China Headwinds and Weaker Margins Weigh on Shiseido's Outlook

Regaining growth momentum in Japan and China, the largest two markets, is on the top of Shiseido’s agenda after covid-19. The strategic shift of its focus to prestige skincare has enabled Shiseido to channel resources to its core competence. Yet, the bet on China has taken its toll after a notable slowdown in China’s consumption and thus beauty spending. Shiseido plans to beef up marketing investment through 2025, preparing for growth acceleration and margin expansion through 2027. The recovery of Japan’s premium (midpriced) cosmetic sales and normalization of margins in China play the most critical roles in our opinion.