TOKYO — Net losses decreased at Shiseido Group, while sales inched up on a consolidated basis during the first quarter, ended June 30.

Net sales increased 1.7 percent to 144.16 billion yen, or $1.32 billion, compared with the same period in the previous year.

Income from operations dropped 1.61 billion yen, or $14.7 million, year-on-year, to a loss of 778 million yen, or $7.1 million, reflecting an increase in marketing expenditures centering on advertising and promotions for the domestic cosmetics business, the company said.

Owing to a reduction in income taxes, however, the net loss was reduced by 1.81 billion yen, or $16.5 million, to 6.61 billion yen, or $60.3 million. Dollar figures are at average exchange rates.

The beauty company said “the Japanese economy revitalized gradually, driven by companies’ improved profitability and increases in capital investments.” Shiseido Group also noted there were “positive indications of recovery in consumer spending” during the quarter.

“Under these conditions, Shiseido initiated ‘proactive’ management by making aggressive investments, with aims to expand share in the domestic cosmetics market and to strengthen development in the Chinese market,” the company said.

“Domestic sales [of the group] were approximately level with the preceding year, while overseas sales expanded, centering on the strong growth in China,” said Shiseido Group.

“To note on quarterly trends, income from operations for the first quarter generally tends to be lower compared with the other quarters, due to relatively small net sales,” said the group.

In addition, “income tax due on the elimination of unrealized gain for the Group-owned inventory is calculated based on the parent company’s taxable income for the first quarter. Hence, income tax tends to be charged excessively, making net income subsequently remain at low levels,” said Shiseido.

Sales from cosmetics, which accounted for 80.2 percent of total sales, increased by 2.1 percent. Sales from the Americas, which made up 24 percent of the total overseas sales for the three months, increased 3.3 percent.

— Koji Hirano

This story first appeared in the July 27, 2004 issue of WWD. Subscribe Today.