Shiseido swings to profit as Drunk Elephant sales slide 23%

Shiseido returned to profit in the third quarter of 2026, with net sales up 7% to ¥741.1 billion for the nine months to September. Core operating profit rose 124% to ¥67.5 billion from ¥30.1 billion a year earlier, lifting the group back into the black.

The recovery was led by skin care brand Clé de Peau Beauté and the group's own Shiseido label, alongside newer names such as Max Mara. The company also cited a new Total V Cream from the ELIXIR line among the launches helping momentum.

Core operating profit now represents 9.1% of net sales, up from 4.3% in the same period of 2025. Profit before tax came in at ¥65.3 billion, a sharp reversal from a ¥32.5 billion loss the year prior, while income tax expense rose to ¥21.2 billion.

The one brand going the wrong way is Drunk Elephant. The skin care label saw global sales fall 23% in the quarter, a steeper slide than the 14% decline recorded in Q2.

What the CFO said on the call

Chief financial officer Ayako Hirofuji addressed the gap on an investor call held on 10 November. "After a 3% decline in Q1, we recorded a 2% growth in Q2 and 3% in Q3," she said, adding the year-to-date figure had "a shift into positive territory."

Sales growth to date now stands at 1%. Hirofuji credited the core brands and the new Max Mara line, saying the group's "commitment to creating value through our innovation" was beginning to show up in the sales performance.

On Drunk Elephant specifically, Hirofuji was blunt. "Dr. Dennis Gross Skincare [and] Drunk Elephant recorded some severe underperformance. That is the detractor," she said. Weakness in US e-commerce dragged the label to low single-digit-to-mid-single-digit negative territory.

Drunk Elephant's reset has not yet worked

Drunk Elephant has been trying to reset since January 2026, when it unveiled a new campaign and brand direction aimed at shedding its association with the 2024 "Sephora Kids" furore.

That episode began in January 2024, when tweens crowded into US Sephora stores to try and buy products, the brand's high-active concentrate formulations among them. The fallout and identity crisis that followed produced multiple consecutive quarters of falling sales.

Those declines dragged down income at Shiseido along the way. Travel retail, by contrast, delivered a bumper quarter: net sales in that segment increased 1.2% to ¥268.5 billion, helped in part by advanced shipments ahead of an anticipated recovery.

Shiseido is a Japanese multinational in beauty and personal care, known for skincare, makeup and fragrance. Its results have been shaped by the retailer restructuring in Mainland China, which the company expects to ease gradually.

"While the recovery pace in travel retail and Mainland China is slower than anticipated, consumer purchases in Hainan Island continue to grow," Hirofuji said. She added that the business as a whole is on an improving trend.

The company said it would "continue to monitor in-store sales trends and flexibly control shipments accordingly." That points to a careful approach to inventory in China rather than a rapid restock after the advanced shipments.

Where Clé de Peau Beauté and the Shiseido mother brand are driving growth, Drunk Elephant is the largest drag the CFO named alongside Dr. Dennis Gross Skincare, and its reset campaign has yet to turn sales around in the US.

When we reported on Dolce & Gabbana Beauty planning up to 70 boutiques, it was a brand that had tripled turnover since leaving Shiseido. That history is a reminder of what the group has lost from its portfolio.

The group gave no date for a Drunk Elephant recovery and committed only to monitoring in-store trends and controlling shipments. Next quarter's figures will show whether the 23% decline has found a floor.

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Images: Shiseido