Japanese beauty group Shiseido Company reported ¥232 billion (US$1.46 billion) in net sales in the first quarter of FY2026 ended 31 March. This represented a -3% like-for-like decline year-on-year.
The drop was attributed to trading weakness due to tensions between Japan and China, though Shiseido Group said the impact was “within expectations”.
The decline offset momentum in the China & Travel Retail division, led by Hainan and Hong Kong, alongside selected regional domestic markets.
The China & Travel Retail business delivered a stronger-than-expected performance, with net sales down -1% on a like-for-like basis, exceeding internal forecasts.
Core operating profit at group level rose +58% year-on-year to ¥13 billion (US$81.7 million), underpinned by structural reforms, disciplined cost management and an improved fixed-cost base.
The company said the impact of prolonged Japan-China tensions remained “within a controllable range”, although it acknowledged a “clear impact” on Japan inbound demand and travel retail during the quarter.
During an investor Q&A, Shiseido Group Chief Financial Officer Ayako Hirofuji said: “In terms of Japan-China impact, as was explained in the last earnings report, we talked about the Q1 impact being already embedded of ¥10 billion (US$62.9) for the revenue in Q1.
“In Japan, sluggish inbound business was originally expected to be a decline of over -30%, but as you can see on the slide, was a high -20% impact only. Then, the travel retail impact was also recognised in the Japan business, but we tried to capture the other regional inbound customers sales.
“In Hainan and other regions, there were some positive impacts on travel retail. For the impact from the China-Japan tensions, it was within our expectations.”
On the record with Shiseido Group President and CEO Kentaro FujiwaraOn tensions between China and Japan: “The overall impact of Japan-China tensions is manageable. We anticipate a prolonged slump in inbound demand in Japan, but we plan to compensate for this with accelerated growth in China and travel retail.” On Hainan recovery: “We have already seen an improvement in momentum, particularly in Hainan Island in Q1, and we will maximise this opportunity.” On the Middle East conflict: “The business risk due to heightened tensions in the Middle East has increased significantly, and we recognise that this is where our fundamental management capabilities will be tested. However, if the current situation prolongs and supply constraints, production cuts and stock-out risks materialise, we will assess the situation from Q2 onwards and update our earnings forecast as necessary.” On diversifying the consumer base: “Through growth in China and travel retail, as well as diversification of our business portfolio across regions, we have reduced our dependence on profits from any single market and are able to respond flexibly to shifts in demand.” On travel retail recovery: “In travel retail, the sell-out negative impact was narrowing down, so the Q4 was 20% negative, but in Q1, this time, it is in the mid-teens, so quite a big improvement.” On turning risks into resilience: “What is important here is that we do not view the current changes in the business environment merely as risks, but rather as an opportunity to transform into a stronger and more efficient business structure.” |
The company said revised assumptions for weaker Japan inbound demand had been incorporated into its full-year outlook.
Hirofuji added, “Japan sales forecast was revised down to a low single-digit growth, and then China travel retail originally anticipated negative growth, but now it improved to a low single-digit percentage growth, not negative.”
Travel retail and regional performance
Highlighting China & Travel Retail, Shiseido highlighted “strong growth” in Hainan and said the impact of Japan-China tensions had been “smaller than expected”. This has prompted the group to revise its full-year outlook upward for the business and target full-year growth.
Within travel retail, performance varied by market. Hainan and Hong Kong returned to strong growth, while Mainland China travel retail sales declined, as Shiseido cited retailer transitions in the market. As reported, China Duty Free Group (CDFG) and Wangfujing Duty Free won the anchor retail concessions at Beijing Airport. CDFG and Avolta – through Dufry (Shanghai) Commercial Co – captured the tenders for Shanghai Pudong and Hongqaio airport duty-free concessions.
Shiseido said its increasingly diversified regional portfolio has reduced reliance on any single market, enabling the group to respond more flexibly to geopolitical shifts and changing consumer demand.
Hirofuji said: “In travel retail, although sales declined due to retailer changes in Mainland China, Hainan and Hong Kong remained solid. We are successfully capturing demand through marketing activities aligned with shifts in travel destinations.
“In travel retail as well, momentum differences across regions have become increasingly pronounced,” Hirofuji added. “Hainan and Hong Kong have returned to strong growth, while Mainland China recorded a big decline due to the temporary impact of retailer changes. Going forward, we will continue to identify growth areas and flexibly allocate resources accordingly.”
Japan recorded a -4% decline in net sales, driven by a sharp fall in Chinese tourist demand and shipment restrictions linked to product transitions. However, Shiseido said its domestic business remained resilient, with double-digit growth from local consumers for brands including Shiseido, Elixir and Anessa.
The company also noted that structural reforms in its domestic Japan business have lowered the breakeven point, allowing it to maintain profitability despite reduced inbound tourism demand.
Commenting on the impact of the Japan-China tensions on the group’s performance across regions, Hirofuji said: “Although the impact of Japan-China tensions remains within expectations, inventory adjustments led to lower-than-expected global figures.
“While the Americas saw a +5% increase in sales, the impact of Japan-China tensions affected negatively inbound business in Japan as well as China and travel retail. Sales in EMEA decreased due to the impact of initial shipments of new products in the previous year.”
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The travel retail perspective from Shiseido Group Deputy Managing Director, Travel Retail Global Business Division and General Manager, Travel Retail Asia Adele ZhangOutlook
Shiseido maintained its full-year earnings guidance despite ongoing geopolitical uncertainty and rising costs linked to Japan-China tensions and the conflict in the Middle East.
The company said higher raw material and logistics costs had already been factored into forecasts and would be managed through pricing initiatives, procurement optimisation and company-wide cost discipline.
Management added that if Middle East tensions intensify further, supply constraints and raw material shortages could eventually affect production and sales, though these risks are not currently reflected in earnings forecasts.
The group said it views the current business environment as an opportunity to accelerate transformation efforts and strengthen its long-term profit structure through further optimisation of supply chains, portfolio management and investment allocation.
Shiseido Group President and CEO Kentaro Fujiwara commented: “As for our full-year outlook, we have revised downward our assumptions for growth in Japan inbound demand. At the same time, we intend to secure overall growth and profitability by steadily capturing growth opportunities in China, travel retail and other regions.
“While uncertainty in the market environment remains extremely high, the management reforms we have advanced over the past several years have steadily strengthened our resilience. The fact that we were able to respond swiftly and secure profits even amid sales declines in Q1 is clear evidence of this progress.
“We view this uncertainty as an opportunity to accelerate transformation and further enhance our competitiveness.” ✈
