Shiseido China Loss 20.6% in Q1 of 2022
- Chaileedo Press
- May 13, 2022
- 3 min read
Shiseido Group from Japan reported its results in Q1 of 2022. The sales of the Group in the first quarter were $1.825 billion, down 1.3% year-over-year while sales in China declined 20.6% year-on-year to $405 million, which is the largest decline for Shiseido China in at least the last six years.
On May 12, Shiseido reported its results for the first quarter ended March 31, 2022. The report showed that Shiseido sales in the first quarter were $1.825 billion, down 1.3% year-over-year, while core operating profit (operating profit excluding gains and losses from non-recurring factors) was $34 million, down 52.3% year-over-year.
Sales in Shiseido's Japan and China regions were sluggish in the first quarter with sales declining, but the decline was partially offset by strong travel retail in the Americas and Europe while Shiseido also boosted the proportion of skincare products through business portfolio restructuring. In terms of operating profit, the business reduced fixed costs to secure benefits through structural changes in Europe and the US.
By region, in the first quarter, sales of Shiseido Group in China declined 20.6% year-on-year to $405 million, an actual decline of 14% excluding the impact of business transfers, accounting for 22.2% of total sales.
According to the financial reports, China became the market with the largest decline in sales for the Shiseido Group globally, down 20.6%, surpassing the decline in the same period in 2020 when the pandemic broke out and the largest decline for Shiseido China in the least the last six years. Just a year ago, Shiseido had just achieved the world's fastest growth rate of 46% in China.
The main reason for the decline in China's performance was the restriction of activities centered on Shanghai due to the epidemic, which resulted in fewer customers in its offline stores. A portion of the stores was closed while also shortened business hours, which is also a part reason for its decline. It is also publicly reported that the delivery from Shiseido's Shanghai warehouse has been largely suspended according to restrictions.
The E-commerce business continued to grow benefiting from the hot sales of products such as CPB and NARS, as well as promotions such as Chinese New Year and Women's Day. However, increased marketing investment efforts and other reasons led to a decline in profits.
Compared to the sluggish state of the China and Japan markets, the Shiseido Group's business segments in the Americas, Europe, and travel retail seized the opportunity of market recovery to achieve growth in the first quarter.
In terms of its brands, on the one hand, brands such as CPB and NARS performed strongly, both achieving double-digit growth. CPB sales grew 10% over the same period last year, while NARS sales grew the most, reaching a 35% increase. Meanwhile, Shiseido's fragrance brands also achieved a 28% year-over-year increase.
The earnings report noted that NARS and CPB not only performed well in China with driving growth but also continued to expand their share in the Americas, where the two brands increased their market share by over 40%.
On the other hand, its acquired American skincare brands Drunk Elephant, its own brand Shiseido, IPSA, and other brands are under-performing. Among them, Drunk Elephant sales fell the most reaching a 32% drop. Shiseido sales fell the least, at 9%. IPSA, ANESSA, ELIXIR sales fell 20%, 16%, and 12%, respectively.
It is worth mentioning that the report stated that although some businesses are still affected by COVID-19 in March, the travel retail business in Hainan, China has maintained sustained growth and travel retail sales of Shiseido far exceeded its sales in 2019.
Performance of the travel retail segment grew the most rapidly, with sales of $290 billion, an increase of $74 million compared to last year, an increase of 34.3% year-on-year, accounting for 15.9% of total sales.
In terms of products, its major brands such as Shiseido, CPB, ANESSA, and NARS have launched new products.
2022 is also an important year for the Shiseido Group to achieve its goal of "full recovery" by 2023.
In February 2021, the Shiseido Group announced the launch of its medium- and long-term business strategy "WIN 2023 and Beyond". 2022, the second year of the strategy's implementation, is positioned as the year of "getting back on right track for growth".
According to the financial report, the Shiseido Group will focus on skincare and beauty, reconstruct the business portfolio, improve the profitability of the business structure with a focus on the European and American businesses, and carry out fundamental reforms to make management more focused on profits and cash flow for achieving the strategic goals.
Recently, Shiseido Group also established its first special investment fund in China, "Ziyue Equity", with a total registered capital of over 500 million yuan(about $73.6 million), focusing on emerging and innovative brands in beauty and health frontier markets and investment opportunities in upstream and downstream related technology service companies to target new growth opportunities.
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