Shiseido Co. Ltd. on Aug. 8 lifted its profit forecast for 2019 following positive results for the first half of the year, boosted by improving consumer spending in its home market of Japan and its steadily growing operations in China and the rest of Asia.
The cosmetics company now expects net profit for 2019 to grow 35.2% year over year to ¥83 billion, or ¥207.81 per share, versus its prior guidance of a 23% increase to ¥75.5 billion, or ¥189.04 per share.
For the six months ended June 30, the company reported a 10% year-over-year increase in net profit attributable to owners of the parent to ¥52.45 billion from ¥47.67 billion. Meanwhile, operating profit fell 3% to ¥68.98 billion from ¥71.11 billion as a result of increased investments in marketing, research and development and talent.
Diluted EPS came in at ¥131.20, up from ¥119.18 a year prior.
Net sales during the period rose 6% to ¥564.65 billion from ¥532.60 billion in the first half of 2018, driven by expansion in all regions. Shiseido's travel retail business — which includes the company's namesake brand, as well as NARS and Anessa — led the gains with a 17.2% year-over-year increase in net sales to ¥53.10 billion in the first half from ¥45.26 billion.
Across the company's geographic segments, Shiseido's China business also contributed to the growth with net sales of ¥107.68 billion, up 15.9% from ¥92.90 billion last year due to strong sales of prestige brands such as Shiseido, Clé de Peau Beauté, IPSA and NARS.
Shiseido's domestic business generated ¥231.89 billion in net sales, up 0.5% from ¥230.76 billion a year ago, also driven by the Shiseido brand, in addition to the strong performance of the Ultimune serum; Haku, which launched the medicated brightening care-hybrid foundation; and the Elixir brand of lotions, emulsions and wrinkle-reducing cream.
In the rest of Asia-Pacific, Shiseido saw net sales climb 8.8% year over year to ¥36.25 billion from ¥33.34 billion, while sales in the Americas also saw an 8.9% year-over-year growth to ¥64.07 billion from ¥58.84 billion. Net sales in Europe, the Middle East and Africa were ¥48.22 billion, up 2.9% from ¥46.86 billion.
Meanwhile, Shiseido Professional, the company's salon-exclusive brand focused on hair products for hairdressers, saw net sales fall 0.5% to ¥7.22 billion from ¥7.26 billion.
Shiseido said economic conditions in Japan for the first half of the year continued to recover with signs of a positive turnaround in consumer spending. It also attributed the growth to the growing number of tourists arriving in Japan.
Shiseido cut its net sales target for the full year to a growth of 6.3% to ¥1.164 trillion, down from its previous outlook of ¥1.172 trillion, or an increase of 7%, due to the application of a new accounting standard, which will result in the deduction of approximately ¥8.0 billion for selling, general and administrative expenses. The company added that changes in foreign exchange will also result in a downward revision of net sales.
The company will start paying interim cash dividends of ¥30 on Sept. 3. The dividend represents a ¥10 increase from last year. It expects to pay ¥60 in full-year dividend.
Shiseido's stock closed up 2.14% to ¥7,260 in Tokyo trading prior to the release of its financial results.
As of Aug. 7, US$1 was equivalent to ¥105.70.