Rising advertising costs and delays in launching new products

「一方、費用面においては、前年同期と比較し広告宣伝費が約1.7倍増となったことが主因となり、販売費及び一般管理費が増加して利益を圧迫し、営業損失が大幅に拡大する結果となりました。」

「Selling, general and administrative expenses for the current consolidated fiscal year were ¥1,931.080 million, up ¥548.796 million from the previous consolidated fiscal year. This was due to increases including ¥202.143 million in advertising expenses, ¥92.268 million in sales promotion expenses and ¥42.662 million in advisory fees.」

「Meanwhile, in terms of costs, selling, general and administrative expenses increased because, as part of strategic marketing measures to raise awareness of the Group's products and achieve a sustained future increase in loyal customers and higher LTV (customer lifetime value), the company intentionally allocated a greater proportion of selling expenses to the current fiscal year as part of its sales strategy.」

「However, awareness of the products' competitive advantages failed to spread in the market, and sales ultimately fell below the original forecast. In light of these circumstances, the cosmetics and beauty and wellness business will further strengthen product differentiation, review its marketing strategy and sales structure, and proceed with reforming its earnings structure.」

「The company expected revenue from cosmetics to increase by developing quasi-drugs and other products as new products and launching them in new markets. However, although it conducted sales promotions, demand recovered slowly. Revenue was ¥1,474.008 million, up 1.9% year on year, and operating loss was ¥33.109 million, compared with a loss of ¥27.432 million in the same quarter of the previous year.」

「The company expected revenue from cosmetics to increase by developing quasi-drugs and other products as new products and launching them in new markets. However, although it increased sales promotion expenses to raise market awareness, demand for cosmetics recovered slowly. Revenue was ¥933.841 million, down ¥73.024 million year on year, and operating loss was ¥40.017 million, compared with an operating loss of ¥4.947 million in the same quarter of the previous year.」

「However, demand for cosmetics recovered more slowly than expected due to delays in selling new products and the trend toward slower personal consumption accompanying rising prices. Nevertheless, the operating loss improved substantially as a result of developing proprietary products, expanding sales channels and restraining advertising investment.」

「However, demand for cosmetics recovered more slowly than expected due to delays in selling new products and the trend toward slower personal consumption accompanying rising prices. Nevertheless, the expansion of sales channels and restraint of advertising investment led to a substantial improvement in operating loss. Revenue was ¥1,446.643 million, down ¥155.366 million year on year, and operating loss was ¥27.432 million, compared with a loss of ¥408.308 million in the same quarter of the previous year.」

「The company developed new cosmetics products and began selling them in new markets, and also developed new beauty and wellness products jointly with public figures. However, as advertising investment was restrained, revenue was ¥533.780 million, down ¥46.614 million year on year, and operating profit was ¥12.435 million, compared with an operating loss of ¥124.313 million in the same quarter of the previous year.」

「Meanwhile, amid intensified upfront investment in advertising through social media, video-sharing services and paid search aimed at acquiring new customers, operating loss, ordinary loss and net loss attributable to owners of the parent for the first six months of the current consolidated fiscal year were all lower than in the same period of the previous year.」

「However, although the company is seeking growth by generating funds through financing and expense reductions, developing and launching new products, and investing in advertising, during the first quarter of the current consolidated cumulative period the effects of these measures were still taking time to emerge.」

「This was due to an increase of ¥98 million in advertising and sales promotion expenses, offset by a ¥212 million decrease in the provision for doubtful accounts, a ¥66 million decrease in depreciation and amortisation, natural reductions resulting from lower sales and the effects of cost reductions.」

「Meanwhile, amid intensified upfront investment in advertising through social media, YouTube and paid search aimed at acquiring new customers, operating loss, ordinary loss and net loss attributable to owners of the parent for the second quarter were all lower than in the same period of the previous year.」

「However, cost-effectiveness fell short of expectations due to factors including higher media and affiliate costs. Although development of the new products was progressing smoothly, the launch was significantly delayed from the original schedule because obtaining the trademarks took longer than expected as a result of a re-examination by the Japan Patent Office.」