Shiseido : Transition to a “Company with Three Statutory Committees” Business Transformation Initiatives to Drive Profitability for Sustainable Growth

The Company operates its business by collaborating with various committees, including the Global Strategy Committee established for the purpose of facilitating discussions, making strategic decisions, and approving other important business decisions. In addition to these committees, we will establish the Global Transformation Committee chaired by the CEO in 2024 to clearly define the roles and responsibilities of each functional area while also "reinforcing the execution, oversight and monitoring functions" to deliver expected results from the business transformation. The Global Transformation Committee will be composed of nine task forces representing six regional headquarters (Japan, China, Asia Pacific, Americas, EMEA and Travel Retail) with addition of Global Headquarters, Supply Network and Marketing ＆ Innovation. All task forces will implement action plans to realize our dual ambitions: "driving gross profit" and "implementing extensive cost reduction measures and improving personnel productivity" while tracking progress toward achieving our targets.

(1) Gross Profit Enhancement
In addition to driving sales growth through brand value enhancement by leveraging our cutting- edge innovation, we will bring selection and concentration to the next level. Also, we will take bold steps in brand and product mix strategy focusing on gross profit while utterly committed to drive higher gross profit outpacing growth in sales by implementing competitive and appropriate pricing along with reduction of cost of goods sold through optimizing supply network efficiency.

(2) Extensive Cost Reduction and Improvement of Personnel Productivity
We will relaunch the "Global Cost Reduction Project (achieved reduction of 63.3 billion yen)" undertaken in 2015 until 2017. With an aim to optimize our cost structure in light of business divestitures during COVID-19, volatile market environment as well as our medium-to-long-term business outlook, we will embark on extensive cost reduction measures, targeting all possible areas without compromising on a global basis, including IT, logistics, procurement, offices, general expenses. With respect to marketing investments, we will increase profitability by, for example, leveraging consumer data to improve ROI.

In addition to the foregoing, we are also committed to reduce fixed cost ratio on a global basis which allows for greater flexibility in responding to changes in market environment to generate higher profits. With the completion of global ERP system (FOCUS) implementation and other digital transformation initiatives in 2024, we will significantly improve productivity across the middle and back offices while optimizing headcount on a global basis by dramatically increasing our e-commerce sales ratio.

We are strongly committed to enhance our profitability by driving gross profit and achieving cost reduction of over 40.0 billion yen in the next two years from 2024 to 2025. In the meanwhile, we will closely monitor changes in economic environment and reinvest profits in marketing as deemed appropriate in order to drive growth. We are fully committed to achieve profitability for sustainable growth and enhance corporate value over the medium-to-long-term.