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Investing.com -- Moody’s Ratings has downgraded Shiseido Company, Limited’s issuer and senior unsecured ratings to Baa1 from A3, while maintaining a negative outlook.
The credit rating agency cited Shiseido’s "prolonged low profitability" and challenging market conditions as key factors behind the downgrade. The company’s EBITA margin stood at 6.4% for the twelve months ended June 2025, falling short of previous estimates.
"We expect that the company’s potential for profitable growth and improving geographic and product diversification will be limited," said Shunsuke Kimura, a Moody’s Ratings Analyst.
Despite ongoing restructuring efforts including workforce reductions and selective brand withdrawals, Moody’s expects weak consumer sentiment and intense competition across key markets to limit significant margin recovery over the next 12-18 months.
Shiseido has repeatedly revised its medium-term profitability targets downward, highlighting its vulnerability to market pressures. Consumer sentiment in China, historically an important profit driver for the company, remains subdued. The Travel Retail business continues to face headwinds from weak tourist demand, stagnation in duty-free channels, and declining resale-driven purchases.
In the Americas and Europe, slowing market growth and production issues at Drunk Elephant, Shiseido’s US brand, have contributed to sluggish sales performance.
Moody’s projects leverage to decline as the company realizes savings from its restructuring program, but expects more meaningful profit and leverage recovery only starting in late 2026. The agency forecasts Shiseido’s EBITA margin to reach around 8% by 2027 if cost reduction efforts succeed, though topline growth will likely remain limited.
The negative outlook reflects Moody’s view that market recovery across key regions is unlikely in the near term. Japan and China generate the majority of Shiseido’s core operating profit, with ongoing stagnation in China likely to increase reliance on the Japanese market.
Shiseido’s Baa1 rating is supported by its solid market position in Japan, strategic focus on prestige skin care and makeup brands, R&D investments, and strong liquidity. However, these strengths are offset by weak profitability, narrow product categories, and geographic concentration.
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