Shiseido ups forecast but warns of tougher times ahead

By Guy Montague-Jones

- Last updated on GMT

Related tags: Revenue, Generally accepted accounting principles

Shiseido has upped its profit forecast for the first half of the year but the company warned that business conditions will be tougher in future quarters.

The Japanese cosmetics company increased its forecast for operating income to ¥33,500m (€290.3m) from ¥28,000m and pushed up expectations for net income by ¥4,000m to ¥20,000m.

A lower than expected cost of sales ratio went some way towards explaining the improved forecast for the April to September period.

Lower confidence leads to improved forecast

But a dip in confidence regarding consumer demand in the second half of the fiscal year ending March 2009 also played an important role in the revision.

The company said it had shifted some selling, general and administrative (SG&A) expenses to the third quarter and beyond.

Initially earmarked for the first half of the year, these expenses will now be used in later quarters to defend sales figures from an expected dip in consumer demand.

“The company expects business conditions to become more difficult, both in Japan and overseas, with no signs of reversal in the global economic slowdown and weakening personal consumption,” ​said Shiseido in a statement.

Building sales growth by getting closer to consumers

Shiseido intends to use the allotted cash to focus on counselling-based brands and lines in order to deepen its relationship with consumers and maintain healthy growth in tougher economic times.

The company does not intend to make any major revisions to its full-year forecasts but will make an announcement after fully reviewing its forecasts on October 30 when it releases results for the first half of the year.

In the previous quarter ending June 30, net sales dropped 5.4 percent to ¥164.1bn largely because of a 9.3 percent fall in Japanese sales. The company put the blame at the door of intensified competition and lower consumer confidence.

Elsewhere in overseas markets, which make up around 40 per cent of total sales, Shiseido met with more success.

Sales in other Asian countries were particularly strong rising 7 percent on last year. The region is again expected to be a key driver for growth in the latest quarter.

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