| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2319.6B | ¥2282.4B | +1.6% |
| Operating Income | ¥123.3B | ¥72.0B | +71.2% |
| Profit Before Tax | ¥132.7B | ¥74.1B | +79.1% |
| Net Income | ¥83.5B | ¥37.5B | +122.8% |
| ROE | 1.3% | 0.6% | - |
Shiseido Company, Limited's consolidated results for Q1 2026 delivered revenue of ¥2319.6B (YoY +¥37.2B +1.6%), Operating Income of ¥123.3B (YoY +¥51.3B +71.2%), Ordinary Income of ¥132.7B (YoY +¥52.6B +71.0%), and Quarterly Net Income attributable to owners of the parent of ¥83.7B (YoY +¥46.9B +127.1%), achieving year-over-year increases in both revenue and profit. Operating margin improved by 2.1 points to 5.3% (prior 3.2%), clarifying a recovery in profitability. Gross profit margin rose 0.9 points to 78.4% (prior 77.5%), and SG&A increased only to ¥1713.2B (YoY +¥10.9B +0.6%), substantially below revenue growth, meaning gross margin improvement plus expense control created operating leverage. By region, China & Travel Retail revenue grew to ¥783.3B (+4.5%) and Americas to ¥295.6B (+8.7%), while Japan declined to ¥712.2B (-4.0%). Segment core operating profit totaled ¥246.6B, with China & TR contributing the largest portion at ¥157.1B. Cash flow deteriorated with Operating Cash Flow (OCF) at -¥8.4B (from prior +¥24.8B, a -133.8% swing), as inventory increase -¥35.6B and decrease in other current liabilities -¥160.1B pressured working capital. Free Cash Flow was -¥71.3B, meaning dividend payments of ¥77.5B were not covered by internally generated cash. Progress against the full-year forecast (Revenue ¥9,900.0B, Operating Income ¥590.0B, Net Income ¥420.0B) is 23.4% for revenue, 20.9% for Operating Income, and 19.9% for Net Income — below the standard 25% quarter-through rate, confirming a second-half weighting assumption.
[Revenue] Revenue was ¥2319.6B (YoY +1.6%), a modest increase. By region, China & Travel Retail was ¥783.3B (+4.5%), Americas ¥295.6B (+8.7%), Asia Pacific ¥180.3B (+5.6%), and Europe ¥325.5B (+3.1%), all positive, while core Japan declined to ¥712.2B (-4.0%), suggesting intensified domestic brand competition. China & Travel Retail accounted for 33.8% of total revenue and led growth as the largest revenue segment. Other businesses fell sharply to ¥22.8B (-30.0%) but had limited overall impact. Gross profit was ¥1818.6B (YoY +¥49.3B +2.8%), with gross profit margin rising 0.9 points to 78.4% (prior 77.5%), supported by pricing actions and increased sales in higher value-added categories.
[Profitability] Cost of sales declined to ¥501.0B (prior ¥513.1B), a -2.4% decrease, which together with revenue growth improved gross margin. SG&A was ¥1713.2B (YoY +¥10.9B +0.6%), a slight increase, resulting in an SG&A-to-revenue ratio of 73.9% (prior 74.6%), a 0.7 point improvement. Gross profit increase of ¥49.3B versus SG&A increase of ¥10.9B produced a ¥38.4B contribution to Operating Income growth. Other operating income increased materially to ¥17.9B (prior ¥5.0B), boosting Operating Income by ¥12.9B. Consequently, Operating Income reached ¥123.3B (YoY +¥51.3B +71.2%), and Operating margin improved 2.1 points to 5.3% (prior 3.2%). Financial income was ¥23.0B and financial expenses ¥14.6B, yielding a net +¥8.4B (prior +¥0.2B) of non-operating gains, and together with equity-method investment profit of ¥0.9B, Profit Before Tax amounted to ¥132.7B (YoY +¥52.6B +79.1%). Income tax expense was ¥49.2B (effective tax rate 37.1%), producing Quarterly Net Income attributable to owners of the parent of ¥83.7B (YoY +¥46.9B +127.1%), with net margin improving 2.0 points to 3.6% (prior 1.6%). Non-controlling interests attributable was -¥0.2B (prior +¥0.6B), immaterial. Special items included restructuring costs -¥6.6B, impairment losses -¥0.4B, and impairment reversals +¥0.04B, with limited impact. In summary, the quarter demonstrated revenue and profit growth and confirmed structural improvement in profitability.
China & Travel Retail achieved revenue of ¥783.3B (YoY +4.5%) and core operating profit of ¥157.1B, the largest segment profit contributor. Its margin was about 20.0%, supported by recovery in duty-free demand and expansion of higher value-added product sales. Japan revenue declined to ¥712.2B (-4.0%), but core operating profit remained solid at ¥104.2B (prior ¥113.4B), maintaining a margin of approximately 14.6%. Americas turned to growth with revenue ¥295.6B (+8.7%) and achieved core operating profit of ¥3.3B (prior -¥18.5B), driven by improved cost efficiency. Europe posted revenue ¥325.5B (+3.1%) but core operating loss widened to -¥16.4B (prior -¥4.2B), with brand investments and fixed-cost burdens weighing on profitability. Asia Pacific revenue was ¥180.3B (+5.6%) and core operating profit turned positive to ¥5.0B (prior -¥0.8B), aided by regional demand recovery and improved promotion efficiency. Other businesses recorded revenue ¥22.8B (-30.0%) and core operating loss -¥6.6B (prior +¥0.9B), reflecting contraction in foodservice and similar operations. Adjustments from core operating profit to Operating Income moved from segment total ¥246.6B less corporate costs and other adjustments -¥116.3B (prior -¥141.3B), and then non-recurring items (restructuring, impairments) -¥7.0B, producing Operating Income of ¥123.3B. The regional portfolio clarified a two-pillar structure with China & TR and Japan, Americas and Asia Pacific turning profitable, while Europe remains the major turnaround challenge.
[Profitability] Operating margin improved to 5.3% (prior 3.2%), driven by a 0.9 point increase in gross margin and a 0.7 point decline in SG&A ratio. Net margin improved to 3.6% (prior 1.6%), aided by improved non-operating results. ROE was 1.3% (annualized approx. 5.2%), driven mainly by improved net margin, but asset turnover was low at 0.18x (annualized approx. 0.73x), with working capital expansion suppressing asset efficiency. EBITDA (Operating Income + depreciation & amortization) was approximately ¥298.7B (Operating Income ¥123.3B + depreciation & amortization ¥175.5B), yielding an EBITDA margin of 12.9%.
[Cash Quality] OCF/Net Income was -0.10x (OCF -¥8.4B / Net Income ¥83.7B), markedly negative, indicating weak cash conversion of profits. Accrual ratio ((Net Income - OCF) / Total Assets) was 0.7%, suggesting short-term deterioration in earnings quality. The negative OCF stems mainly from inventory increase -¥35.6B, decrease in other current liabilities -¥160.1B, and decrease in trade payables -¥17.0B, reflecting working capital deterioration.
[Investment Efficiency] Total asset turnover was low at 0.18x (Revenue ¥2,319.6B / average total assets ¥12,685.1B). Inventory turnover annualized was about 6.1x (Revenue / average inventory) and receivables turnover annualized about 5.8x (Revenue / average trade receivables), both leaving room for improvement. Capital expenditures were ¥64.9B and intangible investments ¥31.0B, totaling ¥95.9B of investment, below depreciation & amortization of ¥175.5B, indicating maintenance-level investment.
[Financial Soundness] Equity ratio was 47.8% (prior year-end 47.4%), broadly stable. Debt-to-equity (total liabilities ¥6,444.8B / net assets ¥6,253.7B) was 1.03x, neutral. Interest-bearing debt (bonds and borrowings) comprised current ¥810.0B + non-current ¥1,516.3B = ¥2,326.3B; lease liabilities current ¥205.2B + non-current ¥937.3B = ¥1,142.5B, giving a broad definition of interest-bearing liabilities of ¥3,468.8B. Debt/EBITDA (on interest-bearing debt basis) is about 1.95x assuming annualized EBITDA of approx. ¥1,195B; on the broad debt basis it is about 2.90x, mid-range. Interest coverage (EBIT / interest paid) is ¥123.3B / ¥9.0B ≈ 13.7x, healthy. Current ratio is 127.1% (current assets ¥4,719.1B / current liabilities ¥3,714.1B), indicating short-term liquidity is secured. Cash and cash equivalents were ¥917.9B, covering roughly 113% of short-term debt. Goodwill was ¥599.1B, 9.6% of net assets; intangible assets ¥1,759.6B, 28.1% of net assets, so M&A-related assets are relatively modest.
OCF was -¥8.4B (prior +¥24.8B), deteriorating to a -0.10x conversion versus Net Income ¥83.7B. Subtotal before working capital changes (Profit Before Tax + non-cash items) was ¥35.1B, from which working capital deterioration had a major adverse impact. Inventory increased by -¥35.6B, implying stock build-up ahead of demand assumptions. Trade receivables decreased by +¥119.8B (improved collections), but trade payables decreased -¥17.0B and other current liabilities decreased -¥160.1B (payment of items booked at prior quarter-end), resulting in an overall large cash outflow in working capital. Corporate tax payments of ¥40.5B, interest payments of ¥9.0B, and lease payments of ¥60.5B also pressured OCF. Investing cash flow was -¥62.9B, reflecting capital expenditure -¥64.9B and intangible asset acquisitions -¥31.0B, partly offset by net increase in time deposits +¥23.0B (withdrawals ¥89.4B - deposits ¥66.4B), proceeds from sale of tangible fixed assets ¥1.9B, and other +¥8.1B. Free Cash Flow (OCF + investing CF) was -¥71.3B, worsening by ¥85.1B YoY. Financing CF was +¥59.0B, driven mainly by increase in short-term borrowings and commercial paper +¥210.0B (prior +¥310.0B); there were no repayments of long-term borrowings or bond redemptions this period (prior -¥200.0B), shortening the maturity profile. Dividend payments were -¥77.5B (prior -¥38.4B), lease liability repayments -¥60.5B, and dividends to non-controlling interests -¥11.5B. After foreign exchange translation effect +¥11.8B, cash and cash equivalents remained unchanged at ¥917.9B from beginning to end of period. As long as OCF remains negative, dependence on short-term borrowings may increase; inventory normalization and restoration of payables/other current liabilities are catalysts for improvement in subsequent quarters.
This period's Net Income of ¥83.7B is largely rooted in core business improvement and is considered to have high recurrence. Non-operating results contributed net +¥8.4B (financial income ¥23.0B - financial expenses ¥14.6B), about 0.4% of revenue, limited in impact. The composition of financial income is not disclosed, but dividends received, interest, and FX gains are plausible, with no evident large one-off items. Special items amounted to -¥7.0B (restructuring -¥6.6B, impairments -¥0.4B, impairment reversal +¥0.04B), small at 5.7% of Operating Income. Comprehensive income was ¥137.6B (owners of the parent ¥135.9B), and the ¥53.9B difference from Net Income ¥83.7B was due to other comprehensive income. The breakdown of other comprehensive income was foreign operations translation differences +¥56.8B (translation gains), FVOCI financial assets -¥3.0B, remeasurement of defined benefit plans -¥0.1B, and equity-method other comprehensive income +¥0.3B, with translation differences comprising the majority. The fact that OCF was -¥8.4B — substantially below Net Income — raises concerns on earnings quality. Working capital deterioration is the primary cause, with accrual (Net Income - OCF) at +¥92.1B (4.0% of revenue), indicating a marked short-term divergence between profit and cash. The gap between Ordinary Income and Net Income is explained by income tax expense ¥49.2B (effective tax rate 37.1%) and non-controlling interests -¥0.2B; the tax rate is within a typical range. Core operating profit excluding non-recurring items was ¥130.3B (adjusted from disclosed segment profits after corporate allocations), consistent with the reported Operating Income ¥123.3B after non-recurring -¥7.0B. Overall, while core business profitability improvement is substantive, weak cash conversion necessitates working capital normalization to solidify earnings quality.
Full-year guidance is maintained at Revenue ¥9,900.0B (YoY +2.1%), Operating Income ¥590.0B, Net Income attributable to owners of the parent ¥420.0B, and EPS ¥105.12. Q1 progress rates are 23.4% for revenue (¥2,319.6B / ¥9,900.0B), 20.9% for Operating Income (¥123.3B / ¥590.0B), and 19.9% for Net Income (¥83.7B / ¥420.0B), trailing the standard 25% benchmark by roughly 4–5 points on operating and net income. Revenue progress is only slightly lagging (-1.6 points), but profit progress is notably behind. This likely reflects prepayment of corporate costs and restructuring charges in Q1, continued European losses, and seasonality (second-half weighted promotions and demand). Segment core operating profits bear a larger corporate allocation burden in the first half, suggesting cost leverage will work in the second half as revenue expands. Dividend guidance is annual ¥30.0 (interim ¥10.0 + year-end ¥10.0 paid), with ¥20.0 per share distributed this period. Full-year payout ratio is 28.6% (total dividends ~¥120B / projected Net Income ¥420B), a reasonable level with high probability of maintenance. Achieving guidance requires second-half revenue growth (remaining ¥7,580.4B after Q1), improved cost efficiency, reduction of European losses, and working capital normalization. Currency movements and durability of China & Travel Retail demand are risk factors.
Dividend payments this period totaled ¥77.5B (prior ¥38.4B), an increase of ¥39.1B YoY. Based on weighted average shares outstanding of 399,544,979, the per-share dividend paid equates to ¥20. Full-year forecasted dividend remains ¥30 (no progress), with the remaining ¥10 to be paid later. The payout ratio based on this period is high (~92.6%) given Net Income ¥83.7B and dividends paid ¥77.5B, but on a full-year basis the payout ratio is approximately 28.6% (total dividends ~¥120B vs. projected Net Income ¥420B), a sustainable level. Share buybacks were minimal at ¥0.01B this period, indicating a dividend-focused capital policy. Total shareholder return (dividends + buybacks) is essentially the same as the payout ratio at about 28.6% on a full-year basis. With Free Cash Flow at -¥71.3B, current dividends were supplemented by cash stock (beginning cash ¥917.9B) and increased short-term borrowings. The company expects OCF to turn positive during the year, enabling dividend funding, but near-term sustainability depends on working capital improvement. Retained earnings were ¥3207.6B, 25.3% of total assets, indicating sufficient capacity for dividends. Treasury stock was ¥17.9B (0.11% of issued shares), limited in scale and contributing little to capital efficiency. Share-based compensation expense of ¥0.6B was recorded as employee incentives. Dividends to non-controlling interests of ¥11.5B were also paid. Overall, dividends are being executed stably, with full-year payout at an appropriate level, contingent on working capital and cash generation improvements.
Working capital deterioration and weakened cash generation: OCF worsened to -¥8.4B (from prior +¥24.8B), a -133.8% change, and OCF/Net Income is -0.10x, indicating weak cash conversion. Drivers include inventory increase -¥35.6B, decrease in other current liabilities -¥160.1B, and decrease in trade payables -¥17.0B, showing notable deterioration in working capital management. Free Cash Flow is -¥71.3B and dividends of ¥77.5B were not covered by internally generated cash, requiring an increase in short-term borrowings +¥210.0B. Continued delay in normalizing working capital would increase short-term funding reliance, refinancing risk, and interest burden. Inventory stands at ¥1,522.7B (prior year-end ¥1,471.4B), posing risks of reduced turnover and valuation losses if sales weaken. Inventory reduction and restoration of trade payables/other current liabilities in subsequent quarters are required for improvement but may be difficult amid demand volatility.
Continued losses in Europe and regional portfolio imbalance: Europe recorded core operating loss -¥16.4B (prior -¥4.2B) with widening deficit, and despite revenue growth to ¥325.5B (+3.1%), profitability has not been achieved. Increased brand investment, promotional spending, and fixed costs are pressuring results amid intensified competition. Persistent European losses would limit company-wide margin improvements and widen inter-segment profit disparities. Heavy reliance on China & Travel Retail (≈20% margin) and Japan (≈15%) means demand slowdowns or regulatory changes in those markets could significantly affect consolidated performance. European turnaround requires cost structure reforms and brand portfolio review, but short-term recovery appears challenging.
Slippage in full-year forecast progress and second-half concentration risk: Q1 progress versus full-year forecasts is 20% range for Operating and Net Income, trailing the 25% standard by 4–5 points, confirming a second-half weighting assumption that depends on seasonality and major promotional events. Demand uncertainty and intensified competition could result in plan shortfalls. Continued European losses, Japan revenue decline (-4.0%), and ongoing working capital deterioration would impede second-half recovery and may necessitate downward revisions to guidance. Debt/EBITDA on interest-bearing debt basis is about 1.95x, mid-range, but with negative OCF, borrowing dependence rises and leverage concerns intensify. Short-term borrowings increased to ¥810.0B (prior year-end ¥300.0B), shortening the maturity profile and elevating refinancing and interest-rate risks.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.3% | 6.8% (2.9%–9.0%) | -1.5pt |
| Net Margin | 3.6% | 5.9% (3.3%–7.7%) | -2.3pt |
Compared with manufacturing median, Operating Margin is -1.5pt and Net Margin -2.3pt, placing the company slightly below peers. Gross margin at 78.4% is high, but SG&A ratio of 73.9% constrains profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.6% | 13.2% (2.5%–28.5%) | -11.6pt |
Revenue growth at +1.6% is substantially below the manufacturing median +13.2%, indicating weak top-line expansion. Japan revenue decline (-4.0%) and continued European losses constrain growth.
※ Source: Company compilation
Structural improvement in profitability and margin recovery: Operating margin improved to 5.3% (prior 3.2%), driven by a 0.9 point rise in gross margin and a 0.7 point decline in SG&A ratio. China & Travel Retail core operating profit ¥157.1B (≈20% margin) and Japan ¥104.2B (≈15%) form two pillars, improving regional portfolio profitability. Pricing strategy and increased sales of higher value-added categories improved gross margin, and promotion cost control enhanced expense efficiency. Excluding non-recurring items including restructuring -¥6.6B, core operating profit shows further improvement. For the full year, operating leverage is expected to work in the second-half revenue expansion phase, offering additional margin upside.
Working capital and cash generation normalization is the top short-term priority: OCF was -¥8.4B versus Net Income ¥83.7B (-0.10x), showing markedly weak cash conversion. Inventory increase -¥35.6B and decrease in other current liabilities -¥160.1B are the main drivers, making inventory management and correction of payment terms urgent. Free Cash Flow was -¥71.3B, and dividends of ¥77.5B were not covered by internal cash, supplemented by short-term borrowings +¥210.0B. Next quarter inventory compression and restoration of payables/current liabilities are catalysts for improvement; if achieved, OCF could turn positive and Free Cash Flow improve. Increased short-term borrowings shorten the maturity profile and raise refinancing and interest burdens, so working capital normalization is key to maintaining financial soundness.
Regional portfolio imbalance and European turnaround: China & Travel Retail and Japan account for over 80% of profits, while Europe recorded core operating loss -¥16.4B, widening inter-regional profit disparities. Americas and Asia Pacific have returned to profitability, but Europe’s recovery is crucial for company-wide margin and growth acceleration. Europe posted revenue ¥325.5B (+3.1%) but has structural cost and brand competitiveness issues, making short-term recovery challenging. High dependence on China & Travel Retail means fluctuations in duty-free demand or regulatory shifts should be closely monitored. Q1 progress rates in Operating and Net Income being in the low-20% range versus the 25% standard confirm second-half weighting, but persistent European losses and working capital deterioration pose downside risk to full-year attainment.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on publicly available financial statements. Investment decisions are your responsibility; consult a professional as needed.