Results for Year Ended March 2012 Outlook for Year Ending March PDF Free Download

SHISEIDO Co., Ltd. Results for Year Ended March 2012 Outlook for Year Ending March 2013 2012-4-27 Hisayuki Suekawa President & CEO SHISEIDO Co., Ltd. In this document, statements other than historical facts are forward-looking statements that reflect our plans and expectations. These forward-looking statements involve risks, uncertainties and other factors that may cause actual results and achievements to differ from those anticipated in these statements. 1 My name is Hisayuki Suekawa, the president of Shiseido. I will be reviewing Shiseido s business results for fiscal 2011 and will explain our outlook for fiscal 2012. 1 Today s Topics 1 2 Results for Fiscal Year 2011 Outlook for Fiscal Year 2012 2 I would like to begin with our results for fiscal 2011, along with market trends in Japan and overseas. 2

Domestic Trends in the Over-the-Counter Cosmetics Market (Shiseido estimate) The second half saw a gradual recovery from the impact of the earthquake and nuclear accident, which affected the first half. The economy is expected to recover modestly, although a sense of uncertainty remains. +/-0% -1 to -2-4 to -5-2 to -3-1 to -2 +1 or so Full year 2010 1st half 3Q 4Q 2nd half (-2 to -3%) 2011 (-3 to -4%) Full-year outlook 2012 3 First, I will explain the trends in Japan. The over-the-counter cosmetics market slowed significantly in the first half of the year, due in part to the Great East Japan Earthquake and the nuclear power-plant accident. The market recovered in the second half, returning to a level that is close to that of the previous year. A sense of uncertainty will linger with the domestic economy, but a gradual recovery is expected. We expect that in fiscal 2012, the overall market will grow by around 1% compared to the previous year. 3 Overseas Trends in the Over-the-Counter Cosmetics Market (Shiseido estimate) Europe FY2011 Achieved growth, albeit at a low level. FY2012 The growth will be weak due in part to the risk of recurrence of the financial crisis in Europe. Americas Remained strong Is expected to continue growing despite the sense of concern China Other areas in Asia Maintained a higher rate of growth than that of GDP, although the economy showed a slight sign of slowdown Showed modest growth generally Will continue to grow at a higher rate of growth than that of GDP Modest growth will continue in the entire Asia 4 Next, let s look at overseas markets. In Fiscal 2011, Europe saw low growth, although the level differed depending on the country. It is likely that growth in this market will remain slow given the risk that the financial crisis will recur. In contrast, the U.S. market remained solid throughout fiscal 2011. It is expected to continue growing. The Chinese economy seems to be slowing slightly, but its cosmetics market should continue to grow faster than GDP. We anticipate that markets in other Asian countries will generally continue modest growth. 4

FY2011 Results (Billion yen) Results YoY % Change Local Currency YoY Amount Change from the value announced in January Net Sales 682.4 +1.7% +4.7% +11.7 +2.4 Domestic 380.0-0.8% -0.7% -2.9-0.0 Overseas 302.4 +5.1% +11.9% +14.6 +2.4 Operating Income 39.1-12.0% -3.0% -5.3-0.9 Ordinary Income 39.4-11.3% -5.0-0.6 Net Income 14.5 +13.5% +1.7-2.5 Overseas Sales Ratio 44.3% (+1.4%) Operating Margin 5.7% (-0.9%) Exchange Rate 1 US$ = 79.8 (-9%) 1 Euro = 111.1 (-5%) 1 RMB = 12.4 (-5%) 5 Next, I will explain our results for the fiscal year 2011. Our net sales increased by 1.7% year on year to 682.4 billion yen. We thus achieved the value we forecast initially. In Japan, we maintained almost the same level of sales as the previous year despite the harsh market environment. Our overseas sales continued to be driven by China, and rose by 11.9% in local currencies, and by 5.1% in yen. 5 FY2011 Results (Billion yen) Results YoY % Change Local Currency YoY Amount Change from the value announced in January Net Sales 682.4 +1.7% +4.7% +11.7 +2.4 Domestic 380.0-0.8% -0.7% -2.9-0.0 Overseas 302.4 +5.1% +11.9% +14.6 +2.4 Operating Income 39.1-12.0% -3.0% -5.3-0.9 Ordinary Income 39.4-11.3% -5.0-0.6 Net Income 14.5 +13.5% +1.7-2.5 Overseas Sales Ratio 44.3% (+1.4%) Operating Margin 5.7% (-0.9%) Exchange Rate 1 US$ = 79.8 (-9%) 1 Euro = 111.1 (-5%) 1 RMB = 12.4 (-5%) 6 To move into a growth trajectory, we planned to significantly increase our expenditure on marketing, both in domestic and overseas markets, and consequently forecast a fall in operating income to 40 billion yen for FY2011. The actual result was operating income of 39.1 billion yen, 0.9 billion yen below our forecast. This reflects initiatives to increase sales for fiscal 2012, such as an increase in the cost of promotional materials overseas in the 4th quarter and the posting of an allowance to strengthen our freshness management of market inventory in Japan. Net income increased 13.5% compared to the previous year, to 14.5 billion yen, despite the reversal of deferred tax assets as a result of the change in the corporate tax rate, which was a negative factor for FY2011. This reflects the absence of a major extraordinary losses such as a loss on valuation of investments in securities. The decrease in value from the level we announced in January reflects the increase in the effect of deferred tax accounting for the elimination of unrealized income in relation to the inventory of a sales subsidiary, which does not affect our consolidated cash position. 6

Increased Investment in Marketing (Billion yen) FY2011 Plan Results Difference from the Plan Domestic 7.0 7.0 +/-0.0 Overseas 13.0 15.0-2.0 Total 20.0 22.0-2.0 Main Contents Strengthening lines such as MAQuillAGE and TSUBAKI Web marketing Strengthening our approach to the prestige market of China (AUPRES, global brand SHISEIDO, etc.) Strengthening our approach to the masstige market of China Bolstering Bare Escentuals 7 At the Financial Results Briefing in April last year, I told you that we would increase our investment in marketing by 20 billion yen in Japan and overseas in fiscal 2011 to achieve sales growth. The actual result was that, in Japan, we increased expenses by 7 billion yen to strengthen lines such as Maquillage and TSUBAKI and for preparations for a new business model, namely web marketing. Overseas, we increased SG&A costs by 15 billion yen, focused on prestige brands such as the Chinaexclusive brand Aupres and global brand SHISEIDO, the masstige market, and Bare Escentuals. In fiscal 2012, we will continue to increase marketing costs. We will operate in such a way that these expenses lead to future growth. 7 Today s Topics 1 2 Results for Fiscal Year 2011 Outlook for Fiscal Year 2012 8 Next, I will explain our initiatives and outlook for fiscal 2012. 8

4 Growth Strategies Global Mega-Brand Strategy Asian Breakthrough Strategy New Frontier Strategy Customer- First Strategy Japan China Asian Countries Americas Improvement of brand value in the prestige market Full-scale promotion of the masstige market Expanding market share in Asia Promote the priority activities in each country Full-scale entry to web marketing Europe Enhancement of iinitiatives in emerging countries 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 CSR activities 9 At the Shiseido Group, we are working on these four growth strategies to move to a growth trajectory during the period of the current three-year plan. 9 Overview of Plan for FY2012 Improve the company quality 2011 Feel the growth 2012 Accelerate the growth 2013 Announce and promote MVW MVW deployment Strengthen Value in Prestige Market Full-scale Expansion of Masstige Business in Asia Start e-commerce in the US and China Shiseido s 140 anniversary New Cosmetics Sales Store Business Model (Beauty & Co., watashi+) Share the Practices of Customer First Strategy Global Beauty Consultant Contest 10 Fiscal 2012, the second year of the current three-year plan, is also a milestone year for Shiseido, when we celebrate our 140th anniversary. We would like to refine the activities that succeeded in fiscal 2011. We will also start new activities, including the introduction of a new business model, so that we can generate growth in fiscal 2012. 10

FY2012 Outlook (Billion yen) Outlook YoY Amount YoY % Change Local Currency Net Sales 720.0 +37.6 +5.5% +6% Domestic 393.0 +13.0 +3.4% +3% Overseas 327.0 +24.6 +8.1% +10% Operating Income 43.5 +4.4 +11.2% Ordinary Income 43.5 +4.1 +10.3% Net Income 22.0 +7.5 +51.6% Overseas Sales Ratio 45.4% (+1.1%) Operating Margin 6.0% (+0.3%) Exchange Rate 1 US = 80, 1 Euro = 105, 1 RMB = 12.5 Dividend Midterm: 25, Yearend: 25 (Plan) 11 Now, first, I will show you our full-year outlook for fiscal 2012. Net sales are expected to increase 5.5% compared to last year, to 720 billion yen. We plan to boost sales 3.4% in Japan and 8.1% overseas. The influence of the strong yen is reflected in the prospected overseas sales. We will aim to achieve double-digit growth in sales in local currencies. Regarding operating income, gross profit should rise with the increase in sales. However, we will continue with marketing outlays in Japan and overseas to ensure that we achieve growth. As a result, operating income is expected to increase 11.2%, to 43.5 billion yen. The operating margin will be 6.0%, up 0.3 percentage points compared to fiscal 2011. 11 Factors for Increase/Decrease of Operating Income in the Full-Year Outlook for FY2012 39.1 (billion yen) Increase in profit due to increase in sales +29.4 Increase in overseas SG&A -16.5 (Including increase in marketing costs: Max. -9.0 and increase in personnel costs: -6.0) Increase in domestic SG&A -8.5 (Including increase in marketing costs: Max. -3.0 and increase in personnel costs (social insurance premiums, etc.): -5.5) Increase/decrease in other domestic costs, etc.: +/-0 43.5 FY2011 Operating Income FY2012 Operating Income 12 We increased the marketing costs in the last fiscal year. In fiscal 2012, we will further increase these costs by a maximum three billion yen in Japan and by a maximum nine billion yen in overseas markets. We are planning to increase the amount of investment, with a focus on bolstering web marketing in Japan and on businesses in China and Bare Escentuals in overseas markets. In addition, "personnel costs including social insurance premiums " will increase in Japan, and personnel costs will also rise overseas, especially in China. Due to these and other factors, operating income will not increase significantly, although we will proceed with initiatives to improve cost-efficiency both in Japan and overseas markets. 12

FY2011 Review and FY2012 Initiatives 1) Japan 2) China and Asian Masstige 3) Global 15 To begin, let me describe the initiatives in Japan. 15 Domestic Cosmetics Business: 1) Highly Selective Launch of New Products and Efforts to Create Longtime Sellers Traditional Marketing Style New Products + Sales Promotion FY2011 initiatives Significant reduction (by half) in the number of launches of new products Fostering existing products by strengthening information editing capability Intensive basic activities in each sales channel 16 Last fiscal year, for the Domestic Cosmetics Business, we moved away from the traditional marketing style that relies on a combination of new products and sales promotions for them. We reduced by half the number of launches of new products and took steps such as strengthening our information editing capability and undertaking intensive basic activities. 16

Domestic Cosmetics Business: 1) Highly Selective Launch of New Products and Efforts to Create Longtime Sellers Continued effort Continued effort Controlling the number of new product launches Bringing carefully selected, highly competitive new products to market Over 1 million items Mid-single digit growth Double-digit growth MAQuillAGE Essence Glamorous Rouge clé de peau BEAUTÉ TSUBAKI 17 As a result of the launch of carefully-selected new products, we enjoyed the emergence of many hit products, a typical example of which is the MAQuillAGE lipstick, which achieved record sales of more than one million items accumulated since its launch in July last year. We also succeeded in the renewals of major lines. As a result, clé de peau BEAUTÉ achieved mid-single digit growth and TSUBAKI achieved double-digit growth. In fiscal 2012, we will continue to bring carefully selected, highly competitive new products to market. 17 Domestic Cosmetics Business: 2) Fostering Existing Products by Strengthening Information Editing Capability FY2011: Creation of new values FY2012 initiatives Information editing capability (product and research information) Storefront activities of beauty consultants Continued effort New initiative Preparing a rich variety of beauty solutions for each season Information editing capability X Activities of beauty consultants Nationwide activities for information development and beauty solutions for the senior market Strengthening existing products 18 Activities last year that delivered results include strengthening our information editing capability. To resolve customers seasonal skin problems, we engaged in company-wide activities to propose beauty solutions, by re-editing a range of internal information and data, such as beauty information and research information. We combined these suggestions with the storefront activities of our beauty consultants. These activities led to the development of existing products. In fiscal 2012, we will continue to enhance activities for suggesting seasonal beauty solutions by combining information editing capability with the activities of beauty consultants. We are also planning to develop and suggest such beauty information in the seniors market, which is large and promising. 18

Domestic Cosmetics Business: 3) Even More Intensive Basic Activities in Each Sales Channel FY2011: Intensive basic activities FY2012 initiatives Department store channel Direct touch on customers skin Use of beauty equipment Intensive demonstrations... etc. Annual store sales exceeded the previous year s level Cosmetic specialty stores (Stores participating in the PS Program) FY2011 store sales 110% or more Over 250 stores FY2009 2011 store sales 130% or more, Over 130 stores Continued effort Continued effort Continued effort Even more intensive basic activities, as an initiative common to all channels (Consultations, demonstrations, etc.) Storefront promotions for the selfselection category Enhancing sample offers and reviving lines by making use of websites Bolstering intensive measures for each major retailer 19 I will move on now to describe the situation in each channel. At department stores, we anticipated a difficult business environment last year because of the decline in the number of overseas tourists and a reduction in the number of business days as a measure for saving power. However, our store sales exceeded the previous year's level thanks to a thorough approach to basic in-store activities, such as promoting the use of direct touch on customers skin, using beauty equipment, and providing demonstrations of skincare and makeup. At cosmetics specialty stores, under the PS Program that we started in 2009, the number of stores with their annual store sales for the last year at 110% or more exceeded 250, and the number of stores with their annual store sales for three years at 130% or more exceeded 130. As a consequence, we have started to see good practices providing evidence that growth is possible even in severe market conditions. In fiscal 2012, we will further enhance these initiatives. On the other hand, issues remained for major retailers such as drug stores and general merchandise stores. Specifically, the issues are activities that are still the same all over Japan and the bolstering of self-selection skincare products and cosmetics for men. As a response, in fiscal 2012, we will aim to increase sales by reviving each line and strengthening intensive measures for each company, in addition to enhancing such activities as in-store promotions for the self-selection category and sample offers via websites. 19 Domestic Cosmetics Business: 4) Introduction of a New Business Model Meeting customers Introduction Taking advantage of the characteristics of both websites and brick-and-mortar stores Deepening relationship with customers Having customers feel effects Store Introduction Mechanism to attract greater numbers of regular customers by creating opportunities for customers seeking beauty to meet Shiseido 20 The highlight of our initiatives in Japan for fiscal 2012 is the introduction of a new business model. As already explained, this is not merely e-commerce. It is a mechanism that increases the number of regular customers by creating opportunities for customers seeking beauty to meet Shiseido, by taking advantage of the strength of both websites and bricks-and-mortar stores. 20

Beauty & Co.: Situation after the Launch (Opened on April 2, 2012) Top page of the website 28 participating companies at the time of opening Beauty Healthcare Medical care Fashion Relaxation Intelligence Customer comments It is interesting because it provides not only beauty information but information about lifestyles in general. The feature articles are worth reading and are very interesting. 21 Beauty & Co. opened on April 2 as a platform that helps customers live beautifully. Participating in Beauty & Co. at present are 28 companies that have products, services, and information for providing support in six domains, namely beauty, healthcare, medical care, fashion, relaxation, and intelligence. Users have given us such comments as It is interesting because it provides not only beauty information but 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. We are expecting that the number of users will increase in the future. 21 Beauty & Co.: Situation after the Launch -- Highly-Acclaimed Collaboration Projects Collaboration projects (examples) We will continue developing many more successful examples of the creation of new value by multiple companies. Linked Accommodation packages booked fully 22 Our collaboration projects with other companies also made a very good start. The Japan Beauty Project was created under the theme of beautiful hair jointly by Panasonic, women's magazine VOCE, and Shiseido as a collaboration project involving beauty equipment, beauty bloggers, and TSUBAKI line. Under this project, we asked JTB to commercialize seminars and accommodation packages that permit participants to experience use of the products. This initiative has made a good start. For example, packages that were offered prior to the opening were fully booked. We would like to continue developing many more successful examples of this creation of new values by multiple companies. 22

watashi+: Situation after the Launch (Opened on April 21, 2012) Top page of the website Purposes of the website An extensive menu that lets customers feel the fun of makeup Web counseling Store Navigation system Online shopping Number of page views of the website Exceeded 1 million page views 23 Next, I will explain watashi+, a website that opened on April 21. The purpose of this site is to give customers a chance to feel the fun of wearing makeup, by meeting diverse customer needs for cosmetics with an extensive menu lineup including Web BC counseling, store navigation system, and online shopping. watashi+ has received more than one million page views per day. We feel attracting that many customers was a very good start. We have also confirmed the expected traffic to and from watashi+ via Beauty & Co. We believe that the new business model is actually enabling us to meet new customers and deepen our relationship with them, as we intended. And in May, to gain more recognition among customers, we will run advertisements on TV and other media. 23 Enhancing Activities with watashi+ Developing and using database Strengthening Marketing with CRM Database of Products Database of Stores Database of In-store Activities Linked Shiseido online (SOL) shops Customer watashi+ website & Online shops Database A points program watashi+ store support site that deepens the relationship with customers we meet Customer analysis function Transmission of e-mails with specific content by each store 24 I believe that the introduction of watashi+ will also lead to an increase in sales from existing businesses. At watashi+, we create a unique customer database by integrating customers purchase information from bricks-and-mortar stores with data obtained from the website. And, by using this database, we will help increase sell through by supporting sales promotional activities through the customer analysis function, providing reports showing the results of analyses, a points program, and sending e-mails with unique, high-quality content from each store with high frequency, for example. 24

FY2011 Review and FY2012 Initiatives 1) Japan 2) China and Asian Masstige 3) Global 25 Next, I will describe the initiatives in China and in Asian masstige. 25 China and Asian Masstige: FY2011 Review China Percentage growth of mid teens, exceeding the market growth rate. Department stores Specialty stores Global brand SHISEIDO and AUPRES are strong Sales URARA and PURE & MILD are strong Operating margin Declined slightly from the preceding three years on greater marketing cost Asian Masstige Za Double-digit growth SENKA Launched in Taiwan and Hong Kong TSUBAKI A full-scale launch underway in China 26 In China, which is the center of our Asian Breakthrough Strategy, we achieved growth in the mid teens in fiscal 2011, far exceeding the market growth. On the other hand, the operating margin declined slightly from its high teens level in the preceding three years. This is due in part to our efforts to increase our workforce, including salespersons and Beauty Consultants, and increase marketing costs, amid fierce competition. However, we were still able to maintain a high operating margin. In the Asian masstige, Za, our core brand, achieved double-digit growth. We launched SENKA in Taiwan and Hong Kong as planned. For TSUBAKI, we started a full-scale launch in China. 26

China Aim for growth of mid teens, exceeding market sales growth, and over 100 billion yen Approach to injection of 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 Highest-priority investment Improving growth potential while maintaining high profitability Priority investment 27 In the Chinese market, competition with global manufacturers has been growing fiercer. We will continue to give it top priority when it comes to allocating our management resources in fiscal 2012. We will further increase expenses, focused on marketing, which we strengthened in the preceding period. Above all, we will give priority to revamping our approach to the prestige market and strengthening our presence in the masstige business. This should help sales in China grow at a percentage rate in the mid teens, which is above market growth, finally the milestone of 100 billion yen will be achieved. Regarding operating income, our operating margin will decline from the previous year due to aggressive investment aimed at top-line growth. However, we will maintain a level above 10%, thereby contributing to consolidated figures. 27 China: Revamping Approach to the Prestige Market: Enhancement of the Department Store Channel Aiming for double-digit sales growth through the renewal of counters and an improvement in beauty consultants capabilities in in-store activities AUPRES Global Brand Clé de Peau Beauté Introducing the premium line in the top 150 stores in 2012 Continuing to foster the top premium line, Future Solution LX Increasing the number of stores to around 50 in 2 or 3 years 28 For the department store channel, we will introduce the premium line of AUPRES in the top 150 stores in response to the growing needs of the higher prestige market. At the same time, we will renew counters of stores of global brand SHISEIDO, to enhance its image as a prestigious brand. We will also increase the number of clé de peau Beauté stores to around fifty in two or three years and improve the ability of beauty consultants to undertake in-store activities. Through these activities, we will target double-digit growth in the overall department store channel. 28

China: Sustainable Growth of the Specialty Store Channel Aiming for double-digit sales growth by continuing to bolster URARA and PURE & MILD and introducing collagen and a skin brightening drink URARA PURE & MILD 29 For the cosmetics specialty store channel, which is our strength, we will continue to expand the network of stores while improving the quality of each. In addition to continuing to strengthen URARA and PURE & MILD, we will introduce collagen and a skin brightening drink to stores ranking in the top one thousand six hundred in terms of customer service capability, thereby expanding the range of highly specialized suggestions we can offer. Thus, we will continue to aim for double-digit sales growth and sustainable growth in profit. 29 Asian Masstige: Expanding Sales Aiming for double-digit growth in sales in all Asian countries including China (but excluding Japan) Za TSUBAKI SENKA Bolstering TV commercials and storefront visual merchandising Held a talk show in Shanghai inviting contracted models of RAY Strengthening mass promotion including TV commercials Bolstering campaigns in Taiwan and Hong Kong 30 For Za, the core brand in the masstige market that we offer at more than six thousand stores in eight Asian countries, we will expand our presence in drug stores and hyper-channels. We will also bolster TV commercials and storefront visual merchandising in China and Thailand. With these activities, we expect to enhance recognition of this brand. And for TSUBAKI, which was localized and started to be produced and sold in China in December last year, we instantaneously increased the visibility of the products with the overwhelming expansion of sales space at each store and TV commercials. The cumulative shipping quantity of TSUBAKI up to the end of March has been very good, having nearly doubled compared to the previous year. We will give a tremendous boost to sales promotions by featuring shining hair in spring, scalp care in summer, and damage care in fall. We will also increase the number of stores to which we deliver the products, from the current number of around ten thousand. In other initiatives, we will also move forward with the broader Asian launch of SENKA, which has already done well in Taiwan and Hong Kong, in addition to AQUA LABEL and MAJOLICA MAJORCA. Through these activities, we will continue to bolster our products for the masstige market in anticipation of the future growth of these markets in those countries. We will aim for double-digit growth in sales in all Asian countries, including China. 30

FY2011 Review and FY2012 Initiatives 1) Japan 2) China and Asian Masstige 3) Global 31 Next, I will describe the initiatives in the global market. 31 Global: FY2011 Review Double-digit increase of sales in Europe, Americas, and Asia Europe 11% growth driven by the fragrance business Americas 13% growth due to the strength of Bare Mineral, global brand SHISEIDO, and NARS Asia 12% growth due to the sales growth in China as well as other factors such as the growth of the self-selection category in Taiwan, Growth of the prestige brands, including global mega brands Global brand SHISEIDO Mid-single digit growth Clé de Peau Beauté Double-digit growth in overseas markets Bare Mineral Mid-single digit growth Fragrance business Mid-single digit growth NARS Growth of nearly 30% 32 In fiscal 2011, we achieved double-digit growth in sales in all three regions, namely Europe, the Americas, and Asia. If we look at the contributing factors in each region, the fragrance business was the leading force in Europe. In the Americas, we enjoyed favorable results with global brand SHISEIDO and NARS, in addition to Bare Escentuals. In Asia, the Self-Selection category in Taiwan achieved growth, with businesses in China serving as the growth engine. In addition, as shown, prestige brands including the global mega brands achieved steady growth. 32

Global: Initiatives in Prestige Markets for FY2012 Continuing to provide customers with a unique world that is hard to obtain elsewhere Global brand clé de peau Beauté 33 In fiscal 2012, in the prestige market, we will continue to take steps to strengthen the three global mega brands, that is, global brand SHISEIDO, clé de peau BEAUTÉ, and Bare Mineral. We will also continue to strengthen designers brands in the fragrance business and NARS, a makeup artist s brand. First, for the global brand SHISEIDO, we will aim to attract new customers in the serum market mainly with BOP serum, our star item. For the Future Solution LX, we will appoint American actress Jennifer Connelly as spokesperson in early February with the aim of enhancing the image of the global brand SHISEIDO as a prestige brand. For clé de peau BEAUTÉ, we will improve its core values further and enhance its presence in North America. We will increase the number of stores in China, thereby aiming for double-digit growth in overseas markets. 33 Bare Mineral Aiming for a double-digit sales increase Strengthening メーキャップの強化 makeup Enhancing communications Expanding the skincare category Makeup: Fostering READY BE A FORCE OF BEAUTY Skincare: From Japan to Asia Strengthening initiatives in Entry to growth areas countries we have already entered UK: Channel expansion Germany: Business expansion at department stores Brazil: Entering the market in June 34 For Bare Mineral, we achieved excellent results by linking the new pressed makeup line, READY, which we launched in September of last year, with the Be a Force of Beauty campaign. As future initiatives, we will strengthen makeup and promote the expansion of categories to skincare. We will also aim for further growth in Japan, Hong Kong, the UK, and Germany as well as in the US market as our main market. And in June, we will begin entering growth areas such as Brazil with a vigorous approach. Through these activities, we will aim for double-digit growth of Bare Escentuals. 34

Designers Brands and Makeup Artist s Brand Aiming for double-digit growth in total overseas sales Four brands of the fragrance business NARS, a makeup artist s brand Increasing the number of stores Expansion into more countries Increase the number of flagship stores, strengthen store promotion, and expansion into more countries 35 And we will also seek to increase the number of stores for three of the four designers brands of our fragrance business, including narciso rodriguez. In addition, we will increase the number of countries where Elie Saab, which we launched last year, is available. NARS grew significantly in fiscal 2011 in North America. We enhanced its brand equity by opening directly managed stores. We will ensure growth of sales via retailers in each country by enhancing in-store promotions and marketing through social network services. We will also increase the number of markets we enter, such as Brazil. Through these diverse initiatives, we will aim for mid-single digit growth in Europe despite the severe market environment, and will target double-digit growth in the Americas. We will also aim for double-digit growth in total overseas sales. 35 Targets Under the Three-Year Plan 36 I have so far explained the priority initiatives for fiscal 2012. Let me conclude by explaining the outlook for the Three-Year Plan. 36

Targets of the Three-Year Plan Targets of the three year: Sales = Achieving 6% annual growth, Operating margin = Achieving 10% To achieve 6% compound annual sales growth on a local currency basis +4.7% +6.0% Achieving steady sales growth FY2011 Results FY2012 Plan FY2013 When we announced our financial results last year, I mentioned that we would not change, but rather would aim to achieve, the targets under the Three-Year Plan that we had set before the earthquake, that is, a compound annual sales growth rate of 6% in local currency terms and an operating margin of 10%. As I mentioned earlier, in fiscal 2012, we will aim to increase our consolidated sales by 5.5% compared to the previous year and by 6% in local currency terms. The rate of growth in local currency terms was 4.7% in fiscal 2011. We therefore believe that, by achieving positive growth surely in fiscal 2013 as the final year of the three-year plan, we will be able to achieve a compound annual sales growth of 6% in local currency terms, a target under the Three-Year Plan. 37 Targets of the Three-Year Plan Targets of the three year: Sales = Achieving 6% annual growth, Operating margin = Achieving 10% Negative factors for profits 2011 2012 2013 Cost of sales 23.9% Marketing costs 23.5% Personnel costs 23.9% Other costs 22.9% Marketing investment in Asia, especially in Japan and China, where market conditions are tough Mandatory adoption of IFRS was postponed, resulting in the continuation of goodwill amortization, etc. Structural Reform Operating margin 5.7% 6.0% 8.0% 10.0% * The arrows indicate an increase/decrease as a ratio to sales. 38 Meanwhile, to achieve an operating margin of 10%, our other target, an early recovery in Japan as the home market and growth in Asia including China are essential. We believe both of these goals require investment because the market environments will remain difficult. There are also negative factors that will reduce our profitability and that we didn't face when we drew up the Three-Year Plan. For example, the compulsory adoption of IFRS has been postponed, resulting in the continuation of goodwill amortization. Another example is the increase in health insurance premiums in Japan. Although we consider that it is possible to achieve an operating margin of around 8% at present, the target value of 10% will be hard to reach in the current three years. However, we will work to fundamentally reform our cost structure, aiming to get as close as possible to an operating margin of 10% in the current three years, to secure the investment resources we need to succeed amid fierce competition, and to continue posting an operating margin of 10% in the future. We are now developing specific measures top-down. We will announce them in a timely manner. 38

We anticipate very harsh conditions again in fiscal 2012. However, it will be a milestone year when we celebrate the 140th anniversary of our founding and renew our business model in Japan for the first time in 90 years. We are therefore determined to achieve growth and proceed steadily with the development of the foundations for our future. 39 40

Financial Results for the Year Ended March 2012 2012-04-27 Yoshinori Nishimura Corporate Officer *Figures in this material are rounded to the nearest 0.1 billion. 41 Consolidated Results Domestic Overseas 302.4 44.3% 287.8 42.9% +5.1% +11.9% Operating Income 39.1 5.7% 44.5 6.6% -12.0% -3.0% Net Income 12/3 Results 11/3 Results % of Net Sales 14.5 2.1% 12.8 % of Net Sales 1.9% YoY % Change +13.5% Local Currency Net sales 682.4 100.0% 670.7 100.0% +1.7% +4.7% 380.0 55.7% 382.9 57.1% -0.8% -0.7% Ordinary Income 39.4 5.8% 44.5 6.6% -11.3% Extraordinary Income / Loss (net) -5-0.1% -15.8-2.3% - Tax Expenses 21.9 3.2% 13.3 2.0% +64.2% EBITDA 77.0 11.3% 65.6 9.8% +17.4% US$1= 79.8(-9%) 1= 111.1(-5%) 1RMB= 12.4(-5%) 42

Sales by Reportable Segment 12/3 Results 11/3 Results % of Net Sales % of Net Sales YoY% Change Local Currency Domestic Cosmetics 353.8 51.8% 358.4 53.4% -1.3% -1.3% Global Business 319.7 46.9% 302.6 45.1% +5.6% +12.2% Others 8.9 1.3% 9.7 1.5% -7.7% -7.7% Total 682.4 100.0% 670.7 100.0% +1.7% +4.7% 43 Domestic Cosmetics Business Sales Counseling 12/3 Results 181.4 % of Net Sales 26.6% 11/3 Results 182.7 % of Net Sales 27.2% YoY Amount -1.2 YoY % Change -0.7% Self-Selection 77.9 11.4% 82.0 12.2% -4.1-5.0% Toiletries 45.1 6.6% 41.9 6.3% +3.3 +7.8% Cosmetics 304.5 44.6% 306.5 45.7% -2.1-0.7% Healthcare 14.9 2.2% 14.5 2.1% +0.4 +2.8% Others Domestic Cosmetics 34.4 353.8 5.0% 51.8% 37.4 358.4 5.6% 53.4% -3.0-4.6-7.9% -1.3% *Starting current fiscal year sales of In & On line which had been included in Healthcare are included in Counseling and figures for prior fiscal year have been retroactively restated. 44

Global Business Sales 12/3 Results % of Net Sales 11/3 Results % of Net Sales YoY Amount YoY% Change Local Currency Cosmetics 278.2 40.8% 261.7 39.0% +16.4 +6.3% +13.0% Professional 41.5 6.1% 40.9 6.1% +0.6 +1.5% +6.9% Global Business 319.7 46.9% 302.6 45.1% +17.0 +5.6% +12.2% 45 Sales by Geographic Segment 12/3 Results 11/3 Results % of Net Sales % of Net Sales YoY Amount YoY % Change Local Currency Japan 380.0 55.7% 382.9 57.1% -2.9-0.8% -0.7% Americas 90.5 13.3% 87.6 13.1% +2.9 +3.3% +13.2% Europe 82.2 12.0% 78.2 11.6% +4.0 +5.1% +10.7% Asia/ Oceania 129.7 19.0% 122.1 18.2% +7.7 +6.3% +11.7% Overseas 302.4 44.3% 287.8 42.9% +14.6 +5.1% +11.9% Total 682.4 100.0% 670.7 100.0% +11.7 +1.7% +4.7% 46

Cost of Sales / SG&A 12/3 Results % of Net Sales % pt. Change 11/3 Results % of Net Sales YoY Increase/ Decrease YoY % Change Cost of Sales 163.0 23.9% +1.3% 168.7 25.2% +5.7-3.4% SG&A 480.3 70.4% -2.2% 457.6 68.2% -22.7 +5.0% (Domestic) 285.3 75.5% -1.6% 282.2 73.9% -3.1 +1.1% (Overseas) 195.0 64.0% -3.3% 175.4 60.7% -19.6 +11.2% Advertising & Selling 160.3 23.5% -2.0% 144.3 21.5% -16.0 +11.1% Personnel 163.3 23.9% -0.2% 159.3 23.7% -4.0 +2.5% Others 147.6 21.6% +0.1% 145.3 21.7% -2.2 +1.5% M&A-Related Amortization Cost 9.1 1.4% -0.1% 8.6 1.3% -0.5 +6.0% 47 Operating Income by Reportable Segment Domestic Cosmetics Global Business Others Elimination Total Operating Income OP Margin Operating Income OP Margin Operating Income OP Margin Operating Income Operating Income OP Margin 12/3 Results 29.5 8.3% 8.2 2.6% 1.4 9.9% 0.1 39.1 5.7% 11/3 Results 33.6 9.3% 9.0 3.0% 1.8 11.4% 0.0 44.5 6.6% YoY Amount -4.1-0.8-0.5 +0.1-5.3 YoY % Change -12.3% -1.0 pt -9.0% -0.4 pt -24.9% -1.5 pt - -12.0% -0.9 pt 48

Operating Income by Geographic Segment Japan Americas Europe Asia/ Oceania Overseas Elimination Total Operating Income OP Margin Operating Income OP Margin Operating Income OP Margin Operating Income OP Margin Operating Income OP Margin Operating Income Operating Income OP Margin 12/3 Results 12.5 3.0% 4.8 5.0% 5.2 5.5% 14.5 11.4% 24.4 7.7% 2.1 39.1 5.7% 11/3 Results 16.7 4.1% 1.6 1.6% 6.4 7.2% 16.9 14.3% 24.9 8.2% 2.9 44.5 6.6% YoY Amount -4.1 +3.2-1.2-2.4-0.4-0.8-5.3 YoY % Change -24.8% -1.1 pt +205.9% +3.4 pt -19.3% -1.7 pt -14.2% -2.9 pt -1.7% -0.5 pt - -12.0% -0.9 pt 49 Other Income (Expenses) and Extraordinary Income (Losses) Other Income (Expenses) Extraordinary Income (Losses) 12/3 Results 11/3 Results YoY Amount 12/3 Results 11/3 Results YoY Amount Interest / Dividend Income Interest Expense Net Interest Income and Expense Foreign Exchange Gain/Loss Others Total 0.7-1.8-1.1-0.6 2.0 0.3 0.7-2.2-1.5-0.6 2.1 0.0 +0.1 +0.3 +0.4-0.0-0.1 +0.3 Effect of Changes in Estimates of Product Samples and Promotional Materials Loss on Sales/ Valuation of Investments in Securities Loss on Disaster M&A-related Expences Effect of Application of Accounting Standards for Asset Retirement Obligations - -0.3 - - - -6.8-4.2-1.7-1.2-0.8 +6.8 +3.9 +1.7 +1.2 +0.8 Others -0.2-1.1 +0.9 Total -0.5-15.8 +15.3 50

Net Income and Comprehensive Income 12/3 Results 11/3 Results YoY Amount Income before Income Taxes 38.9 28.7 +10.3 Tax Expenses (Tax rate) 21.9 (56.2%) 13.3 (46.4%) -8.6 Minority Interests in Earnings of Consolidated Subsidiaries 2.5 2.6 +0.0 Net Income 14.5 12.8 +1.7 Comprehensive Income 5.5-18.3 +23.7 51 Consolidated Balance Sheets 12/3 Changes from 2011/3 Changes from 2011/3 Excludes Foreign Currency Exchange Foreign Currency Exchange 12/3 Excludes Foreign Currency Exchange Foreign Currency Exchange Total Current Assets 315.2 +2.0 +9.4-7.4 Total Liabilities 417.0-2.0 +2.6 Cash Deposits and Notes & Accounts Securities 93.8-11.2-8.9-2.4 Payable 48.3 +4.5 +5.5 Notes & Accounts Receivable 112.9 +9.9 +12.3-2.5 Other payables 44.3 +6.3 +6.5-4.6-0.9-0.2 Inventories 71.9 +6.1 +7.9 Total Fixed Assets 405.5-20.4-10.7-9.7 Total Net Assets 303.7-16.4-3.9 Property Plant and Equipment 129.8-1.4 +0.3-1.7 Shareholders Equity 356.6-5.6 - Intangible Assets 173.6-12.4-4.9 Investments and Other Assets 102.0-6.6-6.1-0.5 Minority Interests 12.6 +0.3 - Total Assets 720.7-18.4-1.3-17.1 (2011/12) US$1= 77.7 1= 100.7 1RMB= 12.3, (2010/12)US$1= 81.4 1= 107.8 1RMB= 12.3-1.9-7.5 Interest-bearing debt 185.2-12.4-11.9 Other Comprehensive Income -66.1-11.1 - Total Liabilities and Net Assets 720.7-18.4-1.3-0.4-12.5 - - - -17.1 * Major account title only Equity Ratio: 40.3% 52

Consolidated Cash Flows 100 50 0-50 -100-150 31.9-5.6 Consolidated Cash Flows Free Cash Flows 07/3 08/3 09/3 10/3 11/3 12/3 53 Supplemental Data Investment in Fixed Assets* Property, Plant, and Equipment 13/3 Estimate YoY amount change YoY % change 12/3 Results YoY amount change YoY % change 33.6-0.7-2% 34.3 +7.1 +26% 21.6 +0.0 +0% 21.6 +2.5 +13% Intangible Assets, etc. 12.0-0.7-5% 12.7 +4.6 +57% Depreciations 32.7 +2.0 +7% 30.7 +1.2 +4% Property, Plant, and Equipment 18.1 +0.7 +4% 17.4 +0.1 +0% Intangible Assets, etc. 14.5 +1.3 +10% 13.2 +1.1 +9% R&D Expenses 14.8 +0.1 +1% 14.7 +0.2 +1% Advertising Expenses 52.4 +3.1 +6% 49.3 +6.6 +15% *Capital investment, investment in property plant and equipment, long-term prepaid expenses and intangible asset excluding goodwill and trademarks, etc. 54