In the global battle of the cosmetics giants, The Estée Lauder Cos. Inc. has an edge on Shiseido Co., according to debt watchdog Standard & Poor’s.
In a side-by-side comparison, the rating agency said both firms enjoy strong brand recognition, good cash flow, strong liquidity and good geographic diversity. But S&P said Lauder has “a slight edge,” noting, “Its margins are higher, its credit metrics are steadier, and its cash flow is stronger.”
Both the U.S.-based Lauder and the Japan-based Shiseido have a credit rating of “A,” with a strong business risk profile and a modest financial risk profile.
S&P noted that Shiseido generates more than half of its revenues in Japan and, although it does well elsewhere, any decline in its primary market will have a significant impact on the company’s results.
The credit firm said there are still lots of growth opportunities in the industry, which has a historical compounded annual growth rate of 3 percent to 4 percent.
“In developing regions, such as Asia, Latin America and Africa, middle classes with disposable incomes are growing,” S&P said. “The cosmetics markets in some emerging economies — China, for example — are growing faster than the countries’ GDPs. Within the Chinese market, in particular, the competition between major Europe-, U.S.- and Japan-based cosmetics companies has intensified.”
That means Shiseido and Lauder will continue to have plenty of opportunities to slug it out.