Shiseido Co. Ltd. has encountered a significant setback, with its stock plummeting by as much as 16% on Thursday, the steepest decline in nearly 37 years. This downturn followed the company’s announcement of a first-half operating loss of ¥2.7 billion ($18.4 million), a stark contrast to the ¥13.6 billion profit reported in the previous year. This drastic shift has led to an unprecedented trading halt.

The main contributors to this disturbing trend include weak demand from China, a crucial market for the cosmetics industry, and production challenges within the United States. Shiseido faces ongoing struggles in restoring consumer confidence, particularly among Chinese buyers hesitant to purchase Japanese products due to lingering concerns over the Fukushima nuclear plant’s treated water discharge, which sparked a boycott in late 2023.

Additionally, Shiseido has initiated restructuring measures, including a ¥22 billion charge as part of its cost-cutting strategy, which entails offering early retirement to about 1,500 employees. Analysts like Shima Yamanaka from SMBC Nikko Securities emphasize the need for Shiseido to rethink its growth strategy, as the current profit loss has left a notably negative impression on investors.

In response to these challenges, Shiseido’s Chief Financial Officer, Ayako Hirofuji, indicated that a revised management strategy will be presented by the end of November. This proactive approach is essential for addressing the current crisis and regaining market trust. The future of Shiseido will depend heavily on its ability to innovate and adapt to an increasingly competitive landscape.