Coronavirus woes: Kosé slashes profit forecasts as it braces for the impact of the epidemic

The spread of the novel coronavirus (2019-nCoV), which originated from the China’s Hubei province, has affected some of the biggest global brands such as Apple, Starbucks and McDonald’s.

In light of this, Kosé has cut its net sales projection to JPY336bn and operating profit to JPY45bn. Net income projection was decreased to JPY30bn.

The original forecast, posted on April 29 last year, predicted net sales, operating product and net income of JPY352bn, JPY54bn and JPY37bn respectively.

Additionally, the firm noted it would decrease the sales forecast of its cosmetics business by 5.8%, which consists of brands such as Decorté, Sekkisei, Jill Stuart and Tarte.

The forecast for its cosmetaries business, which oversees brands like Fasio, Je I’aime and Visée, was cut by 0.3%.

In its latest documents detailing the firm’s financial results in the nine months ending December 31, 2019, sales in the cosmetics business increased 1.2% while cosmetaries decreased 3.3%.

Tourism fall bites

The company said it expected the decline of tourist traffic due to the outbreak to impact its duty-free channels.

China has already banned its citizens from travelling in bid to contain the coronavirus outbreak, while Japan and South Korea have both barred foreigners from Hubei from entering the country.

This has effectively cut off the visitors that made up 30.2% of arrivals to Japan in 2019, according to the Japan National Tourism Organisation.

According to its latest reports, the company saw net sales up by 0.5% thanks to a 27.9% sales growth in the Asian region. This growth boosted the company’s ratio of overseas sales up to 30.4%.

The company said the solid growth in Asia was primarily due to its stellar performance in China and in the South Korean travel retail sector, which have offset the sales declines in Japan and North America.

“Two significant sources of growth are South Korea, where duty-free sales are increasing, and China due to the consistently strong growth of store and e-commerce sales of high-prestige brands,” ​said Kosé in a statement.

In addition to the overall fall in tourism, Kosé also cited the consumption tax hike in October and a stronger yen as reasons why it expected to see a dip in its financial performance.

“As a result, sales are likely to fall short of the previous forecast. Gross profit is likely to be lower due to the above factors. As a result, earnings are expected to be lower than the previous forecast,” ​said the company.

Limiting customer contact

Last Friday, the company announced that it has begun implementing new measures to prevent the spread of the coronavirus.

The measures included suspending its make-up services and all other services that require direct contact between its staff and customers until further notice.

Additionally, it said all its staff will be required to wear masks and disinfect their hands before and after attending to customers.