Group 1 - Japanese cosmetics companies are experiencing collective anxiety in the Chinese market, with Shiseido's executives acknowledging a decline in brand equity [2] - The Japanese beauty industry has been a significant player in China for over 40 years, but recent years have seen challenges due to the rise of local brands and external pressures from Western competitors [2][3] - In the first half of 2025, major Japanese beauty companies reported declines in their Chinese operations, with Shiseido's sales dropping by 10%, Kosé's by 7.3%, and POLA's net profit plummeting by 38% [2][3] Group 2 - The performance of Japanese beauty companies reflects a broader restructuring of the beauty industry, highlighting the need for multinational companies to adapt to the changing market dynamics in China [3] - Despite global profit growth, the persistent weakness in the Chinese market is a common challenge for these companies, indicating a significant shift in the competitive landscape [3][16] Group 3 - Shiseido's overall sales in the first half of 2025 were 469.83 billion yen (approximately 22.86 billion RMB), a decrease of 7.6%, while core operating profit increased by 21.3% to 23.37 billion yen (approximately 1.14 billion RMB) [7][10] - The Chinese and travel retail segment for Shiseido saw sales of 173.94 billion yen (approximately 8.46 billion RMB), down 12.4%, but it contributed nearly 80% of the group's core profit [10] Group 4 - Kao Corporation reported a global sales increase of 2.7% to 809 billion yen (approximately 39.3 billion RMB) in the first half of 2025, with operating profit rising by 19.9% to 69.5 billion yen (approximately 3.3 billion RMB) [10][13] - Kosé's sales were 160.5 billion yen (approximately 7.8 billion RMB), a slight increase of 0.9%, but operating profit fell by 17.7% to 11.3 billion yen (approximately 0.55 billion RMB) [15] Group 5 - POLA ORBIS Group's total revenue was 832.53 billion yen (approximately 38.3 billion RMB), a slight decrease of 0.7%, with net profit dropping by 38.1% to 4.64 billion yen (approximately 0.23 billion RMB) [16] - The performance of these companies illustrates a clear divide between global profitability and challenges in the Chinese market, with POLA facing additional difficulties due to delayed strategic adjustments [16] Group 6 - Japanese beauty companies are optimistic about the long-term potential of the Chinese market and are accelerating transformations to navigate current challenges [17] - Strategies include focusing on high-end products, channel innovation, and localization to better respond to the evolving consumer landscape in China [17][19]

Core Viewpoint - Japanese cosmetics companies are facing significant challenges in the Chinese market, with declining sales and profits, prompting a need for strategic transformation to regain market share and adapt to local consumer demands [2][3][14]. Group 1: Market Performance - Shiseido's sales in China fell by 10% in the first half of 2025, while Kose's business declined by 7.3%, and POLA's net profit dropped by 38% due to market weakness [3][10][13]. - The overall sales of Japanese cosmetics in China have been adversely affected by the rise of local brands and external factors such as the nuclear wastewater incident [3][4]. - In the first half of 2025, Shiseido's global sales were 469.83 billion yen (approximately 22.86 billion RMB), down 7.6% year-on-year, but core operating profit increased by 21.3% to 23.37 billion yen (approximately 1.14 billion RMB) [7][8]. Group 2: Strategic Adjustments - Japanese companies are focusing on high-end markets and localizing their operations to better meet consumer needs in China [16][22]. - Shiseido plans to integrate its China and travel retail operations into an independent profit center to enhance brand synergy and respond to the trend of high-end market penetration [16][32]. - Kose is implementing a strategy of channel optimization and brand restructuring, emphasizing high-end and mass-market segments while enhancing local R&D and marketing efforts [24][31]. Group 3: Future Outlook - Despite current challenges, Japanese companies remain optimistic about the long-term growth potential in the Chinese market and are accelerating their transformation efforts [16][32]. - The focus on high-quality growth rather than short-term sales boosts is evident in Shiseido's strategy, which includes significant investments in core brands and new product launches [18][32]. - The ability to adapt to local consumer preferences and integrate local insights into product development will be crucial for Japanese brands to maintain competitiveness in the evolving Chinese beauty market [27][32].

Core Insights - Shiseido reported a sales revenue of 229.96 billion yuan for the first half of 2025, a decrease of 7.6% year-on-year, marking the largest decline in the past five years [1][4][5] - The core operating profit for the same period was 11.38 billion yuan, reflecting a year-on-year increase of 21.3% [1][2][5] - The decline in sales was observed across all five major business regions globally, with the largest drop in the China travel retail segment, which saw a 12.4% decrease [1][10][16] Financial Performance - The sales revenue for the first half of 2025 was 229.96 billion yuan, down 7.6% year-on-year, and down 6.1% when adjusted for local currency [2][5] - Core operating profit increased to 11.38 billion yuan, up approximately 2 billion yuan from the previous year, representing a 21.3% growth [2][5] - Operating profit turned from a loss of 1.33 billion yuan in the previous year to a profit of 8.81 billion yuan [2][5] Historical Performance - The first half of 2025 marked the largest sales decline for Shiseido in the past five years, with previous years showing either growth or minimal decline [4][5] - In 2021, Shiseido recorded the highest sales growth of 21.5% in the first half, while other years had growth rates below 3% [4][5] Regional Performance - The China travel retail segment's sales were 84.76 billion yuan, down 12.4%, making it the most significant decline among all regions [10][16] - The Americas region saw a 10.1% decrease in sales, while the Asia-Pacific and European regions experienced declines of 2.3% and 5.3%, respectively [10][16] - Japan's sales decreased by 0.6%, indicating a broad downturn across all major markets [10][16] Brand Performance - Among Shiseido's brands, CPB, NARS, and ELISE showed positive growth, with ELISE achieving a 12% increase in sales [6][9] - The overall brand sales declined by 4%, but excluding the China travel retail area, the brand's sales increased by 4% [9][16] - The brand "Zui Xiang" experienced a significant drop in sales by 57% [9][16] Strategic Initiatives - Shiseido aims to achieve a core operating profit of 36.5 billion yen (approximately 17.77 billion yuan) for the year, despite the sales decline [17][18] - The company plans to cut costs globally, having already reduced 13.5 billion yen (approximately 6.57 billion yuan) in the first half of the year, with a target of 50 billion yen (approximately 24.34 billion yuan) in total cost reductions over the next two years [18] - Shiseido is focusing on brand optimization, management efficiency, and cost control to navigate the challenging market environment [17][18]

Core Insights - Shiseido Group's Q1 2025 financial results indicate a significant decline in net sales and core operating profit, reflecting ongoing challenges across all regional markets [1][3][7] Financial Performance - The net sales for Q1 2025 were 228.24 billion yen (approximately 11.10 billion RMB), a decrease of 8.5% year-on-year, marking the lowest in four years [3][7] - Core operating profit fell to 8.25 billion yen (approximately 0.40 billion RMB), down 27.2% compared to the previous year [3][7] - The company reported a turnaround in operating profit, achieving 7.20 billion yen (approximately 0.35 billion RMB) compared to a loss of 8.75 billion yen (approximately -0.43 billion RMB) in the same quarter last year [2][3] Regional Market Performance - All regional markets experienced declines, with the Chinese and travel retail sectors down by 12.1% year-on-year [5][21] - The Americas market saw a significant drop of 14.5%, primarily due to the poor performance of the brand Drunk Elephant, which plummeted by 65% [10][13] - In Europe, the decline was less severe at 9.2%, aided by growth in the brands SK-II and NARS [13][21] Brand Performance - Among the Core 3 brands, Shiseido and NARS saw net sales decrease by 7% and 2% respectively, while SK-II was the only brand to show growth at 2% [10][19] - The Next 5 brands had mixed results, with only Elixir showing an increase of 11%, while others experienced declines [10][19] Strategic Adjustments - Shiseido announced a two-year mid-term plan, "Action Plan 2025-2026," focusing on restructuring and enhancing brand performance [24][25] - The company is undergoing leadership changes, particularly in the Americas and travel retail sectors, to address declining sales [24][25] - The merger of travel retail and China business units aims to create a more flexible and consumer-centric business model [24][25]