Shiseido Company,limited · TSE:4911
Shiseido Company,limited — Shiseido Co Ltd Ord — Q3 2023 Earnings Presentation
32 slides from Shiseido Company,limited's earnings presentation, Nov 10, 2023
Slide 1: 2023 Third Quarter Results and 2023 Outlook
2023 Third Quarter Results (January—September) and 2023 Outlook November 10, 2023 Shiseido Company, Limited Takayuki Yokota Chief Financial Officer
Slide 2: Forward-looking statements
In this document, statements other than historical facts are forward-looking statements that reflect our plans and expectations. These forward-looking statements involve risks, uncertainties, and other factors that may cause actual results and achievements to differ from those anticipated in these s
Slide 3: 2023 Q3 Key Headlines
2023 Q3 Key Headlines Japan Local Continued Recovery, Americas and EMEA Remained Strong Sales Declined in Q3 due Primarily to the Weakness in China and Travel Retail, Affected by Consumer Pullback on Purchases of Japanese Products due to the Treated Water Release in Japan Like-for-like (LfL)* Net
Slide 4: 2023 Q3 YTD Executive Summary
2023 Q3 YTD (January—September) Executive Summary % of % of YoY YoY YoY YoY (Billion yen) 2022 Net Sales 2023 Net Sales Change Change % FX-Neutral % LfL*2 % Net Sales 762.7 100% 722.4 100% −40.3 −5.3% −8.9% +5.0% Core Operating Profit 36.2 4.8% 36.8 5.1% +0.6 +1.6% Non-recurring items −0.6 −0.1% −11
Slide 5: Softness in China and Travel Retail Offset by Steady Growth of Clé de Peau Beauté, NARS, Drunk Elephant
Softness in China and Travel Retail Offset by Steady Growth of Clé de Peau Beauté, NARS, Drunk Elephant and Fragrance Net sales by brand Like–for–like* (Billion yen) FX, etc. Transferred brands Drunk Elephant ANESSA Fragrance +77% +2% +18% NARS Other Clé de +18% ELIXIR brands −2% IPSA 762.7 Peau 722
Slide 6: Net Sales: Negative Growth in Q3 Affected by Decline in China and Travel Retail
Net Sales : Negative Growth in Q3 Affected by the Decline in China and Travel Retail 2023 Like-for-like* vs. 2019 vs. 2022 Q1 Q2 Q3 Q3 YTD Q1 Q2 Q3 Q3 YTD Japan −32% −29% −27% −29% +8% +9% +6% +8% China +10% +43% +4% +20% −3% +20% −9% +4% Asia Pacific +1% +5% +10% +5% +16% +12% +15% +14% Americas +6
Slide 7: Japan: Continued Growth in Mid-to-High Price Range
Japan: Continued Growth in Mid-to-High Price Range, Local Market Growth Boosting the Total Market Share Gain YoY Q3 Market: 0% Local: Low price ranges drove the market growth; middle price range on a recovery track vs. 2019*2 Growth led by makeup and sun care categories Inbound: Grew strongly
Slide 8: China: Negative Growth in Q3 by Consumer Pullback on Japanese Products
China: Negative Growth in Q3 by Consumer Pullback on Japanese Products due to the Release of Treated Water in Japan Q3 Market: Grew marginally in Q3 after the strong rebound in Q2 Consumer pullback of Japanese product by the treated water release Shiseido Consumer Purchases*: Business Total
Slide 9: Travel Retail: Negative Growth Widened in Q3
Travel Retail: Negative Growth Widened in Q3 amid Consumer Pullback on Japanese Products due to the Treated Water Release in Japan Q3 Market: Steady optimization of inventory levels Retailer inventory adjustments associated with tighter LfL %*: Hainan Island Consumer Purchases … External Sales r
Slide 10: Americas, EMEA, Asia Pacific: Continued Double Digit Growth
Americas, EMEA, Asia Pacific: Continued Double Digit Growth Q3 Market Americas EMEA Asia Pacific Continued to grow across all Continued to grow across all Continued to grow across regions categories with further expansion categories with further expansion Shiseido External Sales*1: Shiseido Exte
Slide 11: COGS LfL Ratio: Improved ca. 2pts YoY
COGS LfL Ratio: Improved ca. 2pts YoY with Productivity Improvement, etc. 2022 2022 2023 Q3 YTD FY Q3 YTD Q3 YTD YoY COGS analysis COGS Ratio*1 31.8% 30.6% 27.3% (+) Higher productivity COGS LfL Ratio*1,2 25.2% 23.9% 23.0% (+) Moderation of logistics cost pressures 34.9% COGS ratio*1 COGS LfL Ratio*
Slide 12: 2023 Q3 YTD Core Operating Profit by Reportable Segment
2023 Q3 YTD Core Operating Profit by Reportable Segment Japan : Returned to profitability in Q3 benefitted from higher gross profit driven by sales growth China : Significant improvement in profit supported by higher gross profit driven by sales growth in 1H and agile cost management, despite YoY de
Slide 13: 2023 Outlook: Revised in Light of Changing Market Environment in China and TR
2023 Outlook: Revised in Light of Changing Market Environment in China and TR Consumer pullback on Japanese products due to the treated water release Travel retail inventory reset following tighter regulations and retailers shifting back towards the business model with focus on tourists Change
Slide 14: Navigating the Evolving Business Landscape (Japan, China and Travel Retail)
Navigating the Evolving Business Landscape (Japan, China and Travel Retail) November 10, 2023 Shiseido Company, Limited Kentaro Fujiwara President and COO
Slide 15: Medium-Term Strategy SHIFT 2025 and Beyond
Medium-Term Strategy SHIFT 2025 and Beyond Building a Path to Sustainable Growth: Achieving Profitability through Proactive Investment and Structural Reforms For Further Global Growth Acceleration Rebuild earnings base by bringing back growth in Japan Win in China (China Business, Travel Retail
Slide 16: Japan: Achieving Core Operating Profit of ¥50.0 bn in 2025
Japan: Achieving Core Operating Profit of ¥50.0 bn in 2025 Profit boosting and cost efficiency plans To complete all actions by the end of 2024 for full benefit realization in 2025 Core Operating Profit Profit boosting (billion yen) and cost efficiency plans 25.0 Gross Profit Increase 50.0 38.0 −13.
Slide 17: Japan: Driving Sales Growth Towards 2025
Japan: Driving Sales Growth Towards 2025 Local Steady growth achieved until Q3 2023 2023-2025 Sales - Strong growth in global / Asian brands Local Inbound CAGR (CAGR +high single digit%) +ca. 30% - Sales decline in Japan local brands from SKU rationalization (CAGR −low single digit%) +over 30% C
Slide 18: Japan: ¥25.0 bn Profitability Improvement Plans towards 2025
Japan: ¥25.0 bn Profitability Improvement Plans towards 2025 COGS: ¥5.0 bn SKU Rationalization - Reduce 1/3 of SKUs from 2022 level Profitability improvement from brand mix by focusing on global / Asian brands Strategic price increases Return reduction through improving operational efficie
Slide 19: Our Views on Current China Market Environment
Our Views on Current China Market Environment Changes and Issues Our Analysis and Outlook Consumer pullback on Treated water release challenge will be temporary, and expected to be Japanese products due to normalized by the end of Q1 2024 the treated water release To monitor market changes close
Slide 20: China, TR: Business Transformation to Build Resilience and Profitability
China, TR: Business Transformation to Build Resilience and Profitability Chinese market continues to be strategically important Accelerate business transformation to achieve sustainable growth and profitability in a dynamic market environment Maximize business opportunity by taking a cohesive
Slide 21: Be a Global Winner with Our Heritage
Be a Global Winner with Our Heritage
Slide 22: Supplemental Data 1: KPI Trends
Supplemental Data 1 KPI Trends Net Sales Core Operating Profit Core Operating Profit Margin (Billion yen) 304.6 281.5 269.3 258.4 259.4 254.2 237.0 233.1 234.0 240.0 228.2 6.9% 6.1% 5.2% 5.4% 5.0% 5.1% 4.6% 3.9% 3.8% 2.9% 1.9% 18.7 13.9 12.8 13.2 15.1 12.5 15.5 9.2 6.7 4.4 8.8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 23: Supplemental Data 2: Q3 Net Sales by Brand
Supplemental Data 2 Q3 Net Sales by Brand Like–for–like* (Billion yen) FX, etc. Drunk Transferred Elephant Fragrance brands ANESSA +23% Transferred +60% NARS +6% brands +8% ELIXIR Other SHISEIDO −8% IPSA brands −13% Clé de −31% Peau 269.3 Beauté 228.2 −4% 2022 2022 2023 2023 Excl. business Excl. bus
Slide 24: Supplemental Data 3: Q3 Net Sales and Core Operating Profit by Segment
Supplemental Data 3 Q3 Net Sales and Core Operating Profit by Reportable Segment Top: Net Sales Bottom: Core OP % of Net Sales / % of Net Sales / YoY YoY YoY YoY (Billion yen) 2022 Core OPM % *1 2023 Core OPM % *1 Change Change % FX-Neutral % LfL % *2 62.9 23.4% 66.5 29.1% +3.6 +5.7% +5.7% +6.3% Jap
Slide 25: Supplemental Data 4: Q3 YTD Net Sales and Core Operating Profit by Segment
Supplemental Data 4 Q3 YTD Net Sales and Core Operating Profit by Reportable Segment Top: Net Sales Bottom: Core OP % of Net Sales / % of Net Sales / YoY YoY YoY YoY (Billion yen) 2022 Core OPM % *1 2023 Core OPM % *1 Change Change % FX-Neutral % LfL % *2 178.6 23.4% 191.6 26.5% +13.1 +7.3% +7.3% +7
Slide 26: Supplemental Data 5: Q3 YTD Net Sales by Category
Supplemental Data 5 Q3 YTD Net Sales by Category (Billion yen) YoY Change % / % of % of YoY YoY 2022 2023 YoY *2 Japan Net Sales Net Sales Change FX-Neutral % *1 LfL % Prestige 49.8 27.9% 59.0 30.8% +9.2 +18.4% Premium 106.9 59.8% 111.8 58.3% +4.9 +4.6% Others 21.9 12.3% 20.9 10.9% −1.0 −4.8% Total
Slide 27: Supplemental Data 6: Q3 YTD Cost Structure
Supplemental Data 6 Q3 YTD Cost Structure (% of Net Sales Marketing investments based on Core Operating Profit ) Strengthened investments for brand equity SG&A *1 65.7% 69.4% improvement Lower costs thanks to business transfers Agile cost management Marketing 25.1% +2.3 pts investments 22.8%
Slide 28: Supplemental Data 7: Q3 YTD SG&A
Supplemental Data 7 Q3 YTD SG&A YoY % of % of YoY YoY Change （Billion yen） 2022 2023 Net Sales Change Change % FX- Net Sales Neutral % *1 Marketing investments 245.8 32.2% 250.6 34.7% +4.9 +2.0% −1.0% Brand development / R&D 37.9 5.0% 27.7 3.8% −10.2 −27.0% −28.2% Personnel expenses 96.8 12.7% 101.7
Slide 29: Supplemental Data 8: Cash Flow Management
Supplemental Data 8 Cash Flow Management Free Cash Flow: +43.9 2022 2023 KPIs (Billion yen) Q4 Q3 Operating CF: +61.1 Investing CF: −17.2 Inventories (Billion yen) 130.9 153.4 148 195 Loss on DSI (Days)*1 (200)*2 (250)*2 Depreciation, transfer of Income business Net D/E ratio amortization and taxes
Slide 30: Supplemental Data 9: Q3 YTD Non-recurring Items
Supplemental Data 9 Q3 YTD Non-recurring Items 2022 2023 (Billion yen) 1H Q3 Q3 YTD 1H Q3 Q3 YTD Core Operating Profit 17.5 18.7 36.2 28.0 8.8 36.8 Gain / Loss on Transfer of Business 4.3 10.9 15.2 −9.1 0.0 −9.1 Gain / Loss on Sales of Fixed Assets - 3.7 3.7 2.4 10.1 12.5 Structural Reform Expenses
Slide 31: Supplemental Data 10: 2023 Net Sales Forecast by Reportable Segment
Supplemental Data 10 2023 Net Sales Forecast by Reportable Segment 2023 Previous YoY YoY Change YoY 2022 Latest YoY LfL %*1 (Billion yen) Change % FX-Neutral % LfL %*1 Forecast (Feb. 2023) Japan 237.6 265.0 +11.5% +12% +12% +16% China 258.2 247.0 −4.3% −7% −5% +8% Asia Pacific 68.0 68.0 +0.0% −5% +1
Slide 32: SHISEIDO
SHISEIDO