Interim Performance



3. Consolidated Segment Information

(1) Cosmetics

(Millions of yen)

First Half
of Fiscal
1999

First Half
of Fiscal
1998

Increase/Decrease over
First Half of Fiscal 1998

Amount

% change

Cosmetics Sales from Outside Customers
Domestic
Overseas

227,423
183,988
43,435

227,397
191,996
35,401

25
-8,008
8,034

0.0%
-4.2%
+22.7%

Sales and Transfer Account from
Intersegment Transactions

2,741

3,550

Total Cosmetics Sales

230,165

230,948

Income from Operations in
Cosmetics Division
Percent of Category Sales


23,849
10.4%


28,985
12.6%


-5,135
-2.2%

-17.7%


(a) Domestic Sales
We continued to promote "New Shiseido Marketing" in order to strengthen "customer benefit," which reflects "what is important to customers who desire beauty." We placed particular emphasis on skin care, based on the "Skincare House Shiseido" theme, while introducing new products, which were well received. These included Whitess Click Effector, with enhanced skin-whitening effect, and Eau de Clear, a clear collagenous beauty lotion.
However, overall domestic sales of cosmetics were down 4.2%. This was largely the result of a rise in shipments in the previous interim term following a demand peak prior to the consumption tax hike. We also implemented a more rigorous inventory management system to further enhance product freshness.

(b) Overseas Sales
During the term, we achieved steady increases in sales of Relaxing Fragrance, launched in fiscal 1998, and new makeup products introduced in fiscal 1999. We expanded market share as a result. In addition, the fragrance business of Beauté Prestige International S.A. continued to report an improved performance.
In Asia and Oceania, we achieved a gain in sales, despite concern about the effects of economic crises in several nations in the region.
As a result, overseas cosmetics sales in the first half of fiscal 1999 jumped 22.7% from the previous year's interim period.

(c) Income from Operations
Income from our cosmetics operations fell 17.7%, due to a number of factors. First, we reported an initial increase in depreciation expenses arising from investments in production facilities aimed at building a foundation for growth. Also, the launch of Za, targeting middle income earners in Asia, involved considerable costs. In addition, profit margins were squeezed by the decline in domestic sales.

(2) Toiletries

(Millions of yen)

First Half
of Fiscal
1999

First Half
of Fiscal
1998

Increase/Decrease over
First Half of Fiscal 1998

Amount

% change

Toiletries Sales from Outside Customers

48,778

51,864

-3,085

-5.9%

Sales and Transfer Account from
Intersegment Transactions

544

375

Total Toiletries Sales

49,323

52,239

Income from Operations in
Toiletries Division
Percent of Category Sales


19
0.04%


21
0.04%


-2
-0.00%

-9.3%


(a) Net Sales
During the term, we worked to develop toiletry products that make people comfortable, in order to help them "maximize the individuality and joy in their lives with each passing day." We also conducted sales activities focusing on offering new lifestyle choices by building selling environments.
We strengthened each of our brands, including the addition of a body soap to the Super Mild line.
Although we pursued aggressive marketing activities, interim sales of toiletries were down 5.9% as price competition continued to intensify and the overall market languished due to depressed personal consumption.

(b) Income from Operations
Despite the sales decline amid a difficult personal consumption environment, we maintained income from operations at previous-year level, thanks to cost-efficient expenditures.

(3) Others

(Millions of yen)

First Half
of Fiscal
1999

First Half
of Fiscal
1998

Increase/Decrease over
First Half of Fiscal 1998

Amount

% change

Other Sales from Outside Customers
Domestic
Overseas

31,094
23,393
7,700

31,208
24,938
6,269

-113
-1,544
1,430

-0.4%
-6.2%
+22.8%

Sales and Transfer Account from
Intersegment Transactions

17,842

16,346

Total Other Sales

48,936

47,554

Income from Operations in Others
Percent of Category Sales

-717
-1.5%

-539
-1.1%

-178
-0.4%

-


(a) Domestic Sales
In our salon business, Genic Corporation (formerly Helene Curtis Japan Inc.), which became a subsidiary in fiscal 1998, reported increased sales. In July 1998, Shiseido Beauty Company Ltd. (formerly Qi Salon Cosmetics Co., Ltd.) acquired the goodwill of Takigawa Company, Ltd. In these ways, we strengthened our wholesaler and salon channels and pursued aggressive sales strategies.
Our pharmaceuticals business generated increased sales, thanks to the addition of OEM products to our general line of pharmaceuticals. In lifestyle-related goods, we reviewed the scope of our business with the emphasis on supporting our core cosmetics business. In our health and beauty foods business, we reviewed our sales channel strategies. Domestic sales of other products declined 6.2%.

(b) Overseas Sales
Zotos International, Inc., our North American subsidiary, reported steadily increased sales of brands acquired from Helene Curtis Inc.

(c) Income from Operations
Zotos achieved improved profitability in the interim period under review as it made effective use of infrastructure obtained through its acquisition in fiscal 1998 of the salon operations of Helene Curtis, Inc., thus strengthening its business foundation. Due to declines in sales from our lifestyle-related goods and health and beauty foods business however, profit margins decreased, causing the loss from operations to increase by 178 million yen.


[ Next ]