Shiseido Predicts Worst Loss in Two Decades as Beauty Sector Wilts

(Bloomberg) -- Shiseido Co. fell the most since March after forecasting its biggest loss in almost two decades as the coronavirus pandemic shifts consumer habits, dealing unprecedented damage to the beauty industry.

Shares of the Japanese beauty company fell as much as 10% in early Tokyo trading Friday. On Thursday, Shiseido said it will probably post a net loss of 22 billion yen ($208 million) for the fiscal year and operating income will drop to zero. The loss would be the worst for Shiseido since 2002, when earnings were battered by recalls of cow-based products after an outbreak of mad-cow disease.

It would also be the weakest showing under Chief Executive Officer Masahiko Uotani, who joined the company in the top post in 2014.

“No one has experienced something like coronavirus,” Uotani said in a conference call Thursday. “Our employees are working very hard, but the expenses pulled our forecast down to zero. It is very regrettable.”

The pandemic has hurt the beauty industry in ways that go beyond previous economic downturns. Cosmetics have become a lower priority as people stay home or venture out in masks, doing away with routines such as applying makeup in the morning or spritzing on perfume before a night out. Shiseido's Japan business has also been hurt as travel restrictions keep Chinese tourists away.

Uotani referred to a sense of crisis throughout the earnings call, stressing an inability to clearly predict when the virus can be controlled. Shiseido said its executives would take a pay cut for the last five months of the year and also cut its annual dividend by 10 yen. Uotani said Shiseido doesn't intend to buy back shares.

Shiseido aims to normalize operations by 2023 and the company unveiled a new three-year business plan doubling down on its focus on skincare and skin health. The segment would includes gadgets, dietary supplements and personalized services, Uotani said, and the company unveiled a joint venture with Ya-Man Ltd. to develop beauty devices for the China market. Shiseido aims to boost the segment to account for 80% of sales in four years, from 60% in the most recent fiscal year.

“The coronavirus has greatly impacted how consumers around the world behave and their values,” Uotani said. “There's increased use of e-commerce and obtaining information using digital channels. Also, customers are only buying what they need and value.”

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