TOKYO – Shiseido’s first-half 2017 net income contracted by 23.2 percent, due mainly to the absence of gains on the sales of land and the transfer of intellectual property rights recorded in 2016, as well as an extraordinary loss stemming from a voluntary recall of sunscreen products during the period under review.
For the six months ended June 30, Japan’s largest cosmetics company posted a net profit of 18.8 billion yen ($167.2 million), it said on Wednesday. Operating profit for the period was up 73.9 percent to 34.67 billion yen.
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“Despite the strengthening of investments in connection with new brands, this increase in operating income was largely due to improvements in the profitability of existing businesses mainly in the Japan, China and travel-retail segments, reform of the cost structure and reduction in the cost of sales ratio,” the company said in a statement.
Shiseido’s first-half net sales grew 14.5 percent to 472.11 billion yen.
Revenues advanced in just about each of Shiseido’s business segments. Sales in Japan were up 10 percent to 18.92 billion yen, sales in China grew 13.7 percent to 8.26 billion yen, and sales in the Americas increased 12.4 percent to 6.88 billion yen. In the latter market, sales of Bare Minerals declined on-year as Shiseido works to rebuild the brand. Meanwhile, sales of Laura Mercier, which Shiseido acquired last year, helped to bolster the results.
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Shiseido’s business in Europe and the Middle East boomed, with sales there gaining 24.5 percent to 10.59 billion yen, driven by Narciso Rodriguez fragrances and Dolce & Gabbana fragrances and makeup, for which Shiseido acquired the license last year.
But the biggest growth in a single segment came from its travel-retail business, which saw a sales increase of 92.4 percent to 11.1 billion yen.
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“In the travel-retail business, sales per store increased owing to the effects of proactive marketing investments for strengthening advertising at airports and other efforts,” Shiseido said. “Accordingly, sales at major airport duty-free shops in Asia, including China, South Korea and Thailand, significantly surpassed the levels recorded in the previous year.”
Shiseido raised its guidance for profit and sales this year. For the 12 months ending Dec. 31, it now expects net income to grow 1.2 percent to 32.5 billion yen. This is up from a previous forecast of 26 billion yen, which would have been a 19 percent decline on-year.
The company now predicts operating income will grow 52.3 percent to 56 billion yen, versus the formerly projected 23.7 percent increase to 45.5 billion yen. Shiseido is also forecasting net sales growth of 13.5 percent to 965 billion yen, against the 10.5 percent to 940 billion yen previously announced.