Shiseido Company annual profit and sales hit by challenges in China

Japanese beauty company Shiseido has reported a 39.6% decrease in operating profit for the year ending 31 December 2023, despite "robust growth" in Europe, the Middle East and Africa (EMEA).

The owner of NARS and Drunk Elephant saw operating profits drop to £149 million (¥28.1 billion), with weakening sentiment towards China’s economy impacting the business in the second half of the year.

Last summer, Japan began releasing treated radioactive water from its damaged Fukushima power plant into the Pacific Ocean. The company said this decision triggered a boycott of Japanese products by Chinese consumers.

Net sales declined 8.8% year-on-year to £5.1 billion (¥973 billion), with growth in the Americas, EMEA and Asia Pacific more than offset by the challenges in China and softer demand in travel retail.

Sales in travel retail saw a "vigorous" recovery in Japan thanks to a rebound in tourist traffic. However, this was more than offset by declines in South Korea and Hainan Island in China due to the impact of retailer inventory adjustments in light of the tighter regulations.

Despite these challenging market conditions, Shiseido said its performance in EMEA was strengthened by NARS, Drunk Elephant and Narciso Rodriguez.

The company acknowledged that the current business environment will remain challenging in 2024, primarily due to global inflation, volatility in foreign exchange rates and rising geopolitical risks.

However, Shiseido expects that the global cosmetics market will continue to grow steadily over the course of the year and expects consolidated net sales of £5.3 billion (¥1 trillion) for the fiscal year 2024.