Shiseido results hit by decline in Japan and China market

By Simon Pitman

- Last updated on GMT

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Shiseido results hit by decline in Japan and China market
Japan-based cosmetics giant Shiseido has announced a dip in its full year 2012 financial results as the domestic market continues to face challenges and sales in China also slump.

The company said that full year-on-year sales fell by 0.7 per cent to Yen 677.7bn ($6.9bn), a figure that was positively impacted by foreign currency exchange by 0.1 per cent.

The company said that in Japan sales fell by 1.8 per cent to Yen 373.3bn, which represented 55.1 per cent of the group sales. Although the domestic sales figures were stronger in the second half of the year, the company said this was counteracted by general weakness in the first half of the year.

Overseas sales counteract poor domestic performance

Net sales in overseas were stronger, rising 0.7 per cent to Yen 304.5bn, a figure that was positively impacted by foreign currency exchange rates by 2.4 per cent. However, the company did point out that overseas sales were ‘significantly affected by the anti-Japanese sentiment that broke out in China in mid-September’.

The slow group sales, combined with a number of associated costs meant that the company recorded a net loss during 2012 of Yen 14.7bn, while operating income was Yen 26.0bn, which was down 33.4 per cent compared to 2011.

The company said that because of the net loss directors will not receive any bonuses, while corporate officer bonuses will be reduced for 2012 and further cuts to executives’ incomes are planned for the 2013 financial year.

Targeting a return to the growth track

“My biggest mission is to pave the way for us to get back on a growth track in a short period of time, and to do this, I will have to clear the business obstacles to our growth and keep pushing tough reforms without ‘off-limits’ and without hesitating to overturn the decisions I made in the past,”​ Maeda said.

The top layer executive has also seen a reshuffle, with Shinzo Maeda confirming that he will take over from former president Suekawa, who stepped down in light of the poor financial performance. Maeda says he will now continue to serve as chairman and president until the appointment of a new president.

The costs incurred during the year included the restructuring of its production and R&D bases, together with an impairment loss of Yen 28.6bn associated with the acquisition of the Bare Escentuals business.

Bare Escentuals fails to hit growth targets

Although the Bare Escentuals business has continued to grow since it was acquired in March 2010, the company said that sales have been lower than expected on account of a decline in the North American direct-to-consumer business.

Looking ahead to the full financial year 2013, the company says it wants to tackle a reduced competitive edge that it believes has resulted from the decentralization of important management resources by narrowing down its business fields and increasing production efficiencies, which will mean the company pulling out of certain business areas.

This will see the company focusing its efforts on its three areas of principle of focus, which it has defined as being the Japan market, the China market and its Bare Escentuals business in the US.

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