Kao announces healthy jump in Q1 profits but sales growth is subdued

The company said that group net sales for the three months ending June 30 increased by 1.0 percent to ¥289.96bn ($3.27bn), compared to ¥287.21bn in the corresponding period last year.

But despite sales remaining level, net income increased by 5.7 percent, up from ¥11.80bn to ¥12.47bn, a figure that was attributed to rising international sales combined with favorable currency translation and cost restructuring efforts.

Beauty sales fall​

Sales for the company’s mainstay beauty division fell by 2.2 per cent on a reported basis and 1.9 percent on a like-for-like basis, from ¥134.2bn to ¥131.3bn.

The company said that this was largely attributable to the poorer performance of its prestige beauty brands, particularly in the domestic market of Japan, where consumers remain cautious with their spending.

The company’s smaller human health care division showed an 8.2 percent dip in like-for-like sales for the quarter, down to ¥43.8bn, whereas fabric and home care like-for-like sales fell by just 0.1 per to ¥65.3bn.

Japan sales remains unchanged​

On a geographical basis, the company pointed out that despite modest economic growth in the all-important Japan economy, domestic personal and house care sales have remained virtually unchanged for the quarter.

In the face of this, the company said it is working towards launching products on the domestic market with an added value concept, as well as targeting the promotion of its prestige cosmetics business and offering cost reduction incentives.

In a statement the company referred to ‘an emerging sense that Japan’s cosmetics market was bottoming out’, suggesting that the outlook appears better for the future.

Beauty performs well in China​

On another positive note, the company said that its beauty division had performed stronger in China, where a number of brands, including freeplus skin care, has performed ‘well’, while for Asia as a whole, the Men’s Biore skin care brand contributed to sales growth.

Hair care sales were described as virtually unchanged in Japan, while in North America the sales decreased. The one bright light for this category was in Europe, where sales increased largely due to the success of the John Frieda premium care brand.

Looking ahead to the full year, the company said that it was sticking to previous estimates that sales would grow by approximately 0.9 percent to ¥1,195bn, whereas restructuring is expected to boost net income by approximately 23.4 percent to ¥50bn.