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Shiseido sells bareMinerals and Laura Mercier as shine comes off US push

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Japanese business & finance updates

Shiseido has agreed to sell bareMinerals and two other US cosmetics brands to private equity firm Advent for $700m, closing a bitter chapter in the Japanese company’s $2.1bn expansion into the US.

The sale of bareMinerals, Buxom and Laura Mercier for an amount two-thirds below the original price tag marked a broader strategic shift for Japan’s largest cosmetics group.

Under chief executive Masahiko Uotani, the company has said it would focus on higher-margin skin care products, particularly in Asia.

Over the past 12 months, Shiseido has also offloaded its personal care business to CVC, the Luxembourg-based private equity firm, for $1.5bn and ended its licensing contract with the fragrance business of Dolce & Gabbana, the Italian luxury brand.

The divestitures announced on Thursday came as the Covid-19 pandemic has damaged Shiseido’s sales in Japan and the US. Operating losses in North America expanded three-fold to ¥22.3bn ($202m) last year, while revenue fell 24 per cent in local currency terms. 

But even before the pandemic, analysts questioned the $1.9bn acquisition of Bare Escentuals, the New York-based natural make-up company behind bareMinerals and Buxom, in 2010.

Integration efforts were slow owing to differences in corporate culture and strategic direction. In 2017, Shiseido was also forced to take a writedown of $623m on Bare Escentuals as the US group lagged in its shift to ecommerce. 

Because the deal came just before the final year of Shiseido’s three-year business plan, some investors also viewed the acquisition as a means to reach its numerical target.

In addition to Bare Escentuals, Shiseido acquired Laura Mercier in 2016 for $248m. The two brands and Buxom generated sales of ¥44.8bn last year, which accounted for 4.9 per cent of total group sales. 

Shiseido will not be pulling out of the US, where it continues to sell the cosmetics brand Nars and skincare line Drunk Elephant.

“As we are taking steps to prioritize our brands, optimise our portfolio, and strengthen our competitive advantages under this strategy, we have decided to transfer the business,” Shiseido said.

In a client note published on Thursday, Yu Sato, an analyst at SMBC Nikko Securities, said the sale of the brands would help to improve the profitability of Shiseido’s North American business, “which thus far has been the largest negative factor affecting overall earnings”. 

Jefferies analyst Mitsuko Miyasako said the Japanese group’s focus would shift to how it would achieve its goal of an operating profit of 15 per cent in 2023. “The key issue is how Shiseido manages growth globally with a portfolio centred on prestige skin care,” she added.

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