Income increase without profit increase, Shiseido still failed to change the performance decline in the first quarter of 2024. According to the financial report of the first quarter of 2024 released by Shiseido, the 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 the loss given by Shiseido, but in the industry's view, this is only one of the reasons. The impact of nuclear sewage continues, and the market competitiveness is weak. When Shiseido believes that "the hope of bottoming out recovery in the Chinese market" will become a reality needs to draw a question mark.
Increase income without increasing profit
According to the financial report, in the first quarter of 2024, Shiseido's sales volume was 249.45 billion yen (about 11.58 billion yuan), up 3.9% year on year; Operating profit loss was 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 the period of structural adjustment, and the structural adjustment expenses generated during the period affected the profit. In order to reduce costs and increase efficiency, Shiseido announced the "early retirement" plan for 1500 Japanese employees in early 2024, which led to nearly 20 billion yen of structural adjustment expenditure in the first quarter.
In recent two years, Shiseido's performance has not been very satisfactory. According to previous financial reports, Shiseido's net sales in 2023 will be 973 billion yen, down 8.8% year on year; Operating profit was 28.1 billion yen, down 39.6% year on year; The net profit attributable to the parent company was 21.7 billion yen, down 36.4% year on year. From 2019 to 2022, the year-on-year growth of net sales of Shiseido Group will be 3.4%, - 18.6%, 12.4% and 5.7% respectively.
Wu Daiqi, CEO of Shenzhen Siqisheng Company, said that the nuclear sewage incident had a great impact on daily cosmetics brands, including Shiseido, and skin care products were highly replaceable. Once consumers had concerns about the production place or raw materials, it was easy to seek Chinese brands or European and American brands to replace them. In addition, the competitive environment of the beauty market is changing, especially in the Chinese market. With the rapid development of domestic brands, the competitiveness of the daily cosmetics brands favored by consumers in the past has gradually declined, which will more or less affect the brand performance.
The reporter of Beijing Business Daily interviewed Shiseido about employment performance, but no reply was received as of press release.
It is worth noting that Shiseido said in its financial report that "in the first quarter, it saw the hope of bottoming out recovery in the Chinese market." According to the data disclosed by Shiseido in its financial report, the Chinese market sales of Shiseido in the first quarter were 55.5 billion yen (about 2.6 billion yuan), an increase of 4.2% year on year. Compared with previous quarters, it achieved positive growth. In the first quarter of 2023, Shiseido's sales in the Chinese market fell by 3% year on year. In 2023, Shiseido's sales in China will decline by 4%.
Change from defensive to offensive
In the face of unsatisfactory performance, Shiseido has been constantly making strategic adjustments. At the beginning of 2023, Shiseido released a new three-year medium-term strategy "SHIFT 2025 and Beyond", which plans to further improve profitability by increasing investment in key areas such as brand, innovation and talent, as well as cost structure transformation. With the adjustment of strategy, Shiseido shifted from "defense" to "attack", and its strategic layout became more active.
As the largest overseas market except Japan, the Chinese market is regarded by Shiseido as an important part of its growth strategy. In the past year, Shiseido has frequently acted in the Chinese market. At the beginning of 2024, The Ginza Tmall flagship store of Shiseido's "Lady" skincare brand Royal Ginza opened and entered the Chinese market; At the end of April, Shiseido promoted its Drunken Elephant brand to enter the Chinese mainland market, with 250 Sephora stores in mainland China, including Beijing, Shanghai, Guangzhou and other cities.
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 this vigorous layout is Zuixiang, which became the most prominent brand of Shiseido with a high growth rate of 30% in the first quarter.
While expanding new brands, Shiseido kept closing its inefficient stores to reduce costs and increase efficiency. Since 2024, the IPSA brand has been withdrawn from the market frequently, including the first customized concept store in China located in Lujiazui Center in Shanghai, which was opened at the end of December 2023. According to the data disclosed by Shiseido, 15% of the annual plan progress has been completed in the first quarter of this year, and it is expected that more stores will be closed.
In addition, since 2024, Shiseido has set up a value creation strategy headquarters, a corporate governance department, a global brand value development center, and a global product value development center. At the same time, the original "D&I Strategic Promotion Department" was renamed "DE&I Strategic Promotion Department". In December 2023, Shiseido announced the establishment of Shiseido Future Long Term Investment (LIFT) venture fund, focusing on investing in innovative early stage companies in the field of beauty and health. At the end of 2023, Shiseido will purchase skin care brand Dr. based on dermatology at a price of 450 million dollars (about 3.2 billion yuan) Dennis Gross Skincare。
fierce competition
Behind Shiseido's strategic adjustment, it may be realized that the beauty market in China has changed. With the rapid development of domestic brands, the competitiveness of Japanese brands is gradually declining.
Public data shows that in 2023, 8 of the top ten beauty brands of Tmall's "Double 11" pre-sale GMV will decline by more than 50% compared with the same period last year. Among them, Shiseido's GMV on the first day of pre-sale was 1.297 billion yuan, down 74.1% year on year. SK-II、 The GMV of CPB decreased by 85.8% and 76.8% respectively. In the 2023 "Double 11" full cycle brand TOP20 report released by Tmall in the beauty industry, the top ten brands in turn are Perrier, L'Oreal, Lancome, Estee Lauder, Winona, Mystery of the Sea Blue, OLAY, Xiulike, Helena and Guerlain. SK-II and Skin Key (CPB) fell to 11th and 13th respectively, and Shiseido dropped to 14th from 5th 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, even not just daily cosmetics, but other foreign brands are also facing some of these problems," said Jiang Han, a senior researcher at Pangu Think Tank Research Institute.
In Wu Daiqi's view, in addition to the impact of the nuclear sewage incident, the aging of the brand and the impact of Chinese local brands are another reason for Shiseido's poor performance. "As an old brand, Shiseido has advantages in R&D technology and brand strength, but because it has been in the Chinese market for a long time, after new consumers such as the post-90s and post-00s in China have become an important consumer group of skin care products, it inevitably faces development bottlenecks such as brand aging."
In 2018, the "ingredient party" rose. Estee Lauder, L'Oreal and other major skin care brands followed the trend and began to roll out "ingredients" and "formulas". The "essence of seaweed activity" of the mystery of sea blue, Estee Lauder's "bifida yeast", L'Oreal's "Bose factor" and other brands once supported the competitiveness of these brands in the Chinese beauty market, Shiseido did not launch the true core patent ingredient 4MSK (potassium methoxysalicylate) and the exclusive research and development of ULTIMUNE muscle factor activating ingredient until 2021. At this time, with the concept of "early c and late a", Pelaia has become a big fire in the anti-aging field, and Marubeni shares also reaped the market by virtue of its layout in the collagen field. In this period, the Chinese beauty market did not leave much time for Shiseido to develop, and it was around 2021 that the performance of Shiseido began to decline.
In terms of research and development, Shiseido is also changing. When Shiseido released its medium - and long-term strategy earlier, it said that the Group would make use of the advantages of the global organizational structure to further strengthen cooperation between regional research centers; The R&D process will be optimized, such as expanding research areas and expanding consumer interests. To further accelerate innovation, the Group will invest 3% of its sales in research and development. (Reporter Guo Xiujuan and Zhang Junhua)
