quarter, ended June 30, fell 21.2 percent to 12.2 billion yen, or $116.8 million at average exchange, since “efforts to improve the cost of sales ratio and boost spending efficiency failed to compensate for the decrease in revenues,” stated Shiseido.

Shiseido’s overall sales declined 5.4 percent to 164.1 billion yen, or $1.57 billion.

Its cosmetics activity registered an 8.8 percent drop in domestic revenues to 96.2 billion yen, or $921.5 million, due to weak consumer confidence and unfavorable weather conditions. In Japan, Shiseido focused on nurturing existing brands and lines rather than introducing products. The company said basic skin care performed well but that sales of color cosmetics and skin-lightening essences, alongside items such as sunscreen and deodorants, had a weak showing.

Meanwhile, Shiseido’s overseas cosmetics revenues rose 1.6 percent to 63.2 billion yen, or $605 million. In local currencies, that business’ revenues gained 7 percent. Abroad, the company focused primarily on its basic skin care lines. In the Americas, Shiseido said it registered healthy sales, and in Europe, its signature brand and designer fragrances did particularly well. The firm’s business in China spiked 24 percent in the quarter, and Shiseido expects revenues growth there to be even faster in the first half, due partially to the renewal of its Aupres brand.

The company posted net income of 10.3 billion yen, or $98.7 million, in the quarter. Due to new accounting standards, the gain in net profits came in at 406.3 percent over the same prior-year period.

For its fiscal year’s first half, ended Sept. 30, the Japanese beauty giant estimates sales will be 360 billion yen, or $3.33 billion at current exchange, down slightly (at 0.8 percent) on its initial forecast. This is primarily due to its decline in domestic revenues during the first quarter and the fact that Shiseido expects consumer confidence in Japan to remain weak for the time being.

For its full year ending March 31, 2009, however, Shiseido maintains its sales guidance of 730 billion yen, or $6.76 billion, up 1 percent on-year. The company believes exchange rate fluctuations will offset an expected decline in domestic sales.