Shiseido’s beauty is in the eye of the beholder

Shiseido makes and markets cosmetics, toiletries and beauty products and has revenues exceeding $9b. It’s listed on the first board of the Tokyo stock exchange and has over 39,000 employees.

Shiseido is in the midst of a transformation. In 2020 it suffered an operating loss, in 2021 it recovered and is seeking to change its portfolio and geographical mix away from a reliance upon the Japanese and Chinese markets.

Nars by Shiseido

Click on the corporate site and you’ll see that Shiseido wants to be ‘a global winner with our heritage.’

China actually accounts for a higher mix of sales (30%) versus Japan (26%), although the profit margins in Japan are higher.

Like many large Japanese corporates the biggest challenges are growing in the Americas and Europe where the sales shares are 9% and 13% respectively.

The latest results showed significant rebounds in the Americas and surprisingly to me at least, travel retail.

Although total company revenues were up +12%, Japan declined -1%. The company has blamed the pandemic, stay at home mandates and lack of international tourists.

Whilst these are no doubt valid reasons, the fundamental issue is that Shiseido ultimately has a brand portfolio and sales footprint skewed to Asian markets.

No surprise then that Management is on the look out for acquisitions; it targets beauty to be 75% of revenue.

If you wisely invest in beauty it will remain with you all the days of your life

Frank Lloyd Wright

Shareholders will be hoping the Management team spots some unknown beauty, does not overpay and can integrate smartly. 

Currently the stock is down 16% year on year suggesting not everyone has bought into the plan.