Shiseido Reports 73% Plunge in Annual Profit Due to China Slowdown

TOKYO (Reuters) - Japanese cosmetics giant Shiseido reported a 73% decline in full-year profit, citing sluggish sales in China. Operating profit for the 12 months ended December reached 7.58 billion yen ($49.9 million), a significant drop from the 28.13 billion yen reported the previous year.

As a retailer of high-end personal goods, Shiseido is considered a barometer of consumer confidence in China, a key market for the company and its competitors. "China's cosmetics market experienced a prolonged downturn, impacted by reduced consumer spending and increased household savings amidst deteriorating economic sentiment," Shiseido stated.

Year-on-year, Shiseido's China sales saw a 4.6% decrease on a like-for-like basis, excluding the impact of currency fluctuations and business transfers. The company anticipates a further decline in sales by 2025.

Weak results in China also affected interim earnings reported last week by rivals L'Oreal and Estee Lauder. China's once-booming economy has been hampered by a property crisis, rising local government debt, and high youth unemployment. Additionally, Chinese consumers are increasingly shifting towards domestic brands, exacerbating challenges for international luxury goods makers.

Shares in Chinese beauty brand Mao Geping surged 85% when they debuted on the Hong Kong stock market in December and have continued to rise since. In response, Shiseido launched a two-year action plan in November to improve profitability and focus on its core brands.

Over the past year, Shiseido's shares have plummeted 42%, while the benchmark Nikkei average has gained 5.1% during the same period. ($1 = 151.8300 yen)