Increasing revenue but not increasing profits, Shiseido still failed to change the decline in performance in the first quarter of 2024. According to Shiseido's financial report for the first quarter of 2024, sales increased by 3.9%, but the net loss reached 3.29 billion yen (about 150 million yuan). "Structural adjustment expenditure under the layoff strategy" is the reason for Shiseido's loss, but in the eyes of the industry, this is only one of the reasons, the impact of nuclear sewage continues, the market competitiveness is weak, Shiseido's belief that "the hope of bottoming out in the Chinese market" will become a reality needs to draw a question mark.
According to the financial report information, in the first quarter of 2024, Shiseido's sales will be 249.45 billion yen (about 11.58 billion yuan), a year-on-year increase of 3.9%; operating profit loss of 8.7 billion yen (about 400 million yuan), down 193% year-on-year; The net loss was 3.29 billion yen (about 150 million yuan).
Shiseido said in its financial report that the loss in the first quarter was mainly due to the fact that the group was still in a period of structural adjustment, and the structural adjustment expenses incurred during the period affected profits. In order to reduce costs and increase efficiency, Shiseido announced an "early retirement" plan for 1,500 employees in Japan at the beginning of 2024, and this plan led to nearly 20 billion yen in structural adjustment expenditure in the first quarter.
In the past two years, Shiseido's performance has been less than satisfactory. According to the financial report data of previous years, Shiseido's net sales in 2023 will be 973 billion yen, a year-on-year decrease of 8.8%; Operating profit was 28.1 billion yen, down 39.6% year-on-year. Net profit attributable to the parent company was 21.7 billion yen, down 36.4% year-on-year. From 2019 to 2022, Shiseido Group's net sales increased by 3.4%, -18.6%, 12.4%, and 5.7% year-on-year, respectively.
Wu Daiqi, CEO of Shenzhen Siqisheng Company, said that the nuclear sewage incident has a great impact on Japanese cosmetics brands, including Shiseido, and skin care products are highly substitutable. In addition, the competitive environment in the beauty market is changing, especially in the Chinese market, with the rapid development of domestic brands, the competitiveness of Japanese cosmetics brands that used to be favored by consumers is gradually declining, which will affect brand performance to a greater or lesser extent.
On performance-related issues, a reporter from Beijing Business Daily interviewed Shiseido, but did not receive a reply as of press time.
It is worth noting that Shiseido said in its financial report: "In the first quarter, we saw hope of bottoming out in the Chinese market. According to the data disclosed by Shiseido in the financial report, Shiseido's sales in the Chinese market in the first quarter were 55.5 billion yen (about 2.6 billion yuan), a year-on-year increase of 4.2%. Compared to previous quarters, it achieved positive growth. In the first quarter of 2023, Shiseido's sales in the Chinese market decreased by 3% year-on-year. In 2023, Shiseido's sales in China will decline by 4%.
In the face of unsatisfactory performance, Shiseido has been constantly making strategic adjustments. At the beginning of 2023, Shiseido announced a new three-year medium-term strategy, "SHIFT 2025 and Beyond", which aims to further improve profitability by increasing investment in key areas such as branding, innovation, and talent, as well as transforming its cost structure. With the adjustment of strategy, Shiseido shifted from "defensive" to "offensive", and the strategic layout became more active.
As the largest overseas market outside of Japan, Shiseido sees the Chinese market as an important part of its growth strategy, and Shiseido has been making frequent moves in the Chinese market for the past year. At the beginning of 2024, Shiseido's "lady" skincare brand The Ginza Tmall flagship store opened and entered the Chinese market; At the end of April, Shiseido promoted its Drunken Elephant brand to enter the Chinese mainland market, entering 250 Sephora stores in mainland China, including Beijing, Shanghai and Guangzhou.
According to Zuixiang's plan, Sephora will follow the first strategic channel to sink to more third- and fourth-tier cities, and is expected to cover 300 stores by the end of 2024. Behind such a vigorous layout, Drunken Elephant has become the most eye-catching brand of Shiseido with a high growth rate of 30% in the first quarter.
While expanding new brands, Shiseido continues to close the inefficient stores of its brands to reduce costs and increase efficiency. Since 2024, the IPSA brand has been withdrawn frequently, including the opening of China's first custom concept store in the heart of Lujiazui in Shanghai at the end of December 2023. According to data disclosed by Shiseido, 15% of the progress of the annual plan has been completed in the first quarter of this year, and more stores are expected to close.
In addition, since 2024, Shiseido has established a value creation strategy headquarters, a corporate governance department, and a global brand value development center and a global product value development center. At the same time, the former "D&I Strategy Promotion Department" was renamed "DE&I Strategy Promotion Department". In December 2023, Shiseido announced the establishment of the Shiseido Future Long-Term Investment (LIFT) Venture Fund, which focuses on investing in innovative early-stage companies in the beauty and health space. At the end of 2023, Shiseido acquired Dr. Dennis Gross Skincare, a dermatology-based skincare brand, for US$450 million (about 3.2 billion yuan).
Behind Shiseido's strategic adjustment, perhaps it is the realization that the Chinese beauty market has changed, and with the rapid development of domestic brands, the competitiveness of daily beauty brands is gradually declining.
According to public data, 8 of the top 10 Japanese beauty brands in Tmall's "Double 11" pre-sale GMV in 2023 will fall by more than 50% year-on-year. Among them, Shiseido's GMV on the first day of pre-sale was 1.297 billion yuan, a year-on-year decrease of 74.1%. The GMV of SK-II and CPB decreased by 85.8% and 76.8%, respectively. In the 2023 "Double 11" full-cycle brand TOP20 report card released by Tmall, the top 10 brands are Proya, L'Oreal, Lancôme, Estee Lauder, Winona, La Mer, OLAY, SkinCeuticals, Helena and Guerlain, SK-II and Key to the Skin (CPB) fell to 11th and 13th respectively, and Shiseido slipped from 5th to 14th in 2020.
"With the rise of domestic brands and the competitive layout of other brands, the popularity of daily cosmetics brands is not as good as before, and even not only daily cosmetics, other foreign brands are also facing these problems." Jiang Han, a senior researcher at the Pangu Think Tank Research Institute, said.
In Wu Daiqi's view, in addition to the impact of the nuclear sewage incident, the aging of the brand and the impact of local Chinese brands are another reason for Shiseido's poor performance. "As an old brand, although Shiseido has advantages in R&D technology and brand power, due to its relatively long time in the Chinese market, it will inevitably face development bottlenecks such as brand aging after new consumers such as China's 'post-90s' and 'post-00s' have become important consumer groups of skin care products."
In 2018, with the rise of the "ingredient party", big skin care brands such as Estee Lauder and L'Oreal followed the trend and began to roll up "ingredients" and "formulas", such as "Seaweed Active Extract" of La Mer, "Bifida Yeast" of Estee Lauder, and "Bosonine" of L'Oreal, which once supported the competitiveness of these brands in the Chinese beauty market, and Shiseido did not launch the core patented ingredient 4MSK (potassium methoxysalicylate) in the true sense until 2021, and the exclusively developed ULTIMUNE muscle factor rejuvenating ingredient. At this time, Proya has become popular in the anti-aging field with the concept of "morning C and late A", and Marubeni shares have also harvested the market with the layout in the field of collagen, and the Chinese beauty market during this period did not leave much time for Shiseido to develop, and it was around 2021 that Shiseido's performance began to decline.
In terms of R&D, Shiseido is also constantly changing. At the time of the mid- to long-term strategy announced, Shiseido said that the group will take advantage of its global organizational structure to further strengthen cooperation among regional research centers. The R&D process will be optimized, such as expanding research areas and expanding consumer benefits. To further accelerate innovation, the Group will invest 3% of its sales in research and development.
Beijing Business Daily reporter | Guo Xiujuan Zhang Junhua
Edited by Topol
![Canaan's first-quarter revenue was US$35.1 million: down 36% year-on-year and an operating loss of US$68.05 million[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)