Shiseido drops forecasts due to weaker domestic performance

By Katie Bird

- Last updated on GMT

Related tags Bare escentuals Revenue

A significant drop in profit and weaker domestic sales in the first nine months of 2010 has led Japanese-headquartered Shiseido to lower its forecasts for the full year.

Although sales were up for the company overall - ¥487bn (€4.3bn) compared to ¥465bn recorded in the same nine month period 2009 - net income suffered significantly, dropping from ¥24bn in 2009 to ¥9bn, a decline of 62 per cent.

The company put this down, in part, to costs related to the acquisition of US mineral make-up company Bare Escentuals, as well as differences in tax-related expenses compared to the previous year.

Bare Escentuals boost sales

Although weighing heavily on the company’s bottom line, the Bare Escentuals acquisition significantly benefited the company’s sales, and excluding revenue from the US brand, sales dropped 1.6 per cent during the period.

This was mainly down to a weak performance in the domestic market, which accounts for over half of the company’s sales.

In Japan, sales dropped 4.9 per cent, which Shiseido said was due to difficult economic conditions in the country. While the Japanese economy saw ‘modest signs of recovery’, the company claimed that consumer sentiment failed to turn around in the cosmetics market.

Overseas sales stood up better, even without the additions made by Bare Escentuals, with sales up 5.3 per cent excluding the acquisition, and 22.7 per cent including it.

Shiseido highlighted recoveries in some of the major cosmetics markets in Europe and North America as well as good growth in China, and other emerging markets, as factors that drove the positive performance in the overseas business.

Dropping forecasts

In light of the nine month performance the company has adjusted a number of predictions for the full year.

Instead of the ¥688bn in net sales, the company expects ¥680bn, and net income predictions have been dropped from ¥25bn to ¥18bn.

Revenue is still expected to be up on 2009, while earnings will be lower than the last full year, the company said.

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