Sales slump at Jurlique pulls down Pola Orbis performance

The Japanese cosmetics manufacture of brands such as POLA, Orbis and THREE achieved an increase in both sales and operating income by 1.7% and 1.6% respectively.

The growth was driven by sales of its flagship cosmetics brand POLA, said the company.

Jurlique’s struggle​

According to the Japanese cosmetics manufacturer, Jurlique struggled because of a reduction in sales locations and channel optimisation.

Prompting the firm to announce that it expected to record an extraordinary loss in the fourth quarter. Pola Orbis said Jurlique incurred an impairment loss of approximately ¥11.3bn ($102m) in the fourth quarter.

“Owing to a decrease in the number of stores and increases in costs, Jurlique reviewed its medium- to long-term business plan and future cash flow projections generated there from for the next fiscal year onward. An impairment test was also carried out, which resulted in the decision to record the impairment loss in fiscal 2018,” ​said the company.

Jurlique sales in China, one of Pola Orbis’ most important markets tumbled by 38%.

“Jurlique has changed its business model in the country in 2016, shifting from managing directly-operated stores to a use of a distributor to respond to changes in the market environment, however, the recent performance of the business is still behind the plan,”​ commented Pola Orbis

The company has already taken measures to revitalise the brand in Australia, China, Hong Kong, as well as the travel retail sector.

It plans to rebuild the brand as a premium natural skincare brand and continue to strengthen and expand the business by emphasising on brick-and-mortar locations such as department stores and directly-operated stores.

Additionally, Pola Orbis said it had plans to downsize the organisation and review its cost structure. While it expects to incur losses for fiscal 2019, the company aims to reduce the loss for fiscal 2020 and strive for profitability after.

New brands, new drivers​

It’s ‘next generation’​ brands under ACRO, such as THREE, FIVEISM X THREE and DECENDIA grew 17.1% to ¥17.5bn ($158m).

Pola Orbis expressed that these younger brands were the future of the company and said it would continue to fuel their growth.

The brand said it planned to accelerate the global expansion of THREE and reinforce its e-commerce channels,hile expanding FIVEISM X THREE, ITRIM and Amplitude ‘rapidly’ ​in Asia. Its target is 50 stores in total by 2020 worldwide.

Overall, its target for 2021 is to achieve net sales CAGR of 15% to 20% and realise profitability of ACRO as a whole.