TOKYO — Shiseido said Tuesday that its net profit for its fiscal first quarter rose 16.1 percent compared to the same period last year. The gain was largely due to lower tax payments than the previous year, although net sales also increased.
The company’s operating profit, on the other hand, fell by 17.4 percent to 38.93 billion yen, due to increased investments in marketing, research and development, and human resources. Shiseido said the higher expenses and lower operating profit are in line with its current medium- to long-term strategy, a six-year plan intended to continue through 2020.
Shiseido’s first-quarter net sales were up by 3.7 percent to 273.62 billion yen. On a local currency basis, sales increased by 5.1 percent year-on-year. The company saw its biggest growth in Asia excluding Japan. In China, sales gained 15 percent to total 52.51 billion yen, while sales across the rest of the Asia-Pacific region grew by 11 percent to 18.93 billion. The travel retail business also performed well, with revenues up 9.3 percent to 23.4 billion yen.
“In the China business, the strong performance of prestige brands such as Shiseido, Clé de Peau Beauté, Ipsa and Nars continued, while sales of the Made in Japan cosmetics brands Elixir and Anessa continued to record significant growth,” the company said in a release. “Substantial growth in e-commerce in all brand business[es] contributed to growth of the China business.”
Shiseido saw its first-quarter sales decline by less than 1 percent in three geographic regions: its home market of Japan (down 0.6 percent to 113.97 billion yen), the Americas (0.5 percent to 28.02 billion yen), and Europe and the Middle East (0.1 percent to 25.03 billion yen).
“In the Americas business, fragrance brands such as Dolce and Gabbana and Narciso Rodriguez performed well, but sales of BareMinerals, which is in the process of closing unprofitable boutiques and other structural reforms, underperformed. Nars fell year-on-year mainly due to cycling of a new product launch in the first quarter of 2018,” the company said.
Shiseido has restructured its brand portfolio to focus on consumer-oriented activities, as well as prestige and Made in Japan brands. While it has seen its increased marketing investments pay off with strong sales, it has also struggled to meet demand for certain products.
“In the Japan business, we continued to see strong sales growth of Shiseido and Elixir, in which we have continued increasing marketing investment, and we also secured steady inbound demand from overseas tourists to Japan by strengthening cross-border marketing throughout Asia,” the company said. “We experienced a major opportunity loss after Revital wrinkle-lift cream and other products ran out of stock.”
Shiseido left unchanged its guidance for its current fiscal year. For the 12 months ending Dec. 31, it expects net profit to grow by 23 percent to 75.5 billion yen and operating profit by 10.8 percent to 120 billion yen. It is forecasting full-year net sales growth of 7 percent, for a total of 1.17 trillion yen.