TOKYO — Shiseido announced a new three-year growth strategy as it continues to restructure and shift its focus, with the goal of becoming a major global player in the cosmetics industry.
Separately on Friday, it reported full-year sales grew by 5.7 percent, while net profit dropped by 27.1 percent due mainly to impairment losses associated with the sale of its personal care business.
For the 12 months ended Dec. 31, net profits totalled 34.2 billion yen, or $260.6 million. Operating profit for the year was down by 53.7 percent to 46.57 billion yen.
Net sales amounted to 1.07 trillion yen. Not counting the effects of currency translation, the company’s sales would have decreased by 3.9 percent.
Shiseido’s travel retail business posted strong sales growth of 35.7 percent, totaling 163.65 billion yen. This was due mainly to a sharp rise in tourist traffic as COVID-19 travel restrictions were relaxed throughout the world.
The company’s Americas business saw its yearly sales grow by 13.6 percent to 137.92 billion yen.
“In the Americas business, the cosmetics market continued to grow in all categories with the normalization of economic activities due to the relaxation of COVID-19 restrictions,” Shiseido said in a release. “Nars in particular saw share gains, driven by successful new product launches and growth in e-commerce supported by digital marketing enhancements. Sales of Shiseido remained steady on the back of strengthened promotions.”
In Shiseido’s home market, net sales fell by 8.2 percent to 237.57 billion yen. In China, the company’s sales decreased by 6 percent to 258.23 billion yen.
“In the China business, we are shifting from a growth model driven primarily by large-scale promotions to a more sustainable growth model, which focuses on value-based brand and product communication tailored to consumer needs. While the market faced a significant year-on-year decline during ‘Double 11,’ the largest e-commerce event in China, our annual e-commerce sales achieved growth, on the back of the expansion into major platforms and enhanced communication focusing on effect and efficacy,” Shiseido noted in its release. “Meanwhile, on the offline front, despite our efforts to enhance the unique experience at brick-and-mortar stores and expand the loyal user base, sales decreased year-on-year due to market headwinds such as traffic decline from lockdowns.”
Since 2021, Shiseido has been working under a medium-term strategy called “Win 2023 and Beyond,” which saw it carrying out structural reforms such as the divestiture of its personal care business and some makeup brands, while improving profitability in key markets such as the Americas and EMEA (Europe, the Middle East and Africa). In an effort to refocus its business on what it calls “skin beauty,” an area of the market in which it believes it has a competitive advantage, it has increased its sales ratio of these brands and products.
Now, Shiseido has announced a new medium-term strategy for 2023 to 2025. Dubbed “Shift 2025 and Beyond,” the program will see a restructuring of the company’s management in order to shift it from a defensive position to an offensive one. The first aim of the strategy will be to regain the growth of the Japan business, which in one area that remains unachieved from the previous strategy.
“We will achieve core operating profit exceeding 50 billion yen in the Japan business by 2025 through fundamental reforms over a three-year period from 2023. During the same period, we will implement reforms to improve sustainable sales growth and profitability, aspiring to become a personal skin beauty and wellness company,” the company said. “We are strengthening investment in the three priority areas of brand, innovation and people, and plan to achieve our core operating margin of 12 percent by 2025 and 15 percent in the plan’s final year of 2027.”
The three key areas of focus are enhancing the group’s brand equity, continuously investing in innovation, and strengthening global talent and leadership. Brands that it will focus on include bestsellers such as Shiseido and Cle de Eau Beauté, fragrance brands, men’s brands, and strategically developed new brands. In order to accelerate innovation, the company will invest 3 percent of its sales into research and development. On the talent front, it will invest in various leadership programs including Shiseido Future University, based in Tokyo’s Ginza district, where the company was founded.
Shiseido also released its guidance for its current fiscal year. The company expects its net profit to decline by 18.1 percent year-on-year to 28 billion yen.
The company is predicting a contraction in its yearly net sales of 6.3 percent to 1 trillion yen.