Hisayuki Suekawa

Company is still coming to terms with the human, structural and financial toll of the disaster; hundreds of sales points were destroyed.

TOKYO — Shiseido Co. on Tuesday issued a profit warning for its most recent fiscal year, citing the impact of last month’s massive earthquake and tsunami. But the company is still coming to terms with the human, structural and financial toll of the disaster.

This story first appeared in the April 20, 2011 issue of WWD. Subscribe Today.


Hisayuki Suekawa, who became the beauty giant’s chief executive officer earlier this month, just returned from a trip to the northeastern part of the country to meet with its retail partners and assess the damage. He estimates that about 200 to 300 of Shiseido’s sales points were destroyed and many of those stores’ owners are dead or missing. He flipped through photos of his two-day trip on an iPad, showing empty husks of stores caked in mud. Boats, cars and piles of debris are strewn everywhere. “The water came up to here,” he said, holding his arm up to his chest.

But he’s also quick to note the optimism and resiliency of the region’s people. “She’s the owner,” he said as he pointed to an image of a woman smiling broadly. Suekawa said locals are eager for the stores to reopen and some of the retailers are planning to open temporary stores. Shiseido will help its partners by taking on the cost of lost inventory, replacing damaged cash registers and giving vendors extra time to make payments, he said.

“Entire cities and entire towns were washed away basically…it isn’t just about rebuilding our own customers or clients, but it’s about building the whole town or city back up to its previous condition,” he said. “It will take a long time to see an actual recovery, that’s the impression I got.”

Not long after the quake and tsunami struck, Shiseido made a monetary donation and shipped soap, disinfectant and dry shampoo to displaced victims of the disaster. More products are on their way. Shiseido is preparing some 30,000 kits of lotion, lipstick samples, foundation, mirrors and other items to help people reclaim a bit of their normal routines, he said.

“In the evacuation centers, there is no place where they can check their faces. There are no mirrors for them,” Suekawa said.

The executive said the company is still evaluating the scope of the damage. The 200 to 300 destroyed stores comprise no more than about 1 percent of Shiseido’s total sales points in Japan, according to a spokeswoman. Suekawa said the disaster will translate into 3 billion yen, or $35.7 million, in lost sales and 1.5 billion yen, or $17.9 million, in extraordinary losses for the company for the fiscal year concluded March 31, almost three weeks after the quake and tsunami struck.

It’s clear that the disaster and its aftermath only account for a small portion of the broader financial picture for Shiseido, which releases full-year numbers on April 27.

The beauty giant said Tuesday it expects net profit for the year ended March 31 to come in at 13 billion yen, or $154.7 million at average exchange rates for the period. That’s down from an earlier forecast of 18 billion yen, or $214.2 million.

Sales are now seen coming in at 670 billion yen, or $7.97 billion, from a previous target of 680 billion yen, or $8.09 billion.

This is the second time in four months that Shiseido has cut its earning and sales forecasts as conditions in its home market of Japan continue to deteriorate and consumers spend less on beauty products.

The executive said it’s too soon to give a forecast for the new fiscal year it started this month. There could be more rolling blackouts in the summer when businesses and homes use air conditioning, he said. That means retailers might need to shorten their operating hours and factories might need to shut down at various periods to conserve power. Suekawa said the steep drop in Chinese tourism to Japan and nuclear fears aren’t helping the situation either.

“There are so many invisible factors at this point,” he said.

Suekawa said Japanese consumers, particularly those in the Tokyo area, are starting to come out of the “self-restraint” mode they slipped into in the first few weeks  after the tsunami.

“People are now starting to feel they cannot continue self restraint forever. [We have to support] our economy,” he said.

Last week, the company said it will launch e-commerce in both the United States and China.

Next year, Shiseido plans to launch a virtual shopping mall platform in Japan, incorporating both paid and free content as well as non-beauty products from other companies.

 

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