Shiseido will ‘turn away’ from heavy promotions in China to achieve sustainable sales growth

Shiseido faced significant challenges in China’s business environment due to the lingering impact of COVID-19 restrictions.

China’s net sales declined by 2.9% year on year on a like-for-like. Core operating loss was JPY2.1bn (USD15.2m), an improvement of JPY700m (USD5.1m) year on year.

While offline sales saw improvement in the low digits, online sales shrank by high single digits compared to the prior year.

The firm blamed its underperforming e-commerce numbers on the poor sales performance of International Women’s Day (IWD) sales.

“Even though the market momentum for the Women's Day was weaker than expected, we evaluated that the overall progress is on track to our strategy,” ​said Takayuki Yokota, CFO of Shiseido Company.

Yokota added that the firm does not plan to rely too heavily on mega shopping festivals in the future. Instead, it will “work on sustainable sales growth through strengthening of brand equity​”.

“Although there is the 6/18 – June 18 shopping day online – we will continue to turn away from heavy reliance on extreme promotion and execute appropriate allocation of resource for sustainable and profitable growth,” ​he said.

Overall, the Chinese market has been on a recovering trend since February after “hitting bottom” ​in January, Yokata said.

“After the end of zero-COVID policy last December, the number of COVID cases surged again in January, creating a difficult market environment, but February and March turned into a recovering trend.”​

Future initiatives in China​

“We will accelerate offline growth and strengthen our responses to the diversification of online platforms with an emphasis on sustainable profitability improvement by the brands such as Cléde Peau Beauté, Brand SHISEIDO and NARS.”​

Following the global hit of NARS Light Reflecting Foundation, Shiseido aims to ride on the momentum and further expand sales.

“In addition to the light reflecting foundation, which performed extremely well NARS plans to further strengthen expand the foundation category and to launch a new lip product in May to cultivate new product categories,” ​said Yokata.

The company will also focus on acquiring luxury consumers with its prestige brand, Clé de Peau Beauté.

“In Clé de Peau Beauté, we will capture the momentum in luxury user in the higher prestige market. In addition to continuing to strengthen the Supreme series, our top-end line, we will implement the Height of Radiance campaign, a measure to increase awareness of the brand's unique value of radiance,”​ Yokata said.

The firm will also work to rebuild the brand value and prestige image of its flagship brand, SHISEIDO.

“We will strengthen the brand experience and the top-end future solutions line through the offline events focus on the high function products and launch of the wrinkle cream Vital Perfection Wrinklelift as one way to expand appeal on its efficacy and stimulate demand for 6/18,”​ said Yokata.

Net sales in the first three months of fiscal year 2023 were up 6.6% year on year on a like-for-like basis to JPY234.02bn (USD1.7bn).

Core operating profit increased by JPY8.2bn (USD59.8m) year on year to JPY12.5bn (USD91.2m), attributed to higher sales and continued agile cost management.