TOKYO (Reuters) – Japanese cosmetics maker Shiseido Co on Friday cut its profit outlook for the next two years after a decline in sales to Chinese consumers.
Shiseido joins other luxury brands such as Cartier owner Richemont and Gucci owner Kering, which have been hit by slowing growth, increased competition and weaker consumer confidence in the world’s second-largest economy.
“The state of the Chinese market does not allow optimism,” Shiseido President Kentaro Fujiwara said at a news conference announcing a new medium-term business strategy. “We will work to rebuild our brand.”
The high-end Japanese make-up maker, which this month cut its full-year profit forecast, aims to increase its operating margin to 7% by 2026 from 3.5% in the 12 months to December 31.
In a business plan unveiled in February, the company said it wants to increase its profit margin to 9% next year.
However, Shiseido has also had to deal with Chinese consumers shunning Japanese brands following the release of treated water from the damaged Fukushima nuclear power plant.
“If you look at their online sales in China, they are down 20% so far this year compared to a market that is down 10%,” said Jacques Roizen, managing director of China Consulting at Digital Luxury Group.
“So this is not just about the Chinese economic environment or the consumer slowdown.”
That means Shiseido has become more reliant on sales in Japan, buoyed by demand from a growing number of foreign tourists who are taking advantage of a weak yen to buy creams, foundations and other products cheaper than at home.
To grow profits over the next two years, Shiseido will further reduce costs, focusing on Japan next year and the rest of the world excluding China in 2026.
Those savings will come from cuts in personnel spending and production costs, Fujiwara said.
(Reporting by Tim Kelly; additional reporting by Casey Hall; Editing by Kate Mayberry)