Japan’s largest cosmetics company posted a net profit of 1.4 billion yen ($13.04 million) for the three months ended March 31. This was a steep drop from the same period a year earlier, when net profit totaled 33.5 billion yen. In addition to lower sales and operating profit, the company’s net was adversely affected by a negative impact on tax expenses.
Shiseido’s first-quarter operating profit also fell sharply, as “a drop in margins resulting from lower sales and unfavorable product mix outweighed prompt cost-saving measures in response to the rapid deterioration of the market environment,” the company said in a statement.
Operating profit fell 83.3 percent to 6.5 billion yen from 38.9 billion yen last year. The company’s net sales for the period contracted by 17.1 percent year-on-year to 226.89 billion yen.
For the first three months of the year, Shiseido saw sales fall in each of its eight business segments. In all but the travel retail business, sales were down by double-digit percentages compared with last year.
The company’s largest market remains its home country of Japan, which is where it also took the biggest hit. First-quarter sales in Japan dropped 21.2 percent to 85.67 billion yen.
“The Japan business saw consumption sentiment decline due to the spread of COVID-19 and the resulting tendency to stay at home as well as shortened operating hours or temporary closures of retail stores. This adversely affected sales, mainly for prestige and cosmetics brands. In addition, a sharp decline in the number of foreign tourists to Japan led to a significant drop in in-bound demand,” Shiseido said.
Sales in China were down 15.2 percent to 44.5 billion yen, and Asia-Pacific sales slid 20.3 percent to 15.1 billion yen.
“The China business was largely affected by the spread of COVID-19 from the latter half of January. Although approximately 70 percent of retail stores were closed at a time, over 90 percent resumed operation from late March, showing signs of recovery in mainland China,” it said. “Moreover, sales in e-commerce, an area of strengthened investment, grew mainly for prestige brands.”
Shiseido said its e-commerce sales in China rose 25 percent over the period.
“In the Asia-Pacific business, we took efforts to expand our brands and strengthen e-commerce amid an uncertain economic environment, but performance was hit by the spread of COVID-19, particularly in South East Asia,” the company said. “In Taiwan, the impact was relatively small, and there were signs of recovery in March.”
Shiseido’s Americas business saw its sales contract by 15.9 percent to 23.3 billion yen, but a bright spot was Drunk Elephant, which Shiseido acquired last year. The company said the brand’s performance was “firm due to continuously strong e-commerce sales despite the challenging environment.”
In consideration of the ongoing uncertainty surrounding the global pandemic, Shiseido also withdrew its previous guidance for its fiscal year ending Dec. 31. The company refrained from providing amended forecasts, saying that it will do so when it announces its results for the first half of the year.
“Going forward, business results are still subject to uncertainties, such as the viral spread and the timing of resumption of economic activities due to regulatory measures taken by each country,” the company said. “It is currently very difficult to assess trends and the impact of these uncertainties.”