Shiseido’s Q3 Earnings Call: Optimism Amid Challenges

Shiseido Company,Limited ((JP:4911)) has held its Q3 earnings call. Read on for the main highlights of the call.TipRanks Black Friday Sale Claim 60% off TipRanks Premium for the data-backed insights and research tools you need to invest with confidence. Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off Shiseido’s Earnings Call Reflects Optimism Amid Challenges The recent earnings call for Shiseido Company, Limited painted a picture of cautious optimism. The company reported a positive turnaround in the third quarter, with strong growth in regions like EMEA and Japan’s e-commerce sector. However, challenges persist, particularly in the Americas and with certain brands such as Drunk Elephant. While Shiseido is on a recovery path, significant hurdles remain evident in their financial results. Positive Q3 Turnaround After a prolonged period of resetting, Shiseido achieved a positive return in the third quarter. The sales momentum indicates that the company is back on a growth trajectory, marking a significant milestone in its recovery efforts. Structural Reforms and Profitability Shiseido’s cumulative core operating profit for the third quarter exceeded JPY 30 billion, bringing it closer to the initial target of JPY 36.5 billion. This improvement is attributed to cost reductions and strict financial discipline. Free Cash Flow Exceeds Expectations The company’s free cash flow is expected to reach JPY 35 billion, surpassing initial forecasts by JPY 20 billion, showcasing effective financial management. EMEA Strong Performance The EMEA region demonstrated robust performance with a 22% year-on-year increase, achieving double-digit growth even when excluding comparison base effects. Japan E-Commerce Growth E-commerce sales in Japan rose by mid-20% in the third quarter, driven by strategic investments and increased purchases from loyal users. Strong Growth in Fragrance Segment Fragrance sales in EMEA saw significant growth, with brands like Zadig & Voltaire up over 70% in Q3, and narciso rodriguez and ISSEY MIYAKE maintaining double-digit growth. Americas Business Challenges The company recorded a noncash goodwill impairment loss for its Americas business, leading to a downward revision of operating profit and net profit forecast for 2025. Drunk Elephant Sales Decline Shiseido faced significant challenges due to a sharp decline in Drunk Elephant sales, impacting overall sales figures. Travel Retail Market Weakness The travel retail market remains challenging, affected by weaker spending among Chinese travelers and intensified price competition. Net Sales Decline Cumulative net sales for the first nine months of fiscal year 2025 were JPY 693.8 billion, a decline of 3% like-for-like, mainly due to lower sales in China, Travel Retail, and Drunk Elephant. Net Loss Recorded The company posted a net loss of JPY 44 billion for the quarter due to nonrecurring items and goodwill impairment losses. Forward-Looking Guidance During the fiscal year 2025 third quarter call, Shiseido provided extensive guidance on its strategic plans and financial outlook. The company aims for a core operating profit margin of 7% in 2026, with plans to achieve JPY 25 billion in cost savings by 2026 through structural reforms. Free cash flow for the year is expected to surpass initial forecasts, reaching JPY 35 billion, while maintaining an annual dividend of JPY 40 per share. The company also outlined a strategic focus on brand innovation and geographic expansion, particularly in skincare and fragrance categories, to drive growth and achieve a core operating profit margin above 10% by 2030. In conclusion, Shiseido’s earnings call reflects a company in transition, with positive signs of recovery tempered by ongoing challenges. The sentiment is cautiously optimistic, with strategic plans in place to address current hurdles and capitalize on growth opportunities in key segments and regions.