Shiseido flagship

TOKYO — Shiseido posted a net loss for the first quarter of its financial year, despite increases in sales and operating profit, the company said Wednesday. The loss was mainly due to an impairment loss the company recorded as a result of the partial termination of its license agreement with Dolce & Gabbana.

For the three months ended March 31, Japan’s largest cosmetics company posted a net loss of 1.53 billion yen, or $14 million. This was down from a first-quarter net profit of 1.4 billion yen in the same period a year earlier.

Operating profit for the period totaled 10.88 billion yen, up 67.6 percent year-on-year.

Shiseido posted first-quarter sales growth of 7.5 percent, with net sales coming in at 244.01 billion yen.

“In the first quarter of the fiscal year 2021, global economic conditions remained challenging, as economic activity stagnated due to the COVID-19 outbreak, and consumer sentiment declined due to worsening corporate earnings and employment,” the company said in a release. “In the Japan cosmetics market, consumer traffic decreased as a result of consumers staying at home and shortened operating hours in the retail sector under declared state of emergency. Other factors included a sharp drop in visitors to Japan, which significantly decreased inbound demand. Globally, although some countries and regions showed signs of recovery, the impact of the outbreak continued overall, particularly affecting the makeup market. Meanwhile, China’s economy largely recovered, with the cosmetics market maintaining growth.”

Shiseido’s net sales grew in every region it operates in, apart from its home market. First-quarter sales in Japan dropped by 12.1 percent on the year, totaling 75.29 billion yen. This represented 37.8 percent of the company’s total sales.

In China, sales grew by 46.8 percent to 65.35 billion yen, making up 19.6 percent of total sales. The surge was largely due to a low comparative base from the first quarter of the previous year, whereas this year both Shiseido’s offline and online sales grew strongly, reaching higher levels than the same period in 2019.

“Higher marketing investments, mainly for skin beauty brands such as Shiseido, Clé de Peau Beauté and Ipsa, coupled with promotions for International Women’s Day in March and Shiseido’s 40th anniversary of business activities in China, also contributed to growth,” the company noted.

In the Americas, Shiseido narrowed its operating loss by 3 billion yen to 6.1 billion yen and net sales were up by 4.6 percent year-on-year to 24.37 billion yen. This accounted for 10.3 percent of the company’s total sales.

The company’s Asia Pacific business, which does not include Japan or China, saw its first-quarter net sales grow by 9.6 percent to 16.53 billion yen, which was 6.6 percent of total sales.

“We increased our market share in Taiwan and other major markets, and Vietnam and Singapore recorded double-digit growth,” Shiseido said. “In addition, e-commerce sales doubled, driven by Shiseido and other brands, thanks to proactive expansion into major e-commerce platforms in various regions.”

Shiseido also revised its guidance for the current fiscal year, ending Dec. 31. While it said it does not expect any changes to its forecasts for existing businesses, various reorganization measures have resulted in the changes.

The company raised its full-year net profit forecast to 35.5 billion yen, up from its previous guidance of 11.5 billion yen. Factors leading to the increase included 87 billion yen recorded as extraordinary profit due to a gain on transfer of shares, a 35 billion yen impairment loss on trademark rights resulting from the partial termination of its license agreement with Dolce & Gabbana, and other expected impacts.

On the other hand, the company lowered its sales and operating forecasts as a result of transferring its personal care business and establishing a joint venture company with Accenture, which it announced on Tuesday. It now expects a full-year operating profit of 27 billion yen, down from its previous forecast of 35 billion yen.

Shiseido now predicts its net sales for the year will come in at 1.067 trillion yen, as compared with its previous forecast of 1.1 trillion yen. Net sales for its previous fiscal year totaled 920.89 billion yen.