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Shiseido Lowers FY 2019 Forecast Due to Market Uncertainties

Japan’s largest beauty company posted a profit and sales rise in the first nine months of this year.

Shiseido Co. Ltd. said Thursday that its nine-month profits and revenues both rose, spurred by a last-minute pre-tax-hike spending rush, growth in its domestic activity, China and travel retail.

Also contributing to the gains were the moderate economic recovery in Japan and the group’s more consumer-oriented focus. To speed growth, Japan’s largest beauty company continues to accelerate digitization, develop new businesses and invest in marketing activities.

Still, due to market uncertainties, Shiseido downgraded its guidance for the fiscal year ending Dec. 31.

The company also said on Thursday that it had completed its acquisition of “clean beauty” brand Drunk Elephant Holdings. The transaction, valued at about $845 million, was first announced in early October. It is the latest step in the Japanese beauty company’s push to become a bigger player with a more global footprint.

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“Adding this U.S.-based brand with large global demand potential to Shiseido, Clé de Peau Beauté and other Japanese-based brands will further strengthen and expand the core prestige skin-care business and reinforce the sales and profit base in the Americas business,” the company said in a statement.

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Shiseido’s net profits for the nine months ended Sept. 30 reached 72.46 billion yen, or $663.8 million, up 13.2 percent year-on-year, thanks to a decrease in tax expenses, among other factors.

The group’s operating income for the period rose 1.9 percent to 103.32 billion yen. Its nine-month net sales advanced 5.1 percent to 846.63 billion yen, marking a high for the company. On a constant-currency basis, revenue growth was 7.2 percent.

Sales in each of Shiseido’s business segments — except for the Americas and “other” category — registered gains. In the Americas, revenues declined 1.1 percent to 93.48 billion yen, due partly to BareMinerals underperforming versus the prior year and increased costs linked to organizational enhancement.

The largest growth came from Shiseido’s travel-retail business, where sales gained 16 percent to 78 billion yen. Japan posted a rise of 3.1 percent to 350.67 billion yen. In China, sales grew 12.8 percent to 158.52 billion yen.

Shiseido is now expecting its net income to come in at between 78.5 billion yen and 83 billion yen, versus the previous forecast in August of 83 billion yen. It expects its yearly operating profit to reach 113 billion yen to 120 billion yen, rather than the formerly announced 120 billion yen.

Shiseido predicts its sales will reach 1.13 trillion yen to 1.14 trillion yen, instead of 1.16 trillion yen.

“Market uncertainties increased due to the effect of FX fluctuations, trade frictions between the U.S. and China, declining sales in markets such as Hong Kong and South Korea, unfavorable weather in Japan and a decrease in the number of inbound buyers, as well as structural channel shifts and a continued slowdown in the makeup market in the U.S.,” the company said.