Poor domestic performance sees sales drop at Shiseido

By Katie Nichol

- Last updated on GMT

Steady growth in overseas sales failed to offset a poor domestic performance for Japan-based Shiseido, resulting in a 6.7 per cent decline in consolidated net sales for 2009.

Sales came in at of ¥644.20bn (€5.14bn), compared to a figure of ¥690.25bn for the previous year.

However, net income rose 73.8 per cent to ¥33.67bn, which Shiseido said was down to a year-on-year decline on taxes as well as improved extraordinary items, and operating income rose 0.9 per cent.

Domestic sales slump

Domestic sales, which represent 61.7 per cent of the company’s total sales, were down 5 percent on 2008 levels, which the company said ‘reflected continued weakness of consumer sentiment’.

In the domestic cosmetics business the company contended with on-going structural market changes as a result of polarisation towards high- and low-end cosmetics, noting that it was unable to ‘amply address the desire of customers for lower-priced items’.

Although sales fell in many areas, including the professional division, sales in the healthcare division increased. In particular, the beauty supplement market showed an upward trend through improved sales of The Collagen, and the launch of In&On, a line combining beauty foods and cosmetics for women in their late 40’s.

Overseas sales hit by currency translations

Although overseas sales witnessed a steady growth of 3 per cent on a local currency basis, their value in yen significantly decreased due to the currency’s appreciation, resulting in a drop of 9.3 per cent.

In Europe and the Americas, sales were reported as ‘sluggish’, reflecting the global economic downturn, although things did start to pick up in the fourth quarter. In contrast, the company witnessed strong sales in Asia with China as the driving force.

The company continued its introduction of new products with the launch of premium skin care line, Shiseido Future Solution LX, and in the European and North American fragrance market, a new range was added to the Issey Miyake line of scents.

Outlook for 2010

Despite signs of global economic recovery the company said it expects business conditions to remain challenging in the core domestic market.

However, a year-on-year increase is expected in global net sales, due to expected bottoming out of the domestic market in the second half of the year, recovery in European and North American markets, and Asian sales growth centering on China, said Shiseido.

Outlining growth synergies for Shiseido’s recent acquisition, mineral make-up player Bare Escentuals, the company identified great potential for bolstering skin care lines. In this respect, sales have been ramped up at Japanese department stores and the development of a new skincare brand is expected in 2011.

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