Shiseido expects measured growth in 2019

The Japanese cosmetics business lowered its financial projections for 2019 on Thursday, citing negative effects on the exchange rate and the Sino-American trade conflict, as well as the current political crisis in Hong Kong and friction between Tokyo and Seoul. 

The business now expects an annual net profit of between 78.5 billion yen ($718 million) and 83 billion yen in 2019. Shiseido had previously increased its annual financial prediction to 83 billion yen in August, according to a statement by the business. 

Shiseido now expects an annual operating profit of between 113 billion yen and 120 billion yen, compared to its previous target of 120 billion yen.

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The business has reduced its annual sales forecast more significantly from 1,164 billion yen previously to between 1,134 billion yen and 1,139 billion yen at present. 

The business’ new financial targets still remain higher than in 2018. However. “market uncertainties have increased,” due to currency fluctuations and trade friction between the US and China, said Shiseido.

Shiseido also mentioned a decline in sales in Hong Kong, where pro-democracy protests have been ongoing for over five months, as well as in South Korea, where numerous Japanese brands have faced boycotts since summer against a backdrop of an aggravation of an historical dispute between Seoul and Tokyo. 

Sales growth in the third quarter

Despite a challenging backdrop, Shiseido’s net profit increased by 22.5% year-on-year to total 20 billion yen and its operating profit increased by 13.3% to reach 34.3 billion yen in the third quarter. The business’ quarterly turnover totalled 282 billion yen, representing year-on-year growth of 3.2%. The rate was dampened by negative currency effects and would be a 6.6% increase at constant exchange rates.

The business continued to profit from its main two spearheads, namely Chinese demand for prestige cosmetic brands and "travel retail" (shops in airports).

Shiseido’s sales in Japan also increased by 8.6% in the previous quarter. The business said that it had benefitted from an "rush of last-minute purchases" before the introduction of a new VAT increase which came into effect on October 1. This will, however, most likely incur a backlash at the end of the year. Sales were also robust in the EMEA (Europe, Middle East, and Africa) region but declined in the Asia Pacific region (excluding in China and Japan) and the U.S.

The business also announced on Thursday that it had finalised its acquisition of the U.S. skincare brand Drunk Elephant for $845 million. The acquisition will reinforce the business’ presence in the U.S., especially among the millennial consumer demographic.