Shiseido Unveils New Growth Strategy After Record Annual Net Loss

Shiseido posted a record net loss of ¥52 billion for the fiscal year ending December 2025. The loss was driven by factors such as weak performance in the United States. It marked the company's second consecutive year of losses.

However, President and CEO Kentaro Fujiwara, who announced the forecast on November 10, said that "the foundation for returning to a growth trajectory has been laid." He unveiled a new management strategy aimed at more than doubling the core business's operating profit margin by 2030.

With concerns growing over potential headwinds for duty-free sales amid worsening Japan-China relations, the key question is whether this record loss could mark a turning point toward renewed growth.

Profit Structure Reform

In November 2024, Fujiwara announced a reform of the company's profit structure following deteriorating performance driven by sluggish operations in China. "We aim to break free from this crisis. The next two years will be critical," he said.

About a year later, Japan's core operating profit margin, which shows how profitable the main business is, improved significantly, even though sales stayed flat. It rose from 7.4% in the same period last year to 12.7% for January–September 2025.

In China and the travel retail (duty-free) segment, sales fell 5.7% (excluding foreign exchange effects), but the profit margin rose 0.4 percentage points year-on-year to 19.3%. This improvement in the earnings structure was achieved through fixed cost reductions and rigorous cost management.

*Shiseido's booth at the China International Import Expo on November 6, Shanghai, China. (©Kyodo)*

US Write-Down

For its troubled US operations, Shiseido recorded an impairment write-down, primarily due to the underperforming skincare brand Drunk Elephant, resetting the asset's accounting value. This is why the previously projected net profit of ¥6 billion turned sharply into a record loss.

At the same time as announcing its earnings forecast, Shiseido revealed measures such as voluntary retirement offers for around 200 employees. These initiatives are part of the company's structural reform plan to cut fixed costs.

CFO Ayako Hiroto said that the profit-boosting effect of these measures, estimated at ¥25 billion in 2026, is considered certain, signaling that the company is beginning to emerge from crisis-mode management.

New Vision Under Fujiwara

The management strategy, introduced alongside the structural reforms, reflects Fujiwara's new vision for Shiseido. He is pursuing this vision beyond immediate crisis response, after taking over as CEO in January from Chairman Masahiko Uotani.

The goal of raising the current 4% profit margin to over 10% by 2030 underscores a commitment to profit-focused management that maximizes earnings through efficient use of capital — a core principle of the structural reforms. This approach will also be factored into executive compensation going forward.

*Kentaro Fujiwara (left) succeeded Masahiko Uotani as president — November 2022, Tokyo.*

Luxury Strategy Under Uotani

Uotani, the first CEO to come from outside the company and formerly with Coca-Cola Japan, shifted Shiseido toward luxury brands. He sold the haircare brand TSUBAKI and the men's cosmetics brand uno, while acquiring Drunk Elephant in 2019 for about ¥90 billion.

However, the impairment in the US operations showed that this brand restructuring had not yet resulted in sustainable profit growth. The ongoing challenge is how to strengthen brand competitiveness and growth while maintaining rigorous cost management.

Shiseido's Core Strengths

Fujiwara said, "We will polish our unchanging strengths and lead the market through innovation," adopting as the strategic slogan the words of former president Shinzo Maeda from 20 years ago: "This moment. This life. Beautifully."

Maeda had demonstrated his ability to unlock Shiseido's potential through concentrated investment in strong brands, a customer-focused approach, and the launch of TSUBAKI and uno, creating new value. Fujiwara, also a homegrown executive, appears to see opportunity in building on this legacy.

Shiseido's strength lies in its expertise and technology in dermatology. The company holds the most top awards from the International Federation of Societies of Cosmetic Chemists (IFSCC), often called the "Olympics" of the cosmetics industry.

Dermatology and Innovation

The new strategy creates a system to apply the latest innovations across all brands, with plans to commercialize more than ten new technologies by 2028. The core brand, SHISEIDO, will expand into skincare areas rooted in dermatology and high-growth medical aesthetics.

To strengthen its leading brands, the company also plans to expand the sunscreen brand Anessa into Europe and the US. It also aims to bring its fragrances, already successful in Europe, into the US and Asia.

Nonetheless, the outlook remains uncertain. Worsening Japan-China relations could reduce inbound tourism or spark boycotts in China. In 2023, the release of treated water from the Fukushima Daiichi nuclear plant triggered such a boycott.

The coming year will be a true test for management — whether Shiseido can maintain a resilient profit structure that withstands unexpected risks while successfully implementing its new strategy.

(Read the article in Japanese.)

Author: Noboru Ikeda, The Sankei Shimbun