Shiseido Sets Records for Sales, Earnings in First Half
TOKYO — Shiseido Group announced record sales and net profits for the first half, attributing the results to strong marketing and restructuring initiatives.

On a consolidated basis, net profits skyrocketed 115.3 percent to 10.3 billion yen, or $93.3 million at average exchange, for the half ended Sept. 30, compared with the year-ago period.

“Despite reporting an extraordinary loss related to the mandatory introduction of impairment accounting, interim net income jumped,” the Japanese cosmetics giant stated.

Sales were up 4.6 percent to 330.5 billion yen, or $3 billion, over last year. Meanwhile, domestic sales were up 2.5 percent and overseas sales, which made up 27.6 percent of the total business, grew 10.4 percent. Sales from cosmetics, which made up 78.8 percent of total sales, increased 4.3 percent. Domestic sales of cosmetics rose 1.5 percent.

As for overseas cosmetics, sales grew 10 percent in local currencies and 11.3 percent on a yen-denominated basis. During the period, Shiseido’s cosmetics business benefited from increased sales in all regions, led by China. “Sales of our mainstay Shiseido brand were solid, as were fragrances sold by Beauté Prestige International S.A., together with non-Shiseido brands, notably Nars and Decléor,” said the group.

Sales in China, including Hong Kong, rose 36 percent in local currencies and 33 percent on a yen basis. In China, Shiseido’s products were carried in 777 specialty stores at the end of September, a number the company projects to reach 1,000, by yearend. Sales in Asia and Oceania jumped 18.4 percent in local currencies and 19.7 percent on a yen basis to 31.4 billion yen, or $284.5 million.

Sales in Europe were up 4.1 percent in local currencies and 6.2 percent on a yen basis to 37.7 billion yen, or $341.6 million. In the Americas, including the U.S., Canada and Brazil, sales increased 7.2 percent in local currencies and 5.7 percent on a yen basis to 22.3 billion yen, or $202 million, compared with the same period a year earlier.
— Koji Hirano

Avon 3Q Net Beats Estimates
NEW YORK — Although Avon Products Inc. reported a 5 percent decline in third-quarter earnings per share as it experienced softness in its beauty, skin care and color businesses, the company managed to beat analysts’ estimates by six cents.

This story first appeared in the October 31, 2005 issue of WWD. Subscribe Today.

Net income for the quarter ended Sept. 30 dropped 7.4 percent to $163.8 million, or 35 cents a diluted share, from $176.9 million, or 37 cents, in the same period last year. Analysts had the company pegged to earn 29 cents. Sales in the quarter fell 4.5 percent to $1.87 billion from $1.78 billion a year ago.

“After five years of strong market performance, clearly the business dynamic has changed on us dramatically,” said Andrea Jung, Avon’s chief executive officer, on a conference call. “We are now operating with a new set of macrorealities. At the same time, there are a number of company-specific issues that are also compounding our results and these problems are very fixable, but they will take time.”

Jung said the company’s product pipeline and investments were not strong or deep enough this year to keep up with competitors, but that Avon has long-term structural and process-oriented changes under way to improve operations.

By market, the U.S. was Avon’s weakest performer this quarter. In the U.S., the company faces decreased customer purchase frequency and competition from other beauty companies as well as the impact of increased fuel costs on sales representatives and their customers, the company said.

Regarding the Chinese market, the company attributes a 16 percent decline in revenue to the reduction in sales by Beauty Boutique owners concerned with direct selling. Though companies such as Avon can apply for direct-selling licenses beginning Dec. 1, direct selling may not launch for some time afterward.

“We’re encouraged that the regulatory framework is taking shape and this will provide us with the necessary context in order to successfully launch direct selling and support our Beauty Boutique owners,” said Jung.

The company forecasts full-year 2005 revenues increasing in the low- to midsingle digits, up slightly in local currencies.
— Amy S. Choi

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