Business

Cosmetics giant Shiseido blames yen for lower profit outlook

A make-up artist with Japanese cosmetics maker Shiseido applies make-up on a model during a demonstration in Tokyo Image copyright Getty Images

Japanese cosmetics giant Shiseido, which also owns the Bareminerals and Nars brands, has cut its profit outlook as a result of the stronger yen.

It now expects full-year profits of 30bn yen ($296m; £227m), compared with a previous forecast of 34.5bn yen.

Shiseido said earnings would be hit by the recent strength of Japan's currency and the cost of recent acquisitions.

The 140-year-old firm is buying make-up brand Laura Mercier and skincare line ReVive to try to lift sales.

Shiseido shares fell 7.5% in reaction to the lower forecast.

"There is a growing sense of uncertainty regarding the future," Shiseido said in a statement.

"This largely reflects further appreciation of the yen and a drop in stock prices, mounting anxiety toward overseas economies, and signs that corporate-sector earnings and consumer spending have stalled."

Image copyright Getty Images
Image caption Shisheido is aiming to get more international sales

Andrew Hall, retail consultant at Verdict Retail said: "If you remove currency fluctuations from the picture you see that sales are flagging in international markets such as the U.S.

"Recent acquisitions will also be taking its toll on profit as Shiseido must invest in restructuring these acquisitions to align with the rest of the business, these costs have come sooner in the year than many analysts expected.

"However the brand still has a number of strengths including licence agreements with coveted brands such as Dolce & Gabbana."

"Like all multinational companies, geopolitical turbulence represents an ongoing obstacle to success as uncertainty creates a volatile currency market and changing tourists dynamics.

"For such a large company as Shiseido and one for which tourism has been an important source of sales, these issues are particularly pertinent."

Global beauty

Shiseido has been taking steps to boost its sales from overseas markets by either signing licensing deals or buying rival brands.

It bought Gurwitch Products, which owns the Laura Mercier and ReVive brands, for an undisclosed amount in June.

The company is also the licensee for fragrances by Dolce & Gabbana, Issey Miyake and Elie Saab.

Shisheido said it was "making every effort to become a global beauty company... with its roots firmly entrenched in Japan". The company is aiming to increase its sales to more than $9bn by 2020.

It is currently ranked the fourth-largest company in the US beauty market behind Estee Lauder, L'Oreal and LVMH.

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