Shiseido Co Ltd Ord

I would like to present the first quarter results for 2025. First, please refer to page 3, key highlights of the financial results. Amid continued uncertainty in the business environment, our top priorities remain rigorous profit management and steady execution over action plans. Although first quarter net sales fell short of expectations, we secured core operating profit of 8.3 billion yen, an equivalent level with our plan thanks to the effects of the structural reforms and strengthened cost management. While maintaining our full-year forecast, we will continue to closely monitor the impact of tariffs and implement additional measures as necessary. Further details on this will be provided later by Mr. Fujiwara. Net sales declined by 9% versus last year on like-for-like basis. In our February disclosure, we had anticipated a decline in the low single digits for the first half. However, results in the first quarter were affected by high year-over-year comparisons in China and travel retail, as well as the assumption that Drunk Elephant would not see a full recovery. In such circumstances, China, travel retail, and the Americas performed with challenging results as expected. And on top of that, consumer purchases maintained strong, but shipment declined in Japan and EMEA, making the year start with a slight lower start to plan. Healthy sales growth is essential for the sustainability of our company business growth. We will further explain about the sales performance assessment and the future plans shortly. Core operating profit was 8.3 billion yen, a decline year-on-year. However, thanks to the structural reforms, notably in Japan, and strengthened company-wide cost management, results were largely in line with expectations. Regarding the impact of tariffs, we have already begun quantifying the downside risks. In addition to initiatives started last year, such as shifting procurement sources and reviewing production locations, we are also exploring a range of additional measures, including changes to logistic flows and wholesale price adjustments. Next, please have a look at page 4, the P&L Executive Summary. Core operating profit was 8.3 billion yen. Non-recurring items significantly decreased from the previous year when early retirement-related expenses in Japan were recorded and totaled to 1 billion yen this quarter. For the full year, we expect to incur 23 billion yen in expenses primarily related to structural reforms outlined in our action plan. While a large portion of these costs will occur in the first half, the majority will be booked in the second and third quarters, resulting in a back-end loaded cost profile. There is no change to the overall outlook. As a result, both operating profit and net profit for the first quarter significantly improved compared to the previous year returning to profitability. Next, regarding the negative free cash flow of 12.4 billion yen, the main factor was a decrease in operating liabilities due to changes in contractual terms with certain business partners. Please turn to page 5 for our breakdown of net sales by region. As announced in our March 28 release, we have adopted a new segment structure from this quarter combining China and travel retail into a single reporting segment. First, Japan and Europe, which had shown consistent growth until now, recorded declines of 2% and 9% respectively in the first quarter. However, this was due to temporary shipment adjustments and booking timing differences while consumer demand remained strong. We are confident in the recovery of shipments going forward. Sales in the China and travel retail segment declined by 14%, while the Americas saw a 19% decrease primarily due to continued challenges faced by drunk elephants. Next, please refer to page 6, Net Sales by Brand. Both Giseido and Clé de Poboté were impacted by the challenging market environment in China and travel retail. However, excluding these segments, both brands continue to show solid growth. NARS recorded a decline due to the contraction of the prestige markets in the Americas. Elixir continued to perform strongly. Anessa saw a significant decline impacted by rebound from last year's full renewal in Japan, lower-than-expected bulk purchases by inbound travelers, and decreased spending by Chinese tourists in both China and travel retail. We aim to offset this with enhancement over popular brush-type UV protection powder, popular in Japan, along with expanded initiatives targeting inbound tourists. Narciso Rodriguez and Issei Miyake recorded temporary declines due to shipment timing delays in EMEA. However, we expect a return to positive growth from the second quarter onward and a steady growth for the full year. Next, please refer to page 7, details of the core operating profit. First, the cost of sales improved by 2.3 percentage points to 22.4% compared to last year. This improvement was mainly driven by a better brand mix and the rebound impact from reduction in allowance for excess inventory write-offs, which had been recorded last year due to a sharp decline in shipments in the travel retail business. Marketing investments increased by 700 million yen. While we achieved efficiencies in promotional expenses, this increase was also driven by investments aimed at rebuilding Drunk Elephant, an upfront investment for a major new product launch in EMEA this year. Personal expenses decreased by 6 billion yen, a reduction of about 10% compared to the previous year, primarily reflecting the impact of structural reforms in Japan and China. SG&A were reduced by 1.7 billion yen thanks to structural reforms such as reductions in outsourcing costs, as well as the results of agile cost management. So as mentioned, we are steadily building a more resilient structure that allows us to secure profits even in the face of significant revenue declines. Next, we will move on to a breakdown by segment from page 8, and I would like to briefly explain the change in the definition of segment profit. To eliminate the impact of annual changes in internal transaction prices due to transfer pricing policies, we have revised the definition to clearly reflect the true profitability and progress of each segment over time. Details of this change are provided in the supplementary materials, and the 2024 results under the new definition can be found in the release from March 28th. Please refer to that for more information. Regarding sales by region, Japan, China, and travel retail and other regions each account for approximately one-third of the total. In contrast, for core operating profit, Japan, China, and travel retail together generated 24.6 billion yen in profit, while Asia-Pacific, the Americas, and EMEA all reported losses. Additionally, headquarter expenses, which are included in adjustments, contributed to the consolidated total of 8.3 billion yen. China and travel retail, which have always been high-margin businesses, continue to generate significant profits. Japan has also improved its profitability due to impacts from structural reforms, successfully transitioning to a more profitable structure. On the other hand, the Americas require a quick turnaround. For Asia Pacific and EMEA, We are planning double-digit growth in the second half of the year. Since there is seasonability impacts of larger sales in Q4 and bigger profits in the second half, we expect both regions to be profitable for the full year.

Next, on page 9, we will discuss Japan. In the first quarter, the local market saw its growth pace gradually settle down following the round of reopening measures, showing signs of stabilization. Inbound tourism reached record high levels in terms of visitor numbers, while cosmetics purchases continued to grow at a moderate rate. Despite this, our Japan business maintained strong growth of over a high single-digit percent in customer purchases driven by our core brands and expanded its market share. In particular, New Ultimune from Shiseido, launched in March, features ingredients developed using a proprietary advanced technology and drove growth through communication initiatives focused on anti-aging. E-commerce sales maintained high growth of a high 10%, supported by purchases from loyal users on our newly redesigned online site last year. Inbound sales grew by a high single-digit percentage point. We are focusing on the needs of travelers and prioritizing resources. We are also conducting effective sales activities through digital initiatives such as promotions in collaboration with foreign influencers residing in Japan. As a result, although shipment sales decreased due to temporary adjustments in store inventory, current customer purchasing momentum remains strong, and we are not concerned about the future sales recovery. Regarding the P&L, cooperating profit increased by 5.9 billion yen despite the revenue decrease driven by structural reforms such as reduced personnel expenses by early retirement and improved efficiency of marketing investments resulting in a significant improvement in margin to 15.3%. Next, on page 10, we will discuss China travel retail. Despite the significant revenue decline, we have maintain profitability. First, regarding the market environment, overall consumption in China remained sluggish and price sensitivity continued to rise, while the offline sector continued to face challenges, e-commerce remained positive as consumers continued to prioritize promotions. In the travel retail market, consumptions by Chinese travelers in Asia slowed and Korean retailers accelerated their shift towards a business model centered on travelers. However, we believe these external changes are largely within our expectations. In our business environment, offline sales were challenging overall, but Credible Boutte and NARS saw a slight decline in shipment sales, while customer purchases remained strong in both offline and e-commerce channels. In the women's festival promotions, core brands saw their ranking rise on major platforms, resulting in strong growth that exceeded our plans. On the other hand, Shiseido continued to struggle offline and posted a decline. The travel retail remained strong in Japan, but continued to decline in Asia. Co-operating profit decreased by 2.6 billion yen despite the decline in shipment sales and the deterioration of the mix due to the decrease in the ratio of high-margin travel retail sales. This was achieved through rigorous cost management, including fixed cost reductions and marketing investment efficiency improvements, which have been ongoing since last fiscal year. Going forward, we will further improve integrate the China trouble retail business to create synergies in both sales and costs. Next, on page 11, we will discuss the Americas. Amid growing uncertainty about the U.S. economic outlook, growth in the prestige market has slowed. Consumer sentiment has weakened and trends are below expectations. Due to the impact of this market environment, both shipments and customer purchases have declined by double digits. Dr. Dennis Gross' skincare is growing steadily as planned, primarily through the e-commerce channel, but Drunk Elephant remains a significant challenge. Amid a trend toward heightened consumer price sensitivity, lower price similar products are gaining traction, making it difficult to reacquire customers. Core operating profit decreased due to the reduced revenue and increased marketing investments aimed at revitalizing Drunk Elephant. As previously announced on April 16th, Alberto Noe, who previously served as CEO of the has been appointed a CEO of the Americas region. Under his new leadership structure, we will work together as a company to achieve an early turnaround in the Americas. Next, on page 12, we will discuss Asia-Pacific and Europe. In Asia-Pacific, market growth has slowed in Taiwan and South Korea, resulting in a slight decrease in our shipment sales. However, customer purchases maintain growth of approximately mid-10%. Southeast Asia, centered on Thailand, achieved strong growth, and overall market share has expanded. Corporating profit decreased due to increased labor costs related to inflation and reduced sales. The European market maintained growth, but growth momentum slowed across all categories. Our customer purchases declined by a low single digit percentage due to the poor performance of Drunk Elephant. However, excluding Drunk Elephant, we achieved positive growth and outperformed the market. In addition, fragrance customers were up by a high single-digit percentage, driven by a launch of the new products from Zadig and Voltaire, a focus brand for this year, significantly outperforming the market. decreased by 9% compared to the previous year, primarily due to the impact of the focus system implementation in the previous year and the decline in Drunk Elephant. However, excluding these factors, shipment sales remained positive and other brands maintained steady growth. Core operating profit decreased due to reduced revenue upfront marketing investments related to new product launches. This concludes my presentation.

Now, I would like to share with you about the following three topics. Tariff impact, path to achieve this year's targets and countermeasures for challenging brands, and the turnaround of the America's business. First, on page 14, the impact of the tariff. Currently, we have 11 manufacturing sites globally. We have five sites in Japan and other manufacturing sites located in areas such as Americas, EMEA, and China. The three brands, NARS, Drunk Elephant, and Dr. Dennis Gross Skin Care, which together account for approximately 15% of global sales, are mainly manufactured in the Americas. Fragrance brands, which account for just under 10%, are mainly produced in EMEA. In China, production is primarily for locally targeted products, while more than half of total sales, including brands such as Shiseido and Clé de Peau Beauté, come from products manufactured in Japan. Sales from the Americas account for just over 10% of total consolidated sales. Within the Americas, approximately 60% of the sales come from the combined brands NARS, Drunk, Elephant, and Dr. Dennis Gross Skin Care, around 30% from Shiseido and Clé de Poboté, and the remaining 10% from fragrances. Although negotiations between countries regarding tariffs are still ongoing and the outlook remains uncertain, We have estimated the potential impact based on what has been announced as of 3.30 p.m. today. The U.S. tariff policies and retaliatory tariffs imposed by countries such as China, Mexico, and Canada using certain assumptions. The assumptions are mentioned at the bottom of this slide. The US tariffs on Chinese imports is 145%. China's tariffs on US imports is 125%. The estimation is based on five main factors. First, the cost of importing raw materials into the US from countries such as China, Mexico, and Canada. Secondly, the cost of importing products such as NARS into China and travel retail markets. Thirdly, the cost of importing NARS and drunk elephant products into countries and regions outside of China and travel retail. Fourthly, the import of Shiseido, Clé de Peau Beauté and fragrance products from Japan and EMEA. Fifth, the risk of restricted imports of U.S. manufactured brands into China and travel retail markets. The estimate does not include indirect impacts such as potential decline in the overall cosmetics market due to the rising tariffs. At this stage, we estimate that the net impact on the core operating profit for 2025, calculated as the direct impact amount offset by the effects of countermeasures already deemed certain, will be up to a maximum of 7 billion yen for the full year, with only a minor impact expected in the second quarter. Among the estimated impact items, item 1 is expected to have the greatest impact, followed by item 2. We have already been working on shifting to local sourcing of raw materials in the U.S. and reviewing production locations, and we expect these measures to offset a certain portion of the impact. Moving forward, we will accelerate these initiatives to further minimize risk. In addition, we will advance the company-wide cost management measures announced last year ahead of schedule. As further countermeasures, we will implement additional actions, such as increasing inventory levels, utilizing preferential tariff schemes, modifying logistics flow, raising wholesale prices, expanding sales initiatives, and further reducing fixed costs to minimize the overall impact. As a company, while we are taking proactive measures to address the most significant risks in order to achieve the 36.5 billion yen target, we recognize that the situation remains fluid and have therefore decided to maintain our current outlook. As all of these actions will be completed within the year, we believe that even if reciprocal tariffs remain in place in 2026, the impact of tariffs on raw materials will be small and achieving a core operating profit margin of 7% is sufficiently achievable. Next is page 15. we are maintaining our four-year outlook for both net sales and profit. With regard to net sales, we will continue to drive initiatives in each region to achieve the targeted positive 4% year-on-year growth on a consolidated basis. While there is some downside risk in the Americas, we expect to offset this at the overall level, taking into account factors such as better-than-expected performance in China and travel retail in the first quarter. In the first quarter, sales declined by 9%, and we expect the second quarter to be roughly flat year-on-year. As such, the first half is planned as a period of sales decline, while we are targeting double-digit sales growth in the second half. Our sales tend to be weighted toward the second half due to seasonal factors such as China's double 11 and the holiday season in Europe and the U.S. In 2023, the treated water issue in the second half, then the slowdown in China and travel retail in the second half last year, along with the decline in sales in the Americas, this disrupted the seasonal pattern of the first and second half to be reversed. This year's initial plan assumes no extreme market fluctuations, and given the rebound from last year, the second-half growth rate inevitably appears higher. By region, Japan, where consumer purchasing is growing in line with plan, and China and travel retail, which are performing better than initially expected, are supporting overall performance. And our global growth is being driven by major new product launches from our core three brands, Shiseido and Kletopo Bote. Meanwhile, accelerating the growth of NARS and recovering drunk elephant are seen as key priorities, and we are focusing our efforts accordingly. In April, on flash report basis, Japan achieved double-digit growth, led by the strong performance of Anessa. In EMEA, fragrances have driven a turnaround to positive growth. With global second quarter sales expected to be flat year-on-year, we are off to a solid start. On the profit side, while we continue working towards achieving our initial sales targets, we recognize the need to prepare for risks such as uncertain market conditions and potential sales shortfalls. To that end, we are thoroughly managing costs, including marketing investments, and implementing additional global cost reduction and structural reform measures through the Global Transformation Committee. The entire company is committed to achieving the 36.5 billion yen target and firmly delivering the committed profit.

Next on page 16, NARS was unable to generate significant buzz or achieve dramatic growth in the second quarter of last year due to temporary production shortages. However, production has recovered this year, and we will work to strengthen our brand foundation throughout the year by expanding our content and brand communications and reinforcing our strengths in foundation and concealer products. Additionally, we will advance efforts to acquire new loyal customers through the launch of strategic limited-edition products tailored to regional needs and aiming to achieve sustainable global growth. Next, on page 17, Drunk Elephant also struggled last year due to temporary production declines in the second quarter, which led to product shortages and intensifying competition. Throughout the year, we will rebuild brand engagement through online and offline initiatives, including training for beauty consultants at retailers and strengthening skincare communication to build a strong brand foundation. In addition, we will select and concentrate our investments on high ROI storefronts and media, as well as campaigns by major retailers and achieve growth this year with the launch of new products as production recovers. Last year, sales fell sharply in the second quarter and beyond, and we expect a rebound this year, but we believe that the recovery will take some time with the first quarter as the bottom and the full recovery expected next year. Next, please turn to page 18. I mean increasing uncertainty, including the direct and indirect effects of tariffs. We will accelerate our efforts to reduce costs that we can control and focus on cost structures, reforms that will enable us to generate the committed profits this year. We are making steady progress towards our goal of generating more than 20 billion yen in effect by 2025. We will also bring forward actions originally scheduled to take effect in 2026 so that they will contribute to securing profits in 2025. We will also steadily implement measures to achieve 2026 target of over 25 billion yen. As previously announced, we have been implementing measures at a level that takes into account a certain amount of yield decline, and we will maximize this to ensure that we exceed the 25 billion yen target. Next, please turn to page 19. We have also begun efforts to fundamentally improve profitability in the Americas. Alberto Noe, CEO of the European Region, will serve as CEO of the Americas, leading structural reforms to strengthen brands and build a foundation for sustainable growth. review the improvement of the america's business as a company-wide management issue that requires immediate action accordingly we will assign the three global person personnel in addition to alberto to drive efforts in the areas of brand holder expenses, corporate functions, and factory productivity improvement, which are particularly challenging. We will keep you updated on progress as it develops. And the last page, page 20. The environment is changing rapidly, but our mission remains unchanged. The original goal of the action plan was to create a resilient business structure that can achieve stable profit growth even in a rapidly changing market. This is precisely the reform necessary to become a strong company that can overcome the current uncertain situation. guided by the firm belief that the successful implementation of the action plan is what will shape Shiseido's future. We will continue to advance reforms without pause with our sights set on the future revenue growth driven by growth. That's all from me. Thank you.

Thank you very much. Now we would like to go into the Q&A session. Thank you. Now, if you have a question, please go ahead and click on your button. Kuwahara-san from JP Morgan. This is Kuwahara from JP Morgan. Thank you very much for the presentation today. Especially for the Americas. The environment is, again, uncertain and unseen. So what I would like to ask you is Drunk Elephant. You have been working on different initiatives to improve and recover Drunk Elephant, but we don't see much recovery. I do understand there is market situation, but Drunk Elephant is struggling to recover. Now, in that kind of situation, what kind of different things are you planning to do that is different from the past as a company? And the reason why I'm asking you such question is because... The impact of tariff, what's scary about the tariff impact is the market sentiment. Overall market sentiment is a bit scary. That's a potential scary element. And if that is the case, the drunk elephant sails to recover. Yes, that's important, but the cost improvement has to accelerate significantly. Q1, 74% of SG&A. So if we look at that, is that really resilient is my question. So looking at America's, and yes, this is a drunk elephant from the US market, America's market, and also the structural cost structure. What kind of things are you working on? If you can elaborate a little bit on that, that would be very helpful. Thank you. Now, for Drunk Elephant, I would like to share with you, and then for the progress of the cost restructuring, that will be from the CFO. Now, yes, the Drunk Elephant recovery has been taking a little bit of time, and we are seeing that it's not going to be that easy, and it will take a little bit of time. One of the big initiatives that we are looking into is brand itself the brand has its own concept so the concept of the brand we must obviously convey the brand the brand concept and that's something you just need to continue to do and the growth up to here with the impact of new product launches the brand has grown has had a significant growth but of course that alone it's become it will be a very volatile brand so for that we need to continue to do steady actions And so what we've done from this year is, for example, the education to the store employees. That's something that we have started from there. We need the employees to re-understand the concept of the brand and also the brand communication to convey the brand concept to the consumers. And also what we're also working on is the positioning within the stores, the retail stores, the retailers. We want the positioning to be closer to a a real genuine skincare brand. So we want it to be positioned around that within the retailers. So within the skincare portfolio, we have a very unique position, this Drunk Elephant brand. So in the long term, we want to continue to grow this brand. On the other hand, in the short term, though, we do need to capture growth. So for investment, we have been doing many constant selection and concentration of investment to the brand. And as mentioned here, we have been doing strategic investments to acquire new customers, new consumers. And to any opportunities that we were given, we want to really focus on our customers. And others that are not the priority, we will make a better control. And that's the overall initiatives for the brand. And because the production is fully back, so Q2, we're just getting started. But from Q3 and onwards, as you can see here, we will have very new strong products that will be coming up. So with these new product launches, we want to capture new consumers so that we can enhance fundamentally as a brand and then continue to grow as a brand. Thank you. For the cost structure question, As mentioned, if you look at the P&L by segment, the U.S. profit recovery is something that is very important for our company. And that is something that, yes, is one of the top priorities for us. And what we have announced last year within GTC, especially the U.S., We are forecasting a big profit recovery from the U.S. that has not changed. And we have the new leadership structure. So with that, we want to really focus on GTC initiatives to accelerate. And also, we believe that the depth of all of the activities are becoming more important. and I think we are becoming more certain of the initiatives. And so to the question that you have mentioned, we believe this all will lead to the P&L of Drunk Elephant as a brand as well. So for the cost structure transformation, unfortunately, there are contents with sensitivity. So we cannot disclose much at the moment of this cost structure transformation. But we do have a lot of priorities in America's business so that we can improve and recover on the profitability and, of course, recover on the sales. From the GTC perspective, there is a segment disclosure, the headquarter cost. That is a big point for recovery or improvement as well. So for that too, we have the GTC committee working on it, looking at each of the segments to work on the costs as well. And we are adding all of these up. And the numbers that we have disclosed, we want to continue to stack up on these numbers so that we can even exceed that so that we can definitely capture these numbers. And so those are the kind of initiatives that we have in place. And that is it for myself. Thank you very much. Let me confirm with you one thing. So environment will continue to change. And yes, you have these cost structure transformation and you're adding up all these initiatives. But depending on the situation, the cost structure transformation costs or the cost, you are willing to add up on the cost in order to do these structure transformation. Is that correct? Yes, company-wide transformation. Of course, there is the future growth company-wide, but we are fully committed company-wide that we need the structural transformation for growth. And we need to transform to have a much more efficient cost structure and infrastructure. That has to be something that is not volatile to the environment. But as Hirofuji-san has mentioned earlier, because the environment is very uncertain at the moment, if we need to, we will continue to work on this, revise on this, add on this. And if needed, we will spend cost to achieve this. But at any cost, we want to achieve the cost structure transformation that we have in place. Okay, thank you very much.

I would like to supplement some wording. So the GDC, Global Transformation Committee, is the abbreviation and so to drive the cost improvement. Next question by Sato-san from Morgan Stanley MUFG Securities. Can you hear me? This is Hato speaking. Yes. Thank you very much. My question is, it's about revenue. And so there's an adjustment. There's a decline in revenue due to the temporary adjustment of the store, the inventory, and also the pay receivables turnover. at the moment seems to be declining and also and uh the revenue is lower than the plan and also the the turnover of the the the receivables are going down so um these are combined and uh because on the bbs the uh balance sheet the the revenue is down so the turnover is uh going down so the uh basically I suppose that there's a lack of inventory buildup in order to make the revenue improvement. And in the U.S., there was the change in the receivables, from what I gather, and also in Japan, adjustment of the store inventory. So basically, I suppose you're saying that there's been more returns of the products, and so... doesn't match the view of the quarter-to-quarter improvements, so can you explain? So I would like to explain about the Japan situation. First, in Japan, the customer purchase is growing in the high single digit percentage points. It is going quite steadily and quite well. And so centered around the drugstore, there was the inventory adjustment. So this is only a temporary thing. As I explained verbally earlier, for April, so there's a rebound for it. And so there's the more than a double digit, the return of the inventory. So I'm not so worried about this. So as far as Japan is concerned, there's some adjustment that went across the two quarters. Basically, the return of the products went across the quarters, between quarters, rather than the return happening in the same quarter in the drugstore. Yes, that's true. And also there was inventory adjustments. So these two actions went across two quarters. So that's how it is in the background. Okay, I see, I understand. And also... earlier about the changes in their transaction conditions or terms. And this is about Japan and not about United States, not about Americas. And based on that, there's a reduction of the... There was a short... So the payment cycle is shortened due to the change in the development law. And so under the current cycle, there has been the three payments between January and March. But then due to the change of the system, there's a payment in four occasions. So there's the cash out in more occasions. So that affected the cash flow. I can see that. So then the receivables did not necessarily decrease. That's right. So the payables and the receivables are now exposed to the shorter term. Yes, it's a technical reason, yes. And because of the change in the law of the subcontractor, then the payment cycle changed in both ways. I understand now. In Japan, the shop front and the shipment now understand. And last year, there was a last-minute purchase. happened in April also. The cells was good to start with. We thought it may continue, but it did not continue. And the autoimmune was refurbished or refreshed. And now, so last year, the reality was not as expected. So would it be different this year? Last year also, as you said, as far as the first quarter is concerned, the growth was 20% because the year-on-year, it was low. The previous year, the level was low. And also the last-minute purchase is something that's happened for the first time in a while. So there was a high level of last-minute purchase. Therefore, we did not expect that the 20% is going to continue throughout the year. We expected the rebound from that. And for this year, so a cycle of the shifts has settled down, and there will be a price increase, the wholesale price increase in April, but then this does not necessarily bring their last-minute purchase. But then there's more... products to be bringing to the stores to build up on the inventory to compensate for the reduced level of inventory for adjustments.

Next is Goldman Sachs, Miyazaki, Mr. Miyazaki. Hello, this is Miyazaki from Goldman Sachs. Thank you for your presentation. my question is for Americas and, uh, reciprocal tariffs page 14. Thank you very much for explaining in detail on page 14. And this is, uh, Kind of an estimate, temporary estimate, and say maximum of 7 billion yen. What kind of initiatives do you have in place to suppress this? And so on a temporary basis, what kind of, what level did you make the assumption on? And in Q2, you said the impact will not be that high. So could I assume that the impact is for about six months? Because if... If this continues for 12 months, should we calculate 14 billion yen worth, for example? So the impact that you have, the assumption that you have here, along with the timeline and what you have in place of this, if you can share with us. First of all, for the tariffs, the assumption here is, as mentioned, the U.S. tariffs on Chinese import is plus 145%, and China's U.S. imports is plus 125%. That is the assumption, as mentioned, when we did a simulation and assessment. And on an annual basis, the maximum impact annually is what we have calculated here. And as you see on this chart, continuing what we have been working on, that's something that we will continue to do. do that we will continue the current actions but even without without that uh we can see so if we do the current actions and then we take that away we see an impact of about seven billion yen so this minus seven billion yen how is that next year already uh the current actions that we are taking that's something that we've been working on since last year especially changing to local sourcing or reviewing of production sites. If we do this on an advanced basis, then this minus 7 billion yen would change too. And as a result, the impact for next year would be almost very minor or none, close to nothing. So for this year, we have estimated minus 7 billion yen by adding the additional actions on top of the current actions. And so with the actions that are mentioned here, we are currently mentioning that we will aim for the maximum of minus 7 billion yen. Okay, thank you. But however, let's say in the Americas, you have NARS, Drunk Elephants, you're producing it there. And then you will be exporting those products to China or EMEA. Then does that mean you're trying to go into manufacturing China instead so that you don't have to export to China? Yes, we can't change all the sourcing, etc. But for the brand NARS, for example, majority of it is manufactured in the US. But of course, what's highly selling in Asia? it's a little bit different from what sells in the Americas. So for those kind of products that sell highly in specific areas, we can try to produce closer to that area where it's high selling so that it's not just about tariffs, but going forward, we see an ongoing benefit if we can manage produce closer to Asia, for example. So it's not just about tariffs, but what is the right footprint, an optimal footprint for each of them. And that's something that we have already been working on last year. And now suddenly we have this tariff challenge. So as a result of that, we want to accelerate all the initiatives that we are working on so that we can try to shrink this minus 7 billion yen as much as possible. I see. If I may add on just a little bit here. From about 4.30 p.m., there's separate news that they've decided to bring the tariff down to about 115%. And so we're not doing the impact based on this. So we are doing the calculation assumption to what's before this. So yes, the tariff rate going down, that's great news, if that is true. But the current situation is very fluid. Once again, we do not know, and it's very uncertain. So we will continue to closely monitor the situation and continue to do these tight actions accordingly so that we can adapt quickly. Understood very well. Thank you very much for that.

Next, Hirozumi-san from Daiwa Securities. Hirazumi from Daiwa speaking. Can you hear me? Yes, I can hear you. Thank you. I should avoid overlapping. So in the Americas, the demand, well, it's a trend of the demand of the American consumers. And so when we analyze many customers and customers, I'm worried about the American consumers not really using your products towards the second half of the year. How do you see the demand aspect of the American consumers? At the moment, in the first quarter, the consumption trend is the same level as this period last year. It is flat. When we look at the trend, I can see that the consumer sentiment is declining and associated With that, how much impact there will be due to the terrorist situation is something that is not reflected in our view at the moment. However, there will be some impact. So if there's a major shift in the sentiment, what actions to be taken is something that we've already built up with ideas. And basically, we're going to... pursue the plan we have and see about the growth. So in comparison to January, March months, is it correct to understand that the situation will worsen in the months between April and June? I think it may be too soon to make an assumption for April through to June. Last year, there was a lot of ups and downs between quarters. And so the last year's result will not be a good reference point. But however, we do not see any numbers indicating that there's a major decline in April. And page 17, there's a bar chart. And so in comparison to the first fourth quarter last year, I think the first quarter this year is slightly down. And it's going to go up from the second quarter. How certain are you that this will be happening? Well, the second quarter, so will it grow? That's your question? Yes. As far as second quarter is concerned, this is our view and a plan. And last year, we saw quite a high number last second quarter, second quarter last year. But it's a little bit lower than the second quarter last year. However, from the drop we experienced in the third quarter last year, we will be making improvements. So this is because of the entry-level products to be more pursued. Yes, and that's one of the elements to find the customers for the entry-level products. But then last year, there was the drop in the fundamental part, and this is going to improve. So combined with the increase in the entry-level customers, then it's going to improve. I'm looking forward to the good results. Thank you.

Now to Nomura Securities, Ohana-san. Hello, this is Ohana from Nomura. Tariff impact and core operating profit impact for the full year are some of the areas I would like to ask. 7 billion yen of tariff impact. So you've got it on page 14. So you're saying that the mitigating actions are able to absorb, and that is why you have this number in place. Is that the right understanding? And also, as you have mentioned, the 115% between the tariff of 100... Tariff between US and China of being 115% for the next 90 days that is coming up. So if that is the case, does that mean that the number can actually fluctuate above what you have planned here? So what would happen if something like that happened? First of all, for the mitigation actions, there are the certainty of the mitigation actions. There are certain ones that we are already doing, and then there's additional actions that we have. Of course, all these will be doing it to mitigate the 7 billion impact as much as possible. But overall looking, the tariff situation is very uncertain. And therefore, that's why we have kept the full-year outlook. As for the advancing concurrent actions on the top of the mitigating actions, these are actions that have been ongoing. And if the tariff fluctuates, To that, it's not that it will be additional profit, but it will be just something to try to recover from the tariff impact. But what will be a profit positive impact here will be the cost reduction actions. So regardless of the tariff situation, in order to protect the 36.5 billion yen, if we continue to continue to stack up on these cost reduction, and if we can continue to execute that, of course, that could turn into a positive impact on our profits. Okay, so additional cost actions and reduction, how much are you seeing and what are you doing? And then for tariff, for example, NARS is exported to China. So China mainland versus Hainan Islands, the tariff rate is different. So even in the same country, could there be a price gap? Is that a possibility? Or would you just be adjusting that so that that wouldn't happen? How will you countermeasure that? You mean depending on the Depending on the tariff, yes, if we adjust the wholesale price, then yes, there could be price differences within the country. But that is why we are not thinking of just doing a wholesale pricing for China. We will be overlooking the global situation to harmonize the pricing. And that is something that we're doing. So for tariff countermeasures, the pricing strategy will be... we're not thinking that that will raise the gap of prices between the regions and countries. Okay, thank you very much.

And from Mizuho Securities, Miyasako-san. This is Miyasako from Mizuho Securities. Can you hear me? Yes, we can. Thank you. I have a question on the Americas and also NARS in Americas. First, NARS has a high proportion in the product portfolio, and it seems that the wholesale price increase is not significant. So the NARS is an important product. So I would like to ask you about the future of NARS and also the management in the Americas. I wonder how it's going to evolve. Since last year, there's been the issue of the inventory and the drunk elephant. And I wonder also that the NARS may be dropping in this market share area. And so there will be a new CEO and tentatively the CEO to be is already working. And so with the change in the top management, how do you think that the management is going to change? And also, there are other shifts, and there's an introduction of the top management with the pictures, and so how will the management shift, and also in relation to NARS as well? In regards to NARS, in particular, about last year, we ran out of products, and also the product... Because there was a lack of products in the storefront, we could not create excitement. In particular, in America, how much buzz was created in the U.S., the score went down. And in regards to NARS, well, it is not quite right to compare it with the drunk elephant. And NARS already has a very strong brand equity. And the growth of NARS is something that I'm not worried about. And there are many measures that we have been preparing since last year to launch this year to... attain growth. And as you can see here, the brand equity will be further strengthened and we're going to communicate more and more effectively to make the customer foundation stronger. So we will also communicate about the brand at the right timing and also concealer has a high market share this is very well received by the customers so based on that we would like to further strengthen the foundation and last year we were not able to make a buzz and so this year we were prepared a lot of a lot of the limited edition products of NARS, and we're going to listen to the needs of each region to launch NARS in the right way. So in different regions, NARS is creating a lot of buzz and excitement, so we are sure that we can make an improvement and growth in NARS. So regardless of the top management change, NARDS will be improved under the leadership and change in the management in the Americas. So we are doing this based on the needs for the future growth and we would like to make a reform through the fresh point of view. And Alberto has succeeded in a number of reforms in Europe, starting from Italy and across EMEA, including the cost improvement. And so the Shiseido has grown into the number two brand in Europe, thanks to Alberto's capability. So he has a long history with Shiseido, and he has expertise, and we would like to look at the Americas with a fresh point of view. So we are signing Alberto, and he... alone cannot achieve the growth. So in addition to the commercial organization, there's a brand holder function such as the And so there's the different functions. So this will be covered not only by the voter, but and Hashimoto-san is going to work on the brand holder. And RHQ and the back office cost improvement, Kashio-san, will work on it. And also the supply network will be supported by Antonio. And behind this team, myself included, the entire Shiseido company will be behind them. So by the end of this year, we would like to complete many reforms. And so we will have a full-fledged support of the entire Shiseido. So there's a good progress already. And after the change in the CEO, as reported, so with a very high speed, things have progressed. at a high speed. So there are some sensitive items. So I cannot share with you any of the specifics today, but I have a strong confidence in the future positive changes in the Americas. Just short question. So the CEO changed, is it because of the corporate situation or the previous CEO left the company due to his own reasons? Thank you very much. We have nine more minutes. We have to take questions from two more people.

Kawamoto-san from Jeffrey Securities. Hi, this is Kawamoto from Jefferies Securities. We can hear you. Thank you. China. I wanted to ask about China. Travel retail. So for Q4, compared to Q4, minus 9% to minus 20% plus. So was there something new that happened maybe? In the global results, when you hear Estee Lauder as well, they're struggling as well. So I wanted to hear from you. Is there anything new happening? Are there changes in the way of sales or anything in the distribution, the sales routes? And you said there's inventory in the Daigo, the buyers. How much of that is resolved? For China, Q1, for Q1 China. the number from the previous year has created a very high hurdle and as a result makes the growth ratio look lower. So please have that in mind. China and travel retail, both the big negative, the reason why there was a big minus for both China and travel retail was in Q2 to the second half. So Q1 this year compared to Q1 last year the Q1 last year had a very high growth number growth rate so that's why the decline looks big but when you look at the reality of the market so you asked about are people purchasing differently are there changes in how it's sold which purchased not big change but looking at it by channel the offline is struggling and online is offsetting that and this is not just for Shiseido but I think that is the overall trend of the market So especially for offline, we will look at the growth rate per store and the P&L per store to do our reform. And you mentioned about the DAIGO ratio, the buyers, especially for travel retail. We had a minus negative growth. But the contents of this has improved significantly is how we look at the situation. First of all, the inventory at the stores and the inventory on hand has reduced significantly. Especially when we look at the turnover rate of the inventory, we have improved significantly. That's one thing to mention. And also the DAIGO buyers and the regular tourist sales ratio, we are looking at the targets. And the field team is working on it to promote and approach these segments. And we are improving in these areas as well. So as a business contents, and if you look at the contents of the business, the contents is improving significantly. And I'm quite confident about that improvement. Thank you very much. Then if that is the case, the impact of the tariff. Looking at page 15 of your material. you will be able to offset the tariff impact by sales was what I was thinking. But by sales, how much will you be able to cover or offset? And are there any other details initiatives? For example, you will be launching in a very strong e-commerce platform or is there anything like that? Are you talking about China? Yes, in China. Are there any special initiatives in place for China? For China, we will continue to do what we have been doing with the cost structural reform. One thing what we will be doing is First of all, China and travel retail will have been combined together as a segment. And so a lot of the costs will be more efficient. And that is something that will be streamlined. And also within the offline that I have mentioned earlier, if there are non-efficient or non-productive stores, we will look at it and make the right initiatives to make it more efficient. Now, the impact is not just something that we can offset by one region. It's the tariff impact is something that we need to mitigate as a whole company, a company-wide initiative. I understand. Thank you very much.

Hello.

Thank you. Could you tell us about the new products? You mentioned you're launching in H2. It looks like that's the key action. How confident are you you will see the sales increase from these new products? Thank you.

Sorry, the question of the new products for the beach brands?

It says Shiseido Clay Depor. I see.

So in case of this Brand Shiseido, we launched for the Altium 4.0, which is the biggest launch and the biggest products for the Brand Shiseido in this year. Starting from the Asia, the Japans, and other Europe, Europe and the Americas also starting to push to those products. So which really the key for the success in the Brand Shiseido. And in case of the Crédit Port Voté, we prepare to the new launch in the second half. But this is a little bit sensitive to disclose everything as a marketing point of view. So we are very confident to make it a big success for the Crédit Port as well.

Okay. Then could I just clarify... You said travel retail was better than you expected for Q1. Do you know why that was? What was the difference?

So it is not such a big difference. So it is in our other expectations. So it doesn't have any bad surprise. So that's what I mean.

However, I just wanted to add that travel retail, of course, we should be expecting a deep negativity from the high base coming from last year. This negativity was not as deep as we had initially expected. So that is somewhat good news. We do expect that China travel retail combined should be in line as per plan. So there would be no further big surprises, so to speak, in terms of our P&L management going forward in 2025. That was our intention.

Okay, got it. Thank you very much.

Thank you very much. Now we would like to close the Q&A session. With this, we will be closing our presentation for today.