Shiseido sales shrink: Global spread of COVID-9 causes Q1 operating profits to plunge 83% for J-beauty giant
The company’s results, released on Tuesday, detailed losses in all geographical locations across all of its businesses.
Its home market of Japan took the hardest hit, with sales declining by 21.2% YoY to JPY85.7bn ($802m)
This was due to consumers’ consumption sentiment decline, tendency to remain home and the reduced hours or temporary closure of retail outlets.
Additionally, the sharp decline in the number of foreign tourists in Japan led to a dip in inbound demand.
According to the company, the most affected businesses in Japan were its prestige and cosmetics portfolios.
In the wider Asia Pacific, excluding China, sales decreased by 19.2% YoY even though the company took steps to strengthen its e-commerce presence in the region.
Its performance in South East Asia (SEA) was affected the most in the region while the firm saw relatively little impact in Taiwan, where it is already seeing signs of recovery in March.
In China, the business was largely affected by COVID-19 from the latter half of January.
During this period, about 70% of retail stores were shuttered temporarily and over 90% began to resume operation from late March onwards.
This has led to signs of recovery in mainland China. Additionally, the shift towards online shopping led to the growth of e-commerce for its prestige brands. These factors resulted in net sales decreasing by 12%.
Net sales performance in the Americas was affected by the measures to curb the spread of COVID-19 such as lockdowns and stay-at-home restrictions, resulting in 14.6% YoY net sales decline.
However, Drunk Elephant remained firm despite the challenging environment with its continuously strong e-commerce sales.
In January, Shiseido’s EMEA business outpaced the market, driven by new Dolce&Gabbana launches.
However, things slowed down sharply in March when countries such as the UK, Spain and Italy were affected by COVID-19 measures which resulted in a net sales decrease of 14.9% YoY.
The firm’s travel retail business saw a sharp decline from February onwards, due to the wide-spread suspensions of international flights, particularly in Asia, and the drop in the number of Chinese travellers globally.
While many brands saw weak performance, sales of such brands as Clé de Peau Beauté and NARS increased. This was due to the sluggish performance of the brands in the previous year due to product shortages.
This all resulted in a net sales decrease of 1.6% year-on-year for the company’s travel retail business.
Shiseido withdraws forecast
Due to the uncertainty of the COVID-19 outbreak, Shiseido noted it was hard to predict and access the impact of the pandemic.
“The global spread of COVID-19 is causing stagnation in consumer purchases and business economic activities. Going forward, business results are still subject to uncertainties, such as the viral spread and the timing of resumption of economic activities depending on regulatory measures taken by each country,” said the company.
As such, the firm has made the decision to withdraw its consolidated forecast for the fiscal year ending December 31, 2020.
In its place, the company will provide a revised forecast at the time of the second-quarter results announcement.