TOKYO — Shiseido said Friday that its first-half net profit fell 83.8 percent due to an exceptionally high comparative base in the same period the previous year, which stemmed from the sale of the Decléor and Carita brands. Increased taxes also played a role in the net income decline. Sales and operating income grew at a double-digit pace.
Net profit for the six months ended Sept. 30 totaled 3.99 billion yen, or $32.7 million at average exchange for the period.
Operating profit increased by 36.2 percent to come in at 14.88 billion yen, or $122.08 million.
Japan’s largest cosmetics company said it saw net sales growth of 12.6 percent in the fiscal first half, totaling 411.89 billion yen, or $3.38 billion.
Shiseido’s performance was strong in Japan, thanks to a stabilization of the cosmetics market due to a trend of economic recovery and increased demand from inbound international travelers. The company’s domestic sales grew 12.2 percent to 193.67 billion yen, or $1.59 billion.
Sales also grew in the Americas, Europe and Asian countries outside of China. Brands and products that performed well included Ultimune, Nars and Clé de Peau Beauté. Shiseido’s overall sales outside of Japan rose 13 percent to 218.22 billion yen, or $1.79 billion.
The one geographic area where Shiseido’s sales fell year-over-year was China, where the company’s sales organization reforms are going slower than planned.
“Currently, prestige brands such as Shiseido, Cle de Peau Beauté and Ipsa are performing extremely well [in China],” Shiseido’s representative director, president and chief executive officer Masahiko Uotani said at an analysts’ meeting Friday, adding that e-commerce sales in China also grew by four times. “But in the cosmetics business, where there are four brands: Za, Pure & Mild, Urara and DQ, each brand has its own sales structure. And naturally, there are a lot of areas in which customers overlap, so it seems like they should be under one system.”
Uotani also said the typical Japanese custom of rewarding employees based on seniority doesn’t work well in China, and therefore the company is changing to a performance-based system of compensation. Because of these and other issues, Shiseido lowered its nine-month sales outlook for the Chinese market. It previously predicted 8 percent growth, whereas that figure has been lowered to 3 percent.
Shiseido’s current financial year is a transitional one, as the company switches its fiscal yearend from March 31 to Dec. 31. Therefore its projections for the current fiscal year ending Dec. 31 are for a nine-month period, and percent change figures are based on adjusted figures for the same nine months in the previous year.
The company adjusted its guidance for the nine months ending Dec. 31, raising its net profit forecast, but lowering its sales projection. Net profit is now expected to fall 52.8 percent to 13 billion yen, or $108.54 million at current exchange. This is up from a previous forecast of 11 billion yen, or $91.85 million. Uotani said the new higher forecast had partly to do with extraordinary income that is expected due to the sale of the intellectual property rights of Jean Paul Gaultier fragrances.
The beauty products manufacturer is predicting 12.2 percent growth in full-year net sales, to 760 billion yen, or $6.35 billion. This is down from an earlier forecast of 765 billion yen, or $6.39 billion.
Shiseido left unchanged its operating profit guidance. It expects 41.3 percent growth to 30 billion yen, or $250.49 million.
