TOKYO — As beauty giant Shiseido posted profits that fell 14.7 percent on a 2.5 percent sales gain for 2004, the company’s next president, Shinzo Maeda, announced a three-year plan to more than double sales in China and Hong Kong.
The company expects to see sales in that region reach about 50 billion yen, or $470 million, by the end of fiscal 2007.
Net sales for 2004 rose to 639.82 billion yen, or $6.29 billion, an increase of 2.5 percent year-on-year. Domestic sales edged up 0.5 percent while overseas sales grew 8.2 percent, driven by strong growth in China. Dollar figures are at the average exchange rate.
Income from operations fell 27.7 percent to 28.22 billion yen, or $277.4 million. This was due mainly to an increase in advertising and sales promotion costs, centering on Shiseido’s domestic cosmetics business. Reflecting the decline in income from operations, Shiseido posted a 14.7 percent decline in ordinary income to 30.57 billion yen, or $300.5 million. Shiseido also recorded a net loss of 8.86 billion yen, or $87.1 million, due to the adoption of a special early retirement incentive plan, which incurred an extraordinary loss.
At a press conference reporting consolidated financial results for the fiscal year ended March 31, Maeda also said the Japanese cosmetics giant will generate more than 30 percent of its sales from overseas markets, once his plan is complete.
“A significant portion of the group’s business is conducted overseas, and overseas sales account for 27.5 percent of consolidated net sales for fiscal 2004. This trend is expected to continue in the future,” said Maeda.
“Overseas, we will maintain a proactive strategic budget for China, in order to accelerate growth. Our main focus is on China. We will make an investment of 4 billion yen [or 37.4 million dollars] to the business in China,” Maeda added.
For fiscal 2004, Shiseido generated sales of 23 billion yen, or $226.1 million, from China and Hong Kong. This is a 24 percent increase in the yen, and a 33 percent gain in local currency compared with the prior year. Shiseido has about 300 voluntary chain stores in China now, and plans to have 5,000 stores within a few years.
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Maeda also said he expects consolidated sales to reach 740 billion yen, or $7.3 billion, by the end of fiscal 2007.
By segment, cosmetics in 2004 made up 78.9 percent of sales. Domestic sales of cosmetics rose 0.3 percent. Sales struggled due to languishing demand for men’s and other products. Overseas cosmetics sales grew 10 percent on a yen-denominated basis and 11.6 percent in local currency terms.
“During the period, sales in all regions were solid, with China, our most important overseas market, playing the lead role,” the firm said in a statement.
“In addition to our mainstay Shiseido brand, sales of fragrances sold by Beauté Prestige International SA, as well as of non-Shiseido brands, notably Nars and Zirh, were solid,” the company added.
Sales of toiletries declined 8.9 percent. “Overall sales in the hair care category struggled amid intense competition, and we also made efforts to suppress distributors’ inventories in the market. Consequently, overall domestic sales of toiletries declined,” the company said.
The company also said it will liquidate Taiwan FTS Co. Ltd., a toiletry subsidiary in Taiwan. The company will shift the business into its cosmetics subsidiary, Taiwan Shiseido Co. Ltd., at the end of May, according to the firm.
Shiseido established Taiwan FTS in June 2000 to market mainly hair care products. But, due to severe competition, along with deflation in the market, the sales shrank, according to the company.
In early February, Shiseido held a special board of directors meeting to appoint president and chief executive officer Morio Ikeda to the position of chairman of the board and director, and director Maeda to the position of representative director: president and ceo. The appointments become official upon approval by the ordinary general meeting of shareholders and a board meeting scheduled for the end of June 2005