Shiseido profit outlook squeezed by China downturn, president says (updated)
29/11/2024 08:59
(Adds president's comment in paragraph 3, analyst comment in
paragraph 7)
TOKYO, Nov 29 (Reuters) - Japanese cosmetics maker
Shiseido Co 4911.T downgraded its profit outlook for the next
two years on Friday, after a downturn in sales to Chinese
consumers.
Shiseido joins other luxury brands such as Cartier-owner
Richemont CFR.S and Gucci-owner Kering PRTP.PA that have
been hurt by slowing growth, increased competition and weaker
consumer confidence in the world's second-biggest economy.
"The state of the Chinese market does not permit optimism,"
Shiseido President Kentaro Fujiwara told a press conference at
which he announced a new midterm business strategy. "We will
work to rebuild our brand."
The high-end Japanese make up manufacturer, which slashed
its full-year earnings forecast this month, aims to lift its
operating margin to 7% by 2026 from 3.5% for the 12 months to
Dec. 31.
In a business plan unveiled in February, the company said it
aimed to boost its profit margin to 9% next year.
However, Shiseido has also had to contend with Chinese
consumers avoiding Japanese brands after the release of treated
water from the damaged Fukushima nuclear power plant.
"If you look at their online sales in China, they're down
20% year to date compared to a market that is down 10%," said
Jacques Roizen, managing director of China consulting at Digital
Luxury Group.
"So, it's not just a China economic environment or consumer
slowdown issue here."
That means Shiseido has had to rely more on sales in Japan,
buoyed by demand from growing numbers of foreign tourists taking
advantage of a weak yen to buy creams, foundations and other
products more cheaply than at home.
To grow profits for the next two years, Shiseido will
further cut costs, focusing on Japan next year and the rest of
the world excluding China in 2026.
Those savings will come from cuts in personnel spending and
production expenses, Fujiwara said.
(Reporting by Tim Kelly; Additional reporting by Casey Hall;
Editing by Kate Mayberry)
((tim.kelly@thomsonreuters.com; +813-6441-1311;))