Shiseido results hit hard by Japanese earthquake and tsunami

By Simon Pitman

- Last updated on GMT

Related tags: Shiseido, Japan

Japan-based cosmetics giant Shiseido saw profits tumble by more than 60 percent as its mainstay domestic sales were hard hit by the recent natural disasters that affected the Northern part of the country.

The results came despite the fact that sales increases were healthy during the quarter, thanks to robust sales in overseas markets, particularly in developing countries in Asia such as China.

Net sales for the quarter March to January increased by 2.3 percent to ¥183.7bn ($2.2bn), a result that came despite the fact that domestic sales shrank 8.7 percent during the period to ¥95.8bn.

Sales in Japan still account for more than half of Shiseido’s overall revenue, but after the earthquake on March 11, consumer spending patterns that have already been hard hit by a sluggish Japanese economy, took an even more severe blow.

Distribution networks and unmotivated consumers in Japan

One of the main factors was that distribution networks were badly affected throughout the country, while all services and resources were directed towards a major clear-up operation.

Likewise, the Japanese people were deeply affected by the trauma and loss caused by the natural catastrophe, which in turn led to a significant dip in consumer sales.

The one bright spot was the robust overseas sales, which during the latest quarter rose by 18 percent to ¥87.9bn, a result that was driven by double-digit increases in all the key markets, including Asia, Europe and North America.

Net sales up on strong overseas increases

Net sales for the full year ending 31st March were up by 4.1 percent to ¥670.70bn, while net profits also tumbled by 62 percent to ¥12.8bn.

Looking ahead to the next full financial year, ending March 2012, the company is predicting a strong recovery, forecasting that net profits for the 12 months will increase by 64.2 percent to reach ¥21bn, while revenue is expected to climb 1.4 percent to ¥680bn.

Earlier this year Shiseido said that if consumer demand and the appropriate retail channels exist, it will continue to expand into new markets as part of its aim to become ‘a global player representing Asia with its origins in Japan’.

Targeting new markets

“If there is not only demand for prestige cosmetics among people, but also the right distribution and retail mechanism (or distribution partner-agents) for prestige cosmetics sales, Shiseido will inroad into new markets,” a Shiseido spokesperson told CosmeticsDesign-Europe.com.

Shiseido is currently present in 83 countries and regions, and has recently commenced sales of the Shiseido brand in the Republic of Panama through the Columbian distributor Wisa Group. In Panama, increased demand for prestige cosmetics products is anticipated due to stable economic growth since 2004, according to Shiseido.

Despite growth slowing more than expected as a result of the global financial crisis, Shiseido hopes to achieve net sales of over ¥1 trillion by the end of 2017, with 50 per cent of this expected to come from overseas markets, the spokesperson said.

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