China's consumer slump claims another victim as Shiseido profit slides
09/02/2024 08:41
By Rocky Swift
TOKYO, Feb 9 (Reuters) - Shiseido 4911.T became the
latest victim on Friday of a slowing Chinese economy that has
battered earnings at many global consumer goods companies, when
the Japanese cosmetics maker reported a 40% slide in annual
earnings.
China's weak consumer spending has also hit profits at
L'Oreal OREP.PA and Estee Lauder EL.N , which like Shisedo
had for years banked on the that country's thriving beauty
market for growth.
"We recognise that the macroeconomic numbers are not good,"
Shiseido President Kentaro Fujiwara said about China at an
earnings briefing. "We need to look not only at the
macroeconomy, but also carefully assess where we have a chance
to win, and where growth is taking place."
On Thursday, cosmetics group L'Oreal reported slower sales
growth for the fourth quarter compared with the previous three
months, hurt in part by the Chinese government's crackdown on
resellers of foreign consumer goods, known as "daigou".
That came after Estee Lauder earlier this month announced
plans to cut 3% to 5% of its global workforce amid skittish
Chinese demand.
China's beauty and personal care market, valued at around
$80 billion, has softened as consumers tighten their purse
strings and become more discerning about what they buy, leading
some multinational brands to offer deep discounts.
Beauty manufacturer and retailer L'Occitane Group 0973.HK
bucked the trend, saying steady growth in China helped its
overall sales grow by 19.5% for the quarter to Dec. 31, although
analysts warned that the mainland sector's outlook remains
uncertain.
Another risk for foreign brands, which dominate China's
beauty market, is the rising momentum of home-grown brands such
as Proya and Winona, as some consumers find they cater better to
their needs.
Japanese companies like Shiseido face the additional, if
short-term, headwind of Chinese boycotts in protest against
Tokyo's decision to release treated water from the crippled
Fukushima nuclear reactor from last August.
China accounts for about 25% of Shiseido's sales, but total
exposure is even larger when factoring in purchases in Japan by
Chinese tourists, analyst Steve Zhou wrote on the Smartkarma
platform.
Both segments have suffered from the Fukushima water
issue, which Shiseido expects will linger until the second
quarter of 2024.
"If we look at past similar events, scandals like this
generally take 6-12 months to recover," Zhou said. "In fact,
Shiseido recovered quickly in the last anti-Japan incident in
2012 in China."
Shiseido said operating profit slid to 28.13 billion yen
($188 million) in the 12 months ended in December, compared with
46.6 billion yen the prior year.
That trailed the consensus forecast of 34.05 billion yen in
profit based on an LSEG poll of 13 analysts.
Shiseido's shares have fallen 35% in the past 12 months,
compared with a 34% gain in the benchmark Nikkei .N225
average.
($1 = 149.3400 yen)
(Reporting by Rocky Swift; Additional reporting by Anne Marie
Roantree; Editing by Edmund Klamann)
((rocky.swift@thomsonreuters.com;))