Kose, a prominent player in the cosmetics industry, recently released its financial report for the year 2023, providing a comprehensive overview of its performance and outlining the economic landscape that influenced its operations.
In 2023, Kose recorded net sales of 300.406 billion yen ($2 billion), representing a year-on-year increase of 3.9%. However, the operating profit stood at 15.985 billion yen ($106.5 million), experiencing a decline of 27.7% compared to the previous year. In 2023, Kose experienced significant sales declines in China and South Korea, while sales in Japan and at Tarte, a brand primarily focused on the United States and Europe, witnessed substantial growth.
Throughout 2023, the Japanese economy continued its recovery trajectory, supported by growing domestic demand as economic activities gradually normalized following the aftermath of the COVID-19 pandemic. Consumer spending witnessed a revival, primarily in the food service and other service sectors. Additionally, the weakened yen contributed to robust demand from foreign tourists visiting Japan. However, persistently high prices and supply restrictions stemming from Japan’s severe labor shortage posed concerns and impacted consumer sentiment.
Kose’s primary markets outside Japan are in Asia and the United States. In China, economic growth decelerated as the recovery lost momentum. The government implemented measures to bolster the economy, but growth rates declined due to weaknesses in the real estate sector and other factors. Meanwhile, economies in other Asian regions continued their path to recovery.
In regions, sales in Japan saw a significant increase of 16.4% from 2022 to 189.777 billion yen ($1.26 billion), driven by strong sales of high prestige products at department stores and specialty cosmetics stores, as well as major skincare and makeup brands at drug stores and other mass retail channels.
In the Asian market, sales in China recovered slowly during the first half of 2023 but weakened in the second half due to sluggish consumer spending and negative reactions to the Fukushima nuclear power plant’s treated wastewater. Offline sales, mainly in department stores, remained stable compared to 2022, while e-commerce sales experienced a significant decrease. Declines in distributor purchases in the travel retail sectors of China and South Korea led to a substantial sales downturn. Consequently, sales in Asia decreased by 34.7% from 2022 to 52.774 billion yen ($351.7 million). Notably, Asia was the only region in which the Kose recorded a decline.
In North America, Tarte maintained a strong presence in the prestige makeup market, with sales increasing in categories such as concealers, lips, and other major segments. The expansion of stores selling Tarte products contributed to sales growth, and the depreciation of the yen positively affected sales figures. Sales in North America grew by 27.5% from 2022 to 51.19 billion yen ($341.1 million). Kose stated that in the United States, the economy remained resilient, sustained by strong consumer spending despite concerns about the risks associated with high interest rates and inflation.
Other regions (including Europe) experienced a growth of 28.9% in sales from 2022 to 6.664 billion yen ($44.4 million).
Examining specific business segments, sales in the cosmetics business increased by 2.3% compared to 2022, reaching 240.45 billion yen ($1.6 billion), while the operating profit declined by 29.7% to 17.868 billion yen ($119.1 million). Sales of DECORTÉ, a major brand in the high prestige category, remained robust in Japan throughout 2023. However, total sales for this brand experienced a significant decline, primarily due to sluggish sales in the travel retail sectors of China and South Korea, along with the adverse effects of the slow economic recovery and intense competition in China. On the other hand, sales of other high prestige brands, including ALBION’s Elégance and JILL STUART, demonstrated growth. Tarte, which primarily operates in the United States and Europe, achieved record-high sales due to strong performance in major and new product categories.
In the cosmetaries business segment, sales increased by 10.4% from 2022 to 57.656 billion yen ($384.2 million), while the operating profit surged by 167.0% to 2.941 billion yen ($19.6 million). Visée, the MAKE KEEP Series, and brands under KOSÉ Cosmeport Corp., including CLEAR TURN, contributed to higher sales in this segment.
Looking forward, Kose has forecasted a 3.9% increase in sales, amounting to 312 billion yen ($2.08 billion). The sales projection considers the challenging sales environment in South Korea and the anticipation of a gradual recovery in China, particularly in the travel retail segment. Kose expects stronger sales growth in Japan and with Tarte, which primarily operates in the United States and Europe.
