Shiseido Dividend Cut Pushes Shares Down Most in 2 Years

Shiseido Co. (4911), Asia’s biggest cosmetics maker, reduced its planned dividend 60 percent and pledged cost cuts to recover from the first annual loss in eight years. Its shares slid the most in two years.

The dividend will probably be 20 yen a share for the year ending March 2014, from 50 yen in the previous period, the Tokyo-based company said in a statement today. It’s the first dividend cut since Shiseido listed, Chief Financial Officer Yoshinori Nishimura said at a briefing.

Shiseido pledged to reduce spending including cuts in executive pay after its push into the U.S. with the $1.7 billion purchase of Bare Escentuals in 2010 left it with a 28.6 billion yen ($290 million) loss on goodwill last fiscal year. The maker of women’s cosmetics and toiletries had sought growth outside Japan, where a shrinking population and stagnant wages have sapped demand.

“It’s understandable and makes sense that they cut dividend for growth investment, but they should have done it earlier -- what’s negative is that they had to do it this late,” said Wakako Sato, analyst at Mizuho Securities Co. The company’s payout ratio “was not sustainable,” said Sato, who has a neutral rating on the stock.

Margin Narrows

Shiseido fell 8.3 percent to 1,390 yen, the most since March 15, 2011, after earlier heading for the biggest decline in more than four years.

Photographer: Tomohiro Ohsumi/Bloomberg

Models are made up by Shiseido Co. consultants during the skin care competition at the Shiseido Global Beauty Consultant Contest 2012 in Tokyo on July 25, 2012. Close

Models are made up by Shiseido Co. consultants during the skin care competition at the... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

Models are made up by Shiseido Co. consultants during the skin care competition at the Shiseido Global Beauty Consultant Contest 2012 in Tokyo on July 25, 2012.

Sales fell 0.7 percent to 677.7 billion yen in the year ended in March, the company reported today. The drop is the third annual decline over five years.

Net loss was 14.7 billion yen in the year ended March 2013, the first deficit since 2005, the company reported April 24 on a preliminary basis.

Shiseido had planned for Bare Escentuals, maker of the bareMinerals brand, to be the “base for future growth” and widen its operating profit margin to about 9 percent. It has instead narrowed to 3.84 percent, from 7.26 percent in 2010.

Bare Escentuals’ “sales have remained lower than expected,” Shiseido said in an April 24 preliminary earnings statement. “Bare Escentuals has taken longer than initially envisioned to grow its retail business,” the company said. “The gap between its sales budget and sales performance has been widening during recent months.”

Shiseido last year announced a reorganization of the U.S. business, which included merging back office functions between its subsidiaries and Bare Escentuals.

Bloomberg News reported earlier today that Shiseido was considering cutting the payment.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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