Summary of the Shiseido Group s Businesses

Transcription

1 Summary of the Shiseido Group s Businesses 1 Now I would like to give you a summary of the Shiseido Group s businesses. Consolidated Income/Loss and Property of the Shiseido Group Fund Procurement Investment in Fixed Assets 2 I would like to begin with consolidated income/loss and property of the Shiseido Group, the statuses of our fund procurement and investment in fixed assets.

2 Three-Year Plan (FY2011 FY2013) Sustained Growth as a Global Player Representing Asia with Its Origins in Japan Three-Year Plan Shiseido Establish foundation as a global player Globalization Phase I Improve quality of activities across the board Globalization Phase II Move to a growth trajectory Establish an undisputed presence in Asia Accelerated transformation into a global company (Integration of domestic and overseas business operations) Customer-oriented marketing reforms Globalization Phase III Make a leap forward Become a global player Shiseido 3 We at the Shiseido Group aim for sustained growth as a global player representing Asia with our origins in Japan. As a step toward this goal, we have been working on our Three-Year Plan with the theme of move to a growth trajectory since fiscal Growth Strategies Under the Three-Year Plan Japan China Asian Countries Americas Europe Global Mega-Brand Strategy Asian Breakthrough Strategy Improvement of brand value in the prestige market Full-scale promotion of the masstige market Expanding market share in Asia Promote priority activities in each country New Frontier Strategy Full-scale entry to web marketing Enhancement of initiatives in emerging countries Customer-First Strategy Refining product development Refining of sales activities Reinforcement of management base Optimization of production system / Improvement of procurement system Establishment of IT infrastructure Globalization of human resources Deepening of CSR activities 4 We positioned fiscal 2011, the first year of our Three-Year Plan, as a year to improve company quality, and aggressively invested in future growth in both Japan and overseas markets. We worked on the following four growth strategies: Global Mega-Brand Strategy, Asian Breakthrough Strategy, New Frontier Strategy, and Customer-First Strategy In addition, to reinforce our management base, we worked on: Optimizing the production system and improving the procurement system; Creating an IT infrastructure; Globalizing human resources; and Developing CSR activities.

3 Consolidated Net Sales +1.7% (Billion yen) FY 2010 FY As a result, our consolidated net sales for the fiscal year under review increased by 1.7% compared to the previous fiscal year, to billion yen. For our domestic business, we maintained almost the same level of sales as the previous year, despite adverse market conditions. Our overseas sales continued to be driven by China, and we achieved double-digit growth on a local currency basis. Consolidated Operating Income % 39.1 (Billion yen) FY 2010 FY Operating income declined by 12%, to 39.1 billion yen. This is because we increased marketing costs and other expenses both in Japan and overseas in order to move to a growth trajectory. The result was almost the same as what we had initially planned.

4 Consolidated Net Income % 14.5 (Billion yen) FY 2010 FY Net income increased by 13.5% compared to the previous year, to 14.5 billion yen, due to the absence of major extraordinary losses such as a loss on valuation of investments in securities, despite negative factors including the reversal of deferred tax assets as a result of a change in the corporate tax rate, as well as a decline in operating income. Property of the Shiseido Group Assets, Liabilities, and Net Assets of the Fiscal Year Under Review (Billion yen) Equity Ratio 40.3% Total Assets (-18.4) Liabilities (-2.0) Net Assets (-16.4) Fund Procurement No important fund procurement 8 Next, I will talk about our property. As of the end of fiscal 2011, our total assets decreased by 18.4 billion yen compared with the end of the previous fiscal year, to billion yen. Our liabilities declined by 2 billion yen to billion yen, while net assets decreased by 16.4 billion yen to billion yen. As a result, our equity ratio was 40.3%. We also did not make any important fund procurements during the fiscal year under review.

5 Investment in Fixed Assets by the Shiseido Group 34.3 (Billion yen) The Shiseido-Ginza Future Planning Project (Expenses for constructing the company building in Ginza, etc.) New Business Model (System development expenses, etc.) 4.5 Total Amount of Investment Tangible Fixed Assets Intangible Fixed Assets Long-term Prepaid Expenses 9 I will now move on to discuss our investment in fixed assets. In fiscal 2011, we invested a total of 34.3 billion yen in fixed assets. To give you specific examples of these investments, we renewed our production facilities and improved overseas store counters. We also invested in the Shiseido-Ginza Future Planning Project, which involves building an office in Ginza. Another example is organizational development related to our new business model for the domestic market, which I will describe later. Progress and Achievements of Businesses Issues to Tackle 10 Next, I will report on the progress and achievements of businesses and issues to tackle.

6 Domestic Cosmetics Business 11 I will begin with the domestic cosmetics business. Domestic Cosmetics Business: Net Sales -1.3% (Billion yen) FY 2010 FY During fiscal 2011, we moved away from a traditional marketing style that relies on launching new products and conducting sales promotions for them. Instead, we strived to increase product value and thoroughly refine our process for suggesting beauty solutions to customers. As a result, although the entire market was shrinking, our net sales declined by only 1.3% compared with the previous fiscal year, to billion yen.

7 Copyright 2011 Shiseido Co., Ltd. All Rights Reserved. No reproduction without permission. 8 Copyright 2011 Shiseido Co., Ltd. All Rights Reserved. No reproduction without permission. 51 Domestic Cosmetics Business: 1) Increasing Product Values Bringing Carefully Selected, Highly Competitive New Products to Market Fostering Existing Core Products MAQuillAGE clé de peau BEAUTÉ TSUBAKI 13 From the viewpoint of increasing product value, we reduced our number of new product launches by half and released carefully selected products that would be highly sought after by customers. At the same time, we focused on supporting existing core products. As a result, we enjoyed a hit release for the MAQuillAGE Essence Glamorous Rouge, a product that achieved record sales, with more than one million items sold since its launch. We also enjoyed favorable results for clé de peau BEAUTÉ and TSUBAKI, and worked to gain repeat orders and create longtime sellers. In fiscal 2012, we will continue to bring carefully selected, highly competitive new products to market and will strive to support existing core products. Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers 身体と心の 不 を涼しくする 涼活のスメ季節 社会背景を捉えた 共同取組み 今年の秋と冬は身も心も美しく あたたまる Utilizing products and product variety and Enabling Comfortable Lives 癒しのススメSuggesting Beauty Solutions for Eliminating Discomfort and Dissatisfaction Preparing solutions to suit the beauty needs of each season 14 In our efforts to suggest beauty solutions to customers, we focused on changes in customer lifestyles and their potential needs. We suggested solutions that would eliminate discomfort and dissatisfaction and enable comfortable lives. Specifically, we started with Ryokatsu No Susume (keep cool and active), a beauty solution for staying cool and comfortable in the summer, when we need to save on electricity. This was followed by Iyashi No Susume (be healed) in the autumn, and Fuyu Onkatsu no Susume (keep warm and active) in the winter. In this way, we offered solutions for the beauty needs of each season through the use of our various products.

8 Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers Enhancing Beauty Solutions for Each Season and Preparing Beauty Solutions for the Senior Market Newspaper ad targeting the senior market published on March newspapers across Japan A full-color, double-page ad 15 In fiscal 2012, we will continue to enhance our beauty solutions for each season. We will also develop and suggest these beauty solutions for the senior market, which is large and promising. Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers Department Stores and Cosmetic Voluntary Chain Stores A comprehensive approach to basic in-store activities (promoting the use of direct touch on customers skin and using beauty equipment, etc.) 16 Next, I would like to describe our initiatives for each channel. In fiscal 2011, we took a comprehensive approach to basic in-store activities, such as directly touching customers skin and using beauty equipment, at department stores and voluntary chain stores. As a result, more customers came back to our stores. Our department stores had better results than the previous fiscal year despite the adverse market conditions, which included a significant decline in the number of foreign tourists and a reduction in the number of days of operation in order to on electricity after the Great East Japan Earthquake. Our efforts also led to achievements at voluntary chain stores. For example, at more than 250 stores across the country, sell-through was 110% or more compared with the previous fiscal year.

9 Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers Department Stores and Cosmetic Voluntary Chain Stores <FY2012> Enhance basic in-store activities further A comprehensive approach to basic in-store activities (promoting the use of direct touch on customers skin and using beauty equipment, etc.) 17 In fiscal 2012, we will further enhance our basic in-store activities, such as directly touching customers skin and using beauty equipment, at department stores and voluntary chain stores. Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers Drug Stores and General Merchandise Stores Bolstering self-selection skincare products and cosmetics for men were among the issues. 18 Meanwhile, at drug stores and general merchandise stores, the promotion of self-selected skincare products and cosmetics for men were among our issues.

10 Domestic Cosmetics Business: 2) Refining Activities for Suggesting Beauty Solutions to Customers Drug Stores and General Merchandise Stores <FY2012> Strengthen store promotion for each chain and leverage lines in the self-selection category Bolstering self-selection skincare products and cosmetics for men were among the issues. 19 In fiscal 2012, we will aim to increase sales by strengthening store promotion for each chain and leveraging product lines in the self-selection category. Domestic Cosmetics Business: 3) Introducing a New Business Model Meeting customers Deepening Relationship with customers Having customers feel effects Store Introduction Introduction Taking advantage of the characteristics of both websites and bricks-and-mortar stores Mechanism to attract greater numbers of regular customers by creating opportunities for customers seeking beauty to encounter Shiseido *Note: Japanese-only. To watch the video, please push the Play Video button on the webpage: shm/html/index.html The English translation of the narration of this video is posted on the same webpage. 20 The main pillar of our initiatives for fiscal 2012 in the domestic cosmetics business is introducing a new business model through websites. This is not just providing Internet shopping capabilities. It is a mechanism to attract greater numbers of regular customers by creating opportunities for those customers seeking beauty to encounter Shiseido, which will be enabled by taking advantage of the characteristics of both websites and brick-and-mortar stores. We started this initiative in April of this year. We will show you a video* about its specific content.

11 Domestic Cosmetics Business: 3) Introducing a New Business Model 21 How did you find us? Two months have passed since this new business model was launched. Users of Beauty & Co. have given us such comments as This is interesting because it provides not only beauty information but also information about lifestyles in general and The feature articles are worth reading and are very interesting. We expect a further increase in the number of users. Domestic Cosmetics Business: 3) Introducing a New Business Model 22 watashi+ receives more than 1 million page views a day. We feel that attracting that many customers is a very good start. We will continue to refine these websites to keep responding to the diverse beauty needs of our customers, and help them enjoy the process of applying makeup.

12 Domestic: Healthcare Business Expanding the lineup of collagen-related products The Collagen BENEFIQUE COLLAGEN ROYAL RICH 23 Next, I would like to describe our healthcare business. In fiscal 2011, amid increasingly fierce competition among collagen-related products, we expanded our lineup of these products. In addition to launching our mainstay line, The Collagen, we also released BENEFIQUE COLLAGEN ROYAL RICH, an exclusive line for voluntary chain stores. In fiscal 2012, we will continue our efforts to increase sales, mainly by taking advantage of the strength of The Collagen as a patented beauty food that only Shiseido offers. Global Business 24 Next, I would like to move on to describe our global business.

13 Global Business: Net Sales % (+12.2% on a local currency basis) (Billion yen) FY 2010 FY We continued to enjoy significant growth in the United States and Europe, and maintained a high rate of growth in Asia, including China. As a result, our net sales increased by 5.6% compared to the previous fiscal year, to billion yen. On a local currency basis, our rate of sales increase was 12.2%. Global: Prestige Market of the Cosmetic Business Superior Performance in Countries around the World High Growth in Overseas Markets Global Brand clé de peau BEAUTÉ 26 In the prestige market, products of the global brand SHISEIDO, including the Future Solution LX premium skincare line, continued to be strong in each country. In fiscal 2012, we will enhance the prestige image of the brand, with American actress Jennifer Connelly as our spokesperson, for example. For clé de peau BEAUTÉ, we will further improve its brand value and enhance its presence in North America. In China, we will increase the number of stores. We will thus continue to aim for high growth in overseas markets.

14 Global: Prestige Market of the Cosmetic Business Strengthening Measures for Fostering Bare Mineral Launch of READY, a new makeup products Operation of a large-scale campaign 27 For Bare Mineral, we launched READY, a new makeup line, in September of last year. We achieved excellent results by launching a large-scale campaign, Be a force of beauty. Global: Prestige Market of the Cosmetic Business Creating Synergy between Bare Mineral and SHISEIDO Expanding the categories to skincare Growth in Japan and Hong Kong Further growth in Europe Entry into growth areas including Brazil 28 In fiscal 2012, we will undertake a full-scale initiative to create synergy by using Shiseido s technologies and sales capabilities. We will promote the expansion of skincare categories and at the same time aim for further growth in Japan, Hong Kong, and Europe, as well as in the US, our main market. In addition, we will aim for even higher growth by aggressively entering into growth areas, such as Brazil, where we started to sell our products on June 12.

15 Global: Prestige Market of the Cosmetic Business High Growth of NARS Maintaining the Superior Performance of the Designer Fragrance and Travel Retail Businesses NARS Elie Saab Airport duty-free shop (Hong Kong) 29 Other than that, in overseas markets, our makeup artist s brand, NARS, achieved high growth, mainly in North America. Our designer fragrance also grew steadily, and travel retail businesses, including airport duty-free shops, continued to show superior performance. In fiscal 2012, we will continue to expand both NARS and our fragrance business to more countries. Above all, we will strengthen our marketing of NARS by making use of social networking. Global: Cosmetics Business in the Chinese Market Highest Priority for Injecting Management Resources Quality improvement Reinforcing approach to the prestige market Sustainable growth of specialty stores Strengthening and expanding masstige businesses and new markets Highest priority for injecting marketing costs and human resources Quantity expansion 30 Next, I will describe our cosmetics business in China. Our highest priority for injecting management resources was the Chinese market, where competition with our competitors has been increasingly fierce. In fiscal 2012, we will continue to increase our marketing costs and other costs. We will thus give priority to investing in measures for reinforcing our approach to the prestige market, which are aimed at enhancing the image of the Shiseido brand, and masstige business, targeting the middle-income group, which will expand in Asia in the future. As a result, our net sales in China will finally reach the milestone of 100 billion yen.

16 Global: Cosmetics Business in the Chinese Market Growth of Sales in the Department Store Channel AUPRES clé de peau Beauté Global Brand 31 At department stores, AUPRES, the global brand SHISEDO, and clé de peau Beauté continued to be strong and achieved increases in sales. In fiscal 2012, we will introduce the premium line of AUPRES in stores ranked high in sales, in response to the growing needs of the higher prestige market, and improve beauty consultants capabilities in in-store activities. In addition, we will renovate store counters for the global brand SHISEIDO and increase the number of clé de peau Beauté stores. Global: Cosmetics Business in the Chinese Market Sustainable Growth of the Specialty Store Channel URARA PURE & MILD 32 At cosmetics specialty stores, dedicated brands URARA and PURE & MILD continued to be strong and achieved increases in sales. In fiscal 2012, we will continue to strengthen these brands. In addition, we will introduce a collagen drink and a skin brightening drink, our healthcare products. We will thus deepen the relationship between customers and stores, thereby aiming for steady growth.

17 Global: Cosmetics Business in the Asian Masstige Market Enhancing Our Presence in China and Other Asian Countries Thailand Za TSUBAKI SENKA 33 Next, I will explain our cosmetics business in the Asian masstige market. In this market, the total skincare and makeup brand Za grew significantly, mainly in China. We also took actions for TSUBAKI, including improving content and shifting to local production, in response to the needs of local customers in China. And we also launched SENKA, a brand of low-price skincare products, in Taiwan and Hong Kong, thereby realizing a broader Asian launch of the brand. In fiscal 2012, we will take further measures for Za and TSUBAKI in supermarkets and other channels, as well as drug stores. We will also aim to launch SENKA in more countries. Global: Cosmetics Business in Emerging Countries Changes in the Number of Overseas Countries and Regions where We Operate (Accumulated Total) Next, I will move on to describe the business in emerging countries. We expanded our business in Russia and proactively entered new markets such as Panama. As of the end of May 2012, the number of countries and regions where we operate had increased to 89.

18 Global: Cosmetics Business in Emerging Countries Creating the Next-generation Growth Engine Russia Brazil 35 In fiscal 2012 in Russia, we will strengthen measures for TSUBAKI, which we launched in the country in fiscal 2011, while steadily promoting the global brand SHISEIDO. Also, we will newly launch Bare Mineral and NARS in Brazil as a promising market following Russia. We will thus start operating multiple brands in earnest. Global: Professional Business Mega Hit in Japan Superior Performance in Overseas Markets THE HAIR CARE ADENOVITAL CARITA DECLÉOR Zotos 36 Next, I will describe our professional business. In Japan s hair product market, the HAIR CARE ADENOVITAL, a hair-growing agent that contains adenosine as an active medical ingredient, became a mega hit. In overseas markets, superior results were achieved by Zotos International, Inc., which operates globally with a focus on North America, as well as CARITA International S.A. and Laboratories Decléor S.A.S., which offer our products in beauty salons and operate esthetic salons. In fiscal 2012, we will increase the strength of each brand and increase efforts to expand ADENOVITAL and the Joico brand of Zotos International, Inc. in Asia, for example.

19 Deepening CSR Activities Our Corporate Activities for Putting into Practice Our Corporate Philosophy Dialogue and cooperation with our all stakeholders Activities for achieving a sustainable society through activities that address the issues and expectations of society 37 Next, I will explain our CSR activities. At the Shiseido Group, we regard CSR activities as putting our corporate philosophy into practice through our corporate activities. We help achieve a sustainable society by engaging in activities that address the issues and expectations of society through dialogue and cooperation with our stakeholders. We therefore work to create health and beauty for people. Today, I will describe the activities we are focusing on, which are environmental activities, initiatives to abolish animal testing, support for affected areas, and the MIRAI TSUBAKI Project. CSR Activities: Environmental Activities Use of Containers Made of Sugar Cane-based Polyethylene (SUPER MiLD) Use of Wind-power Generation Facilities at a Plant of Zotos International, Inc. in the United States Activities of Planting and Maintaining Camellia at Goto Islands, Nagasaki Tree-planting Activities in Gansu Province, China 38 I will begin with our environmental activities. In fiscal 2011, we adopted containers made of sugar cane based polyethylene for SUPER MiLD. We were the first to use this material for containers for cosmetics products or daily commodities. Also, a Zotos International plant in the United States uses wind-power generation facilities. We engaged in activities to plant and cultivate camellia on the Goto Islands in Nagasaki Prefecture, where camellia oil, or Tsubaki oil, is produced. We also continued our activities to plant trees in China s Gansu Province.

20 CSR Activities: Environmental Activities Use of Containers Made of Sugar Cane-based Polyethylene (SUPER MiLD) Use of Wind-power Generation Facilities at a Plant of Zotos International, Inc. in the United States Activities of Planting and Maintaining Camellia at Goto Islands, Nagasaki Tree-planting Activities in Gansu Province, China 39 In fiscal 2012, we will continue to promote the use of environmentally friendly materials for our products. At the same time, we will strive to reduce the amount of CO2 emissions from our plants and offices in Japan and overseas by installing environmentally friendly facilities and implementing energysaving measures. CSR Activities: Initiatives to Abolish Animal Testing Ended In-house Animal Testing (on March 31, 2011) Promoting development of new values Development and establishment of alternatives to animal testing Taking further steps to phase out all animal testing by FY Next, I will describe our initiatives to abolish animal testing. We aim to abolish animal testing in our cosmetics product development. We had discussions based on diverse opinions from people in the field. As a result, on March 31, 2011, we abolished in-house animal testing. From now on we will promote diverse initiatives to create new values, and develop and establish alternatives to animal testing, aiming to phase out all animal testing in cosmetics product development by fiscal 2013.

21 CSR Activities: Support for the Affected Areas Provision of Cosmetics Sets Beauty Volunteer Activities by Our Employees Hand massage Makeup 41 Next, I will explain our support for afflicted areas. At the Shiseido Group, we have been engaged in a variety of support activities since the Great East Japan Earthquake. Immediately after the earthquake, we provided emergency support for those affected by the disaster. In addition to relief funds, we provided them with relief supplies such as shampoo that could be used without water. We later provided support to prolong their life as evacuees. Our employees engaged in beauty volunteer activities, such as giving hand massages, applying makeup, and providing evacuees with cosmetics kits. CSR Activities: Support for the Affected Areas Provision of Cosmetics Sets Beauty Volunteer Activities by Our Employees Hand massage Makeup 42 We also provided information support. For example, we submitted articles on beauty to community-based newspapers and provided information to FM community stations and others. In December 2011, we gave cosmetic kits to people living in temporary housing, so they could spend the New Year radiantly. We learned a lot through these activities. We learned that the products and services we offer at the Shiseido Group not only make customers look beautiful, but also contain a tremendous energy that enables them to deliver a joie de vivre and vitality to the people who use them. I think it will take a lot of time for people to recover from the disaster. At the Shiseido Group, we will continue to provide support to those in affected areas, hoping and believing that they will again smile with heartfelt pleasure some day.

22 CSR Activities: MIRAI TSUBAKI Project Deepening Ties with Society and Customers Social Contribution Activities by Approx. 46,000 Group Employees Worldwide Cleaning up flowerbeds in Ginza Shiseido Parlour The Earth Day Poster Contest for raising environmental awareness Shiseido America Inc./Davlyn Industries, Inc. Environmental conservation activities at Yuigahama Technology & Engineering Center Women & Cosmetics Culture Environment Beauty seminar for senior citizens Taiwan Shiseido Co., Ltd. 43 Next, I will move on to explain the MIRAI TSUBAKI Project. Thanks to your support, we have entered the milestone year of the 140th anniversary since Shiseido was founded in 1872 as Japan s first western-style pharmacy in Ginza, Tokyo. All the employees of the Shiseido Group worldwide express their gratitude to our customers and society for their 140 years of support. We plan on strengthening our ties with them further. To symbolize our gratitude, we will work on our MIRAI TSUBAKI Project. In this project, a total of 46,000 Group employees from all our business facilities and departments worldwide will engage in social contribution activities in three fields- women and cosmetics, culture, and the environment -where we can show our strength under the theme of Create beauty. Tasks for Achieving Targets Under the Three-Year Plan 44 Finally, I will summarize tasks for achieving targets under the Three-Year Plan.

23 Roadmap towards FY2017 Sustained Growth as a Global Player Representing Asia with Its Origins in Japan Three-Year Plan Shiseido Establish foundation as a global player Globalization Phase I Improve quality of activities across the board Globalization Phase II Move to a growth trajectory Establish an undisputed presence in Asia Globalization Phase III Make a leap forward Become a global player Aiming to achieve net sales exceeding 1 trillion, an operating margin of 12.0% or higher, and consolidated ROE of 15% or higher in FY2017 Shiseido 45 At the Shiseido Group, we aim for sustained growth as a global player representing Asia with our origins in Japan. Our target is to achieve net sales exceeding 1 trillion yen for the entire Group, an operating margin of 12% or higher, and a consolidated ROE of 15% or higher in FY2017. The three years from fiscal 2011 is the second phase of our globalization. The theme for this phase is Move to a growth trajectory. Overview of the Plan for FY Improve the company quality 2012 Feel the growth 2013 Accelerate the growth Aggressive marketing investment toward growth 4 Growth Strategies Global Mega-Brand Strategy Asian Breakthrough Strategy New Frontier Strategy Customer-First Strategy Refining activities that have clearly produced results Starting the new business model 46 In fiscal 2012, the second year of the phase, as I told you today, we will continue to work on our four growth strategies by making aggressive marketing investments toward future growth, both in Japan and overseas countries. We will also refine the activities we carried out in fiscal 2011 that clearly produced results. At the same time, we will start new activities such as introducing a new business model in order to feel the growth in fiscal 2012.

24 Targets of the Three-Year Plan: Net Sales Sales: Achieving 6% annual growth, Operating margin: Achieving 10% Towards average growth in net sales of 6% on a local currency basis +4.7% +6.0% Accelerating growth FY2011 Results FY2012 Plan FY Under the current Three-Year Plan, we aim to achieve average growth in net sales of 6% and a 10% operating margin. Our growth rate on a local currency basis was 4.7% in fiscal We will continue to make aggressive marketing investments to achieve 6% in fiscal And in fiscal 2013, the final year, we will accelerate growth further to achieve average growth in net sales of 6%, which is our target in the Three-Year Plan. Targets of the Three-Year Plan: Operating Margin Sales: Achieving 6% annual growth, Operating margin: Achieving 10% Toward an operating margin of 10% Promoting growth strategies boldly + Initiatives for cost structure reform Operating margin at 8.0% expected 5.7% 6.0% FY2011 Results FY2012 Plan FY However, regarding the other target, an operating margin of 10%, the economic environment and other elements have changed greatly since we formulated our Three-Year Plan. Because we need to make aggressive marketing investments to achieve average growth in net sales of 6%, we currently expect our operating margin to not exceed 8.0%. Considering current conditions in the global economy and Japanese society, I believe that the important thing for the Shiseido Group now is to achieve growth, which will eradicate a sense of stagnation.

25 Targets of the Three-Year Plan: Operating Margin Sales: Achieving 6% annual growth, Operating margin: Achieving 10% Toward an operating margin of 10% Promoting growth strategies boldly + Initiatives for cost structure reform Operating margin at 8.0% expected 5.7% 6.0% FY2011 Results FY2012 Plan FY Toward this end, we will take measures toward a fundamental cost structure reform, and boldly promote our four growth strategies, instead of just concentrating on marketing investments. This will allow us to get as close as possible to a 10% operating margin. There is no doubt that the environment is very severe. All of us must work together to confront and overcome this situation. 50 Our share price has been declining since we announced our financial results on April 27, in tandem with the decline of the stock market. I believe this has been of great concern to you. I think that the key way to increase our share price is to increase our growth potential and profitability by steadily carrying out the initiatives in our Three-Year Plan, instead of relying on a rise in the stock market. I want to realize sustainable growth by any means possible to respond to the expectations of our shareholders! I will keep this strong desire in mind in my daily work.

26 51 We will continue to work toward being a company that can provide value that exceeds customer expectations in all our corporate activities, not just our products and services. We appreciate your continued support. Thank you very much.