Shiseido Q3 2021: Operating profit surges by over 190% as sales improve in all regions except Japan

By Amanda Lim

- Last updated on GMT

Shiseido has recorded a 194.8% surge in operating profits as sales grew in all regions except Japan. [Shiseido]
Shiseido has recorded a 194.8% surge in operating profits as sales grew in all regions except Japan. [Shiseido]

Related tags Shiseido financial results

Japanese cosmetics company Shiseido has recorded a 194.8% surge in operating profits as sales grew in all regions except for its home market thanks to its skin beauty and prestige brands, as well as the strength of its e-commerce business.

The company reported that the first nine months were challenged by low consumer sentiment due to “worsening corporate earnings and employment” ​brought about by the resurgence of COVID-19.

While the impact of the pandemic was felt globally, the progress of the vaccination drive saw improvement in all categories, including make-up.

Under these conditions, sales grew 13.4% on a like-for-like basis to JPY745.4bn (U$6.6bn). Operating profit surged 194.8% year on year to JPY26.3bn (U$232m) due to stronger sales and effective cost management.

In Japan, consumer traffic continued to decrease as a result of the declared states of emergency.

This impacted retail operating hours and encouraged consumers to stay home. Furthermore, the decline in tourism drastically affected inbound demand.

To offset this, the company took on various omnichannel initiatives such as live commerce and online video counselling. This resulted in e-commerce sales growing by double digits.

Overall, sales declined 2.2% like-for-like to JPY210.3bn (U$1.85bn). Operating profit was up 188.6% year on year to JPY8.6bn (U$76m), however, this was due to intercompany transactions and cost management measures.

Asia sales remain robust

Like Japan, China was also affected by partial retail closures and a drop in consumer traffic from July onwards as COVID-19 broke out in key metropolitan areas.

However, e-commerce sales remained strong in the region. Furthermore, continued strategic investment in prestige brands such as Clé de Peau Beauté and NARS drove market share gains in the high-end beauty category.

As a result, sales grew 25.1% like-for-like to JPY190.9bn (U$1.69bn). Operating profit dropped by JPY18.9bn (U$167m) year on year as a result of the personal care business transfer and higher cost of goods sold (COGS). This led to an operating loss of JPY7.6bn (U$67m)

In APAC, the company saw like-for-like sales growth of 6.3% despite the resurgence of COVID-19 to JPY48.1bn (U$425m). Operating profit also grew by 61.4% to JPY3.4bn (U$30m).

This was driven by the growth in the prestige category. In particular, e-commerce sales for prestige brands such as SHISEIDO and NARS grew substantially because of key expansions in the region.

Steady recovery in Americas and EMEA

In the Americas, several key brands performed well. Drunk Elephant opened new doors, while NARS grew its share due to virtual store openings and other digital marketing initiatives.

Furthermore, SHISEIDO, Clé de Peau Beauté, and other fragrance brands recorded strong performances on the back of increased promotions.

Against this backdrop, sales grew 34.3% on a like-for-like basis to JPY89.8bn (U$793m) and operating loss recovered by JPY10.3bn (U$91m) year on year to JPY9.7bn (U$86m).

In EMEA, the vaccination rollout aided market recovery, mainly in skin care and fragrances.

The company capitalised on the market recovery by pushing Clé de Peau Beauté and Drunk Elephant while also expanding significantly in e-commerce.

As a result, sales increased 22.6% like-for-like to JPY79.5 billion, recovering to pre-pandemic levels when compared with 2019. Operating profit also made a return to black at JPY2.3bn (U$20bn), an improvement of JPY10.8bn (U$95m).

Silver linings in travel retail

The outbreak of COVID-19 in China presented a challenge to growth in the travel retail channel as Hainan Island was impacted by travel restrictions.

On the other hand, this caused travel retail e-commerce sales to accelerate significantly.

Net sales grew year on year, mostly in Asia, as Shiseido increased the number of stores for major brands and strengthened promotions.

The company recorded a sales growth of 15.5% like-for-like to JPY88.6bn (U$783m) while operating profit increased 24.2% year on year to JPY14.9bn (U$132m).

In the professional business, the recovery of hair salon traffic and e-commerce promotions helped to boost sales.

As a result, net sales grew 21.4% like-for-like to JPY11.4bn ($101m) and operating profit surged 296.5% year on year to JPY1.1bn (U$9.7m).

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