Shiseido Returns to Profit as Core Operating Profit Soars 124%

Shiseido posted a 124% rise in core operating profit to ¥67.5bn for the nine months ended September 2026, up from ¥30.1bn a year earlier, with net sales up 7% at ¥741.1bn — yet Drunk Elephant's global sales fell 23% in Q3, the clearest drag on the group's recovery.

Core operating profit margin reached 9.1% of net sales, compared with 4.3% in the same period of 2025. Profit before tax came in at ¥65.3bn, reversing a loss of ¥32.5bn a year earlier, while income tax expense increased to ¥21.2bn. The turnaround was driven by prestige skin care brand Clé de Peau Beauté and the flagship Shiseido brand.

What did the CFO say about the recovery?

"First, we have seen an improvement in our sales growth momentum," said Ayako Hirofuji, Shiseido's CFO, on an investor relations call held on 10 November.

"After a 3% decline in Q1, we recorded a 2% growth in Q2 and 3% in Q3, bringing our year-to-date growth to 1%, a shift into positive territory."

Hirofuji credited core brands Clé de Peau Beauté and Shiseido, plus newer additions and launches, for the swing. "Growth has been driven by our core brands such as Clé de Peau Beauté and Shiseido, as well as new brands like Max Mara and new product launches, including a new Total V Cream from the ELIXIR line," she said. "Our focus on core brands and our commitment to creating value through our innovation are now beginning to reflect in our sales performance."

Why did Drunk Elephant decline 23%?

The bright group numbers conceal a sharp deterioration at Drunk Elephant. Its global sales dropped 23% during Q3, accelerating from a 14% decline in Q2, and it pulled US e-commerce sales into low-to-mid single-digit negative territory for the quarter.

"Brand-wise, Dr. Dennis Gross Skincare [and] Drunk Elephant recorded some severe underperformance. That is the detractor," Hirofuji said.

The Q3 slide follows a January 2026 rebrand, when Drunk Elephant launched a new campaign and brand direction to shake off its association with 2024's 'Sephora Kids' episode. In January of that year, tweens rampaged through US Sephora stores, testing and buying products and leaving chaos behind — with Drunk Elephant's high-active concentrate formulations at the center of the storm. The fallout triggered an identity crisis and multiple consecutive quarters of declining sales, which dragged down Shiseido's income in the process.

How did travel retail and China perform?

Travel retail delivered a stronger quarter, with net sales up 1.2% to ¥268.5bn. Shiseido expects the impact of retailer restructuring in Mainland China to ease gradually.

"Helped in part by advanced shipments in anticipation of a market recovery in Mainland China, net sales turned positive on a cumulative basis," Hirofuji said. "While the recovery pace in travel retail and Mainland China is slower than anticipated, consumer purchases in Hainan Island continue to grow, and the business as a whole is on an improving trend."

She added: "We will continue to monitor in-store sales trends and flexibly control shipments accordingly."

The group enters Q4 with momentum from its core prestige brands, but the widening Drunk Elephant contraction shows the rebrand has yet to stabilize the label, and management's willingness to throttle shipments into China suggests it will keep prioritizing margin discipline over volume in the months ahead.