Cosmetics Q2 FY2026: Kao leads on margins as Shiseido stages a sharp rebound

Both companies posted higher sales and profit than a year earlier, but growth came from different sources.

• Sales rose 7.8% at Kao and 6.2% at Shiseido. Foreign exchange accounted for 4.4 percentage points of Kao's increase, leaving underlying growth of 3.4%.
• Price revisions and a shift toward higher-value products contributed to Kao's performance. Of its 3.4% underlying growth, pricing accounted for 2.1 percentage points; volume and other factors contributed just 1.3 points.
• Shiseido's operating profit jumped 131.8%, supported by structural reforms and an improved brand mix. Excluding foreign exchange, its sales fell 0.2%.
• Kao's cosmetics business returned to profitability. Improvement across the group, including its household products business, supported earnings.

Kao is a diversified manufacturer with household products and other businesses, while cosmetics are central to Shiseido. Their sales figures are not directly comparable without accounting for this difference in scope.

Kao is the overall winner. Sales were ¥871.9 billion, up 7.8% year on year, ahead of Shiseido's ¥499.0 billion, up 6.2%. Kao also recorded a higher operating margin, at 11% versus Shiseido's 8.4%.

Shiseido, however, led in the rate of operating profit growth. Its operating profit rose 131.8% to ¥41.9 billion. Kao's increased 38.5% to ¥95.8 billion. Shiseido's core operating profit also climbed 90.1% to ¥44.4 billion, pointing to a strong recovery.

Shiseido faces the greater remaining challenges. Sales excluding foreign exchange declined 0.2%, and it left its full-year forecast unchanged. Uncertainty in China and losses in its European business also persist. Kao, by contrast, returned its cosmetics business to profitability and raised its full-year forecast. The contrast: Kao leads in earnings power, while Shiseido is recovering faster.

Shiseido is seeing structural reforms flow through to earnings. Operating profit rose 131.8% year on year to ¥41.9 billion, while core operating profit reached ¥44.4 billion, up 90.1%, helped by a better brand mix and cost reductions. Its efforts to return its Americas and Asia-Pacific businesses to profitability also advanced. Shiseido kept its full-year forecasts unchanged at ¥990 billion in sales and ¥59 billion in operating profit.

Kao pursued price revisions and a shift toward higher-value products. Its cosmetics business returned to profitability, and all businesses advanced. Sales increased 7.8% and operating profit rose 38.5%. Kao raised its full-year forecasts to ¥1.8 trillion in sales and ¥190 billion in operating profit.

Kao also booked a ¥11.5 billion gain from land sales tied to logistics optimization. Operating profit still expanded even excluding that gain. Shiseido's focus is rebuilding costs and brand mix; Kao's is improving prices and product mix.

• A slower recovery in China could weigh on sales and demand from travelers. Shiseido faces uncertainty in the market, while Kao still needs to regain share.
• Currency swings can move sales and profit. Foreign exchange added 4.4 percentage points to Kao's sales growth, a tailwind that could fade if the yen strengthens.
• Price increases risk reducing sales volumes. Kao's underlying growth was 3.4%, but volume and other factors contributed only 1.3 percentage points.
• Higher raw-material and logistics costs could pressure margins. Price increases could also widen the gap with competitors.
• Tighter rules on ingredient labeling, advertising and environmental practices are another risk. Compliance costs could affect product development and sales strategies.

Kao remained ahead in sales, operating profit and operating margin. Shiseido, however, posted stronger growth in both operating profit and net income. Net income rose 211.4% at Shiseido, compared with 32.3% at Kao.

The figures show that current earnings scale and the pace of recovery are reflected in different measures. Kao raised its full-year forecast, while Shiseido kept its unchanged. Whether Shiseido can sustain its profit recovery is the next key question.

Kao's breadth across cosmetics, household products and other businesses is a notable strength. Roles in pricing strategy, planning higher-value products and improving logistics efficiency may draw attention.

At Shiseido, the challenge is to reshape the cost structure while protecting brand strength. Opportunities may include overseas market analysis, product development and business turnarounds. For both companies, building a model that generates profit, not just sales growth, will be important.