Shiseido (4911) A Clé on the quarter

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Shiseido (4911)

A Clé on the quarter

Reiterate Rating: BUY | PO: 4,000 JPY | Price: 3,154 JPY

Buy rating, PO ¥4000

03 August 2026

We recently reinstated coverage on Shiseido with a Buy and PO of ¥4,000 (c.30% upside;

see Setting the foundation). We expect an improving beauty market backdrop plus ¥50bn

of structural cost savings to drive margin rebuild. We expect 2Q26 results on 5 Aug to be

a positive catalyst, with confirmation of LFL acceleration, margin expansion, limitation

of downside risk in naphtha shortage and FX upgrades. We see Shiseido as undervalued

at 1.5x EV/sales vs 2.4x for Estée Lauder and 4-5x for recent beauty M&A, Exhibit 5.

2Q26 revenues: +2% LFL, recovers from 1Q lows

We forecast +2% LFL sales growth in 2Q26, a 4ppt pick-up from 1Q26, but broadly in

line with consensus (Exhibit 15). Japan & Rest of Asia should drive growth. We expect

reported revenues of +11% YoY in Q2, 4ppt above consensus, driven by FX (Exhibit 55).

2Q26 OP: +51% YoY driven by 220bps margin expansion

We forecast core operating profit of ¥22.9bn in 2Q26. This +51% core OP growth will be

driven by (1) Q2 revenue +11%, (2) gross margins +40bps, and (3) +300bps of operating

cost leverage. This implies 220bps of core OP margin expansion to 8.5% in Q2 (50bps

ahead of consensus). We are 10% ahead of consensus Q2 core OP (¥20.8bn).

Positive X-read from 2Q beauty reporting so far

For listed beauty companies who reported so far, revenues are +5.7% in 2Q26, +40bps

vs 1Q26, see Exhibit 56. Peer reporting plus industry data suggests (1) Japan local

beauty continued to improve, as did tourism supported by RoW, less so Chinese. (2) The

prestige beauty market in China is recovering, +7% according to L’Oréal, boosted by 618

(Clé de Peau +40% on Douyin and +17% on Tmall, on our channel checks). (3) Travel

retail still mixed, better for Korea, whilst Hainan a bit softer. (4) US beauty remains solid,

like Q1. However, Shiseido driven by idiosyncratic factors i.e. Drunk Elephant turnaround,

whilst Q1 was boosted by sell-in. We note selective US price increases in Q2, Exhibit 10.

(5) Europe mixed message, Germany and France tougher, other markets better.

Estimates (¥)

EPS

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