II. Performance and Outlook


(2) Fiscal 2000 Outlook

(a) Overall Performance Outlook
We believe that the market environment surrounding the Company will remain severe. In response, we will unite the Shiseido Group to create "benefit that exceeds the expectations of customers." We will also pursue greater cost efficiency through "cost-best activities" and strive to secure ample profitability and growth.
In fiscal 2000, we will promote two core strategies: (1) Our "Global Multibrand Strategy" aimed at accelerating growth in the global market by creating diverse brand values; and (2) Increased profitability and full-scale structural reform of our cosmetics business.
By pursuing business operations based on these strategies, we forecast a 5% increase in net sales, a 2% rise in income from operations, and a 26% gain in net income in fiscal 2000.

Consolidated Net Sales

(Billions of yen)

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase /
Decrease over Fiscal
1999

Amount

% change

Cosmetics
Toiletries
Others

470.0
100.0
65.0

444.5
98.9
60.9

25.5
1.1
4.1

+6%
+1%
+7%

Net Sales

635.0

604.3

30.7

+5%


Overseas Sales

115.0

93.6

21.4

+23%

Share in Net Sales

18.1%

15.5%

-


Consolidated Income

(Billions of yen)

Fiscal 2000
(Estimate)

Percent
of
Net Sales

Fiscal 1999
(Results)

Percent
of
Net Sales

Increase/Decrease over
Fiscal 1999

Amount

% change

Income from
Operations

36.0

5.7%

35.4

5.9%

0.6

+2%

Ordinary
Income

38.0

6.0%

33.9

5.6%

4.1

+12%

Net Income

13.0

2.0%

10.3

1.7%

2.7

+26%

Consolidated
Net Income/
Nonconsolidated
Net Income

0.87 times

-

0.79 times

-


Nonconsolidated Net Sales

(Billions of yen)

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase /
Decrease over Fiscal
1999

Amount

% change

Cosmetics
Toiletries
Others

195.0
91.0
14.0

251.0
90.4
21.7

-56.0
0.6
-7.7

-22%
+1%
-36%

Net Sales

300.0

363.1

-63.1

-17%

Note: The Company revised transaction prices with its sales subsidiary. As a result, estimated fiscal 2000 sales of cosmetics and net sales are 4% and 1%, respectively, higher than they would be without such a revision.

Nonconsolidated Income

(Billions of yen)

Fiscal 2000
(Estimate)

Percent
of
Net Sales

Fiscal 1999
(Results)

Percent
of
Net Sales

Increase/Decrease over
Fiscal 1999

Amount

% change

Income from
Operations

24.0

8.0%

23.9

6.6%

0.1

+0%

Ordinary
Income

31.0

10.3%

28.9

7.9%

2.1

+7%

Net Income

15.0

5.0%

13.0

3.6%

2.0

+15%


Per Share Information and Financial Ratios

 

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase/Decrease over
Fiscal 1999

Return on Equity (%):
Consolidated
Nonconsolidated


3.1%
4.0%


2.5%
3.5%


0.6%
0.5%

Net Income per Share (Yen):
Consolidated
Nonconsolidated


31.16
35.95


24.55
30.92


6.61
5.03

Payout Ratio
(Nonconsolidated)


38.9%


45.1%


-6.2%

Dividends per Share (Yen):
Interim
Year-End


7.00
7.00


7.00
7.00


-
-

(b) Outlook by Major Business Category

� Cosmetics
In fiscal 2000, the first year of our "Global Multibrand Strategy," we will implement numerous strategies. Domestically, we will restrict the "Shiseido" brand to the prestige sector, while other self-selection brands, which the Company makes and sells, will be marketed as "by Shiseido" products. We will also continue to pursue other brand-strengthening strategies. Non-Shiseido brands form the core of these strategies, and we will introduce a new brand called "Free Soul Piccadilly" in June 1999. We will also cultivate existing non-Shiseido brands in Asian markets.
We will also undertake drastic restructuring of our organization. We will integrate our domestic and overseas marketing development functions, rearranging them into two "Value Creation Centers" to handle "Shiseido" and "by Shiseido" brands, respectively. And we will reform our sales functions, which will entail such initiatives as the integration in June 1999 of our counseling and self-selection sales functions.
We are scheduled to transfer the goodwill of Shiseido Cosmenity Co., Ltd., to Shiseido Cosmetics Sales Co., Ltd., thus unifying our domestics cosmetics sales system. At the same time, the latter company's name will change to Shiseido Sales Co., Ltd.
We hope to revitalize our business through these initiatives, allowing us to revert to increased revenues even in severe operating conditions. Although expenses related to business restructuring and depreciation expenses will increase, we predict that profits will be practically unchanged from the previous year as we endeavor to implement efficiency in expenditures.

� Toiletries
In our toiletries business, we will prioritize quality over quantity in order to promote brand concentration in line with our "megabrand" strategy. Since we will start new business with Johnson & Johnson in fiscal 2000, we expect a slight increase in overall revenues in this category.
Although profit will be affected by future-oriented investments in new businesses, we will further reinforce our efforts to enhance efficiency in promotional expenditures and reduce costs.
As a result, we believe we can achieve a profit gain.

� Others
We forecast increased net sales and profits from our salon business, which will enjoy the synergistic benefits of acquisitions made in Japan and overseas.
In contrast, we will reassess the scope of businesses in pharmaceuticals, health and beauty foods, lifestyle-related goods, and fashion boutiques, and pursue more efficient expenditure policies. For the category overall, we predict that these efforts will result in increased net sales and attainment of profitability.

� Overseas Sales
We anticipate double-digit growth in North America, Europe, and Asia/Oceania. In the North American and European markets, we will introduce the top-of-the-line Clé de Peau Beauté range of cosmetics and reinforce our line of fragrances. We also predict steady growth in Asia. This will be supported by the introduction of domestic brands, such as UV White, aimed at the growing market for products that make the skin whiter. We will also expand and upgrade our production and sales operations in the rapidly growing Chinese market.

� Economic Indicators Expected to Significantly Impact Operations
A major factor affecting our performance will be real domestic fiscal 2000 GDP, which we predict will report negative growth. Based on Ministry of International Trade and Industry of Japan statistics for cosmetics shipments, we believe that demand for cosmetics will remain at previous-year levels. Our forecasts for the year ahead are based on exchange rate of 120 yen per U.S. dollar, 22 yen per French franc, and 4 yen per new Taiwan dollar.
Since these preconditions form the basis for our fiscal 2000 forecasts, there is ample possibility that major changes in the economic environment will affect the performance trends of the Company. For Shiseido, fiscal 2000 will be the year in which we strengthen our foothold for the 21st century. For this reason, we will harness all our resources to achieve our plans, without being swayed by such external factors.


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