Shiseido stocks have crashed to an eight-year low after the Japanese beauty giant’s plan to offset slow sales in China was met with lukewarm reception.
Shares in the Tokyo-headquartered business fell by 8.4% in early trading, with investors underwhelmed by the brand owner’s recovery plan for the Chinese market.
The plan is centred around three objectives: reinforcing the brand foundation, rebuilding its profitability and enhancing its operational governance.
This will include a strategic investment in key brands, strengthening its R&D team and bolstering its workforce.
“[This] is to achieve its goal of establishing a resilient business model to drive sustainable profit growth amid volatile market conditions,” Shiseido said in a statement.
Shiseido has been hit hard by a slump in consumer sales in China, which is the company’s largest market beyond Japan.
As a result, the NARS and Drunk Elephant owner has downgraded its profit outlook from 9% to 7% for the next two years.
It follows the beauty giant reporting an operating loss of ¥2.7bn (US$18.4m) for the six months to 30 June 2024, in contrast to operating profit of ¥13.6bn in H1 2023.
H1 net sales were ¥508.5bn, down 0.5% on the prior year period on a like-for-like basis.
The “modest” performance during the period reflected faltering economic sentiment among Chinese consumers, according to the company.
Additionally, net sales for Shiseido’s Travel Retail business dropped 22.7% on a like-for-like basis, once again reflecting changes in the purchasing behaviour of Chinese tourists.
Profit was pushed down particularly, meanwhile, by a restructuring charge associated with Shiseido’s Early Retirement Incentive Plan.