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This is Michael Coombs, and I'd like to explain our financial results for the first quarter of fiscal 2020.
Please see Page 3 of the deck. Our net sales fell 16% to JPY 226.9 billion on a like-for-like FX-neutral basis, with all of our regions significantly impacted by COVID-19. Operating profit decreased by 83% to JPY 6.5 billion. While striving to adjust our cost base to protect profits, we were unable to make up for the full impact of the decline in gross profit.
Net profit attributable to owners of parent decreased by 95.8% to JPY 1.4 billion. This is mainly due to a decrease in operating profit and an increase in the effective tax rate, which I will describe in the following slide. Our EBITDA was JPY 24 billion, and the margin was 10.6%, maintaining double digit.
Slide 4 is a table summary of our P&L, and I'll move on to Slide 5 to explain the rise in our tax rate. On Slide 5, we explain the imbalance in tax rates between 9.9% in fiscal 2019 and 64% this year. In 2019, there was a positive tax effect from the recognition of losses due to a capital redemption in a U.S. subsidiary. Excluding this, the tax rate would have been 34%. In 2020, there are negative impacts from the nonrecoverability of deferred tax assets, stemming from the decline in taxable profit in Americas and EMEA as well as the tax treatment of unrealized profits on inventories in JGAAP.
Now let me move on to Slide 6, our sales by region. In Travel Retail, sales declined by 1.6% relatively mildly following strong momentum in January. All other regions experienced double-digit negative growth. In particular, almost half of the overall sales shortfall is from our Japan business.
On Slide 7, we illustrate the same sales but by brand. Prestige brands that are popular among Chinese consumers, mainly inbound tourists, dropped most significantly.
On Slide 8, we explain the state of our business operations. In China, stores, factories and logistics mostly resumed operations in February, and the business overall returned to normal in March. E-commerce remained solid throughout this period. In other regions, many retailers, except drug stores are closed or operating with shorter hours. Regarding production, our factories in Japan, Vietnam and Taiwan are in operation. The plants in France and the U.S. temporarily ceased operations, but those in France started to resume in late April, and will restart in mid-May in the U.S.
On Slide 9, we have the results by business segments. The Japanese cosmetics market remained sluggish. A sharp decline in the number of visitors in the Chinese New Year holiday season and the closure of major retail channels had a significant impact. Our consumer purchases also declined significantly, falling by over 20% year-on-year. Local sales were down by mid-teen percentage points. We discontinued placing samples at stores and have refrained from skin touch-up activities in order to prevent the spread of COVID-19 from the early stage, being unable to engage in the normal level of customer service. Inbound sales slowdown was intense with minus mid-40% average in the quarter and minus 60% after February.
Moving on to China on Slide 10. The impact of COVID-19 on our business first appeared in China. Most retail outlets reopened in March and consumer demand also recovered. Our consumer purchases outperformed the market average, with negative 20% in overall China and negative 14% when we exclude Hong Kong. Our e-commerce was strong, with growth of 25% leading the overall e-commerce ratio to the high-30 percentages. In particular, Prestige online sales grew strongly in promotions for Women's Day, up by 160% in the month of March. Prestige brands posted steady growth even in a challenging environment. And in April, Prestige growth returned to strong pre-COVID-19 levels, with e-commerce occupying an even greater share.
On to our Travel Retail business on Slide 11. As international flights were significantly curtailed, the market has been largely affected by the decrease of Chinese travelers. Under these circumstances, our consumer purchases fell by over 20%. In January, the growth momentum continued to exceed 20% in Asia, driven by strong demand in South Korea and China. However, from February onwards, inbound demand in the Japanese duty-free business declined sharply, and Asia also recorded significant negative growth due to the COVID-19 pandemic.
Next, our Americas business on Slide 12. Many stores have been closed since March, leading to a tough market situation. Despite this, skincare was relatively resilient, while makeup and fragrances were more severely impacted. The negative impact from the temporary shutdown of logistics and production in the latter half of March, was partially offset by the growth of Drunk Elephant and e-commerce, resulting in an overall 9% sales decline. On top of our continued efforts to strengthen e-commerce across a variety of brands, the addition of Drunk Elephant to our portfolio resulted in an overall U.S. e-commerce ratio exceeding 30% in this quarter. Consumer purchases for Drunk Elephant increased by 14%. Strong growth in e-commerce compensated for the slowdown in offline, enabling us to achieve overall positive growth.
Next is EMEA on Slide 13. In January, the momentum continued to be favorable with double-digit growth in sales due in part to Dolce & Gabbana's solid performance. The market sharply dropped due to lockdowns in March, and our sales in the United Kingdom, Spain and Italy suffered the most, resulting in negative 15%. Although the overall scale is not yet large, e-commerce is growing.
Moving on to Slide 14. In response to the rapid deterioration in the business environment and a decline in our sales, we revisited our cost base and activated various reduction initiatives. As a result, we managed to reduce our overall SG&A expenses by 7% or about JPY 13 billion when compared with our initial plan. However, this was not enough to offset the decline in our gross profit of about JPY 40 billion. And as a result, operating profit margin stood at 2.9%. The ratio to sales in all 4 major expense items increased due to a substantial decline in sales.
The COGS ratio rose 0.8 percentage points, excluding the impact of adopting ASC 606 in the Americas. Product mix deteriorated due to the decline in inbound sales, which has a large proportion of skincare, and the provision for inventory write-offs increased due to a decline in our sales. Marketing investment decreased by JPY 3.3 billion on an absolute value basis. As we consider this to be the biggest area for cost reduction in the current market situation, we managed to reduce by over 10% compared to our plan.
Personnel expenses decreased by JPY 3.9 billion due to partial freezing of recruitment and other people costs. Other SG&A decreased by JPY 2.3 billion through cutting back on various expenses. However, an increase in fixed costs, including goodwill amortization of Drunk Elephant, offset this, leading to an overall increase of JPY 0.4 billion.
On to Slide 15. We did not anticipate that the impact of COVID-19 would grow this rapidly on a global basis, and we have to say that the speed and scale of our cost reductions in the first quarter were insufficient. In order to secure profits for the current fiscal year, we're committed to strict cost control, accelerating a review of our overall cost structure. We'll continue to promote the various initiatives we've implemented in the first quarter. At the same time, we'll be taking further steps, including deprioritizing and halting some business development and center of excellence projects.
On to Slide 16, our cash flow and liquidity management. We believe that the management of cash flows and liquidity is more important than ever in the current extremely uncertain business environment. In terms of enhancing our on-hand liquidity, we've secured a further JPY 200 billion in funding through the addition of overdraft facilities and commitment lines. We've also reduced our capital expenditures by approximately JPY 40 billion or 28% from the originally planned level of JPY 145 billion. While ensuring that funds are allocated to essential investments for future growth, we've made decisions to cancel or postpone certain investments. We'll also continue to strengthen inventory management by reducing lead time and maintaining our focus on minimizing working capital.
On to Slide 17, our FY 2020 guidance. As we get information from various reports and analyze the situation through discussions with medical and epidemiological experts, it's extremely challenging for us today to foresee how and when this pandemic will end. We continue to face social restrictions resulting from lockdowns and stay-at-home policies, and there are still many uncertainties over government policies or time lines for the reopening of economic activities.
Under these circumstances, it's extremely difficult to assess economic trends, changes in consumer lifestyles and future trends in the beauty market as of today. Considering this, we concluded that we should withdraw our original full year 2020 guidance, including our dividend forecast. We plan to disclose our revised guidance in August at the time of our second quarter results announcement, once we have better visibility of the external environment and market trends.
And that's all from me.
[Interpreted] Good afternoon, ladies and gentlemen. This is Uotani. And reflecting the current environment, what are our initiatives? I would like to share our business management stance.
Many of you may be the same I am calling in from home, and am sending the message from my home. And maybe my dog may be barking, I apologize for that.
So I am going to talk about the business. The message I would like to send to you, we are facing a very challenging situation in the world and good to see beauty company like us, how shall we be? Our mission -- based on our mission, we would like to prioritize contributing to the society. And first -- so cosmetics is alcohol as well. So we were thinking whether we can manufacture alcoholic sanitizers. And we did not have a designated quality drug, but we have received approval for that, and we started manufacturing. We're doing the same in Americas and EMEA, and we are manufacturing 40 -- 400,000 bottles a month, and we are providing this to Japan Medical Doctors Association as well. And we are taking initiatives in other countries as well, and we are providing donation and relief supplies.
And also in Japan, looking at the consumers, they are very much restricted. They are staying at home, they're wearing masks. And against this backdrop, beauty [ value ], this is sought after by consumers. Wearing facial masks, how should they wear makeup? They want to emphasize their eyes more while they're in masks, makes your skin red and how should they treat their skin? What should be the skincare? This is not really the business itself, but this is a social contribution. And on top of that, we have issued tabloid beauty magazine over 10 million copies. We have beauty advice through social media. We have campaigns together with Matsumoto Kiyoshi, for example, which started today. We are sending such message to consumers, and we provide cosmetics, which is beauty solution.
And going on to the next page. As I mentioned earlier, relay of love project in China. We are going to start this on a full-pledged basis. We have already made donation worth JPY 150 million, and it is appreciated. But from here on, the Chinese -- China society will start to recover fully from now. We are going to launch Beauty Caravan in major cities. And the source will be coming from the sales in Asia, 1%, so roughly JPY 1.6 billion. We would like to use such funds, 1% of the sales, to contribute to the Chinese market.
We are taking such initiatives. And as business, what is our business stance? You probably know very well already, but based on the current environment, I would like to talk about this.
First, in simple words, COVID-19, how long would it last? How would it devolve? So solution to the pandemic, the vaccine is being developed, it will take time. Drugs are being approved finally. And once the herd immunity is established, things can start to improve. We're getting a lot of information from experts.
And also recovery of the economic activities, social activities, how will they start? Emergency declaration in Japan. There's a discussion lifting it, and that's what's happening in other areas like India, Americas. But it will take for the economy to recover. And as a result, the GDP is expected to drop. And consumer trend is very challenging. And every country's economic support will start to be full-fledged. And with these consumers' changes, new normal is the word that's often used, the values, purchasing behaviors, lots of change and social distance. So isolating yourself from the society and spending your daily life and changing in the way people work. Well, it happened as well. In the beauty category, there's impact on how you sell as well.
From this perspective, we have created 2 scenarios. One is -- so with the impact coming from the recovery matters, one of the scenario is that we will be able to recover early in 2021. The other scenario is, it wouldn't be so simple. It's a very big recession, and it will take 2 or 3 years. And for the full recovery, it will take 2023. And this is the worst scenario. And of course, neutral scenario, it's ideal to be able to recover early. But we can think of this as a good opportunity. And based on the worst-case scenario, for the coming 3 years, we would like to fundamentally review our business.
On next page. Up until now, legacy challenges, we would like to boldly take measures to restructure the business. 2020 -- fiscal 2020, as was mentioned earlier, we would like to manage cost fully and defend business. And China market, already in March, April, it has grown significantly. And we would like to continue to make investments, strategic investments to capture the opportunities. And the 3-year plan, 2020 -- VISION 2020 -- 2023, we would like to -- we were thinking of extension on VISION 2020. But we would like to start from a scratch to build -- rebuild the strategy. And based on this, 2021, 2022, we would like to go through various structural reforms, make investments in China to build a resilient revenue base. And we would like to realize the new vision in 2023.
And next page. This is our vision for 2023. We are a global company. We'd like to build a strong revenue base and foundation for growth. And the important points are: we would like to aim for global level productivity right now compared to global peers. Unfortunately, Shiseido's productivity is low. But for the future, we cannot [indiscernible] as is.
And also, cash is everything. We are really seeing that we would like to increase our profitability. Of course, P&L is important, but cash is the most important. Therefore, we have reviewed that capital investments fully. And we do not have the intention to stop the building of new factories, but we will make decisions to stop and suspend or postpone the capital investments that are not necessary, urgent, and we will divest assets that we can to build a strong revenue base.
And looking at the people's movements in the world, SDGs ESGs are important. That's the same body how the society should be. And in cosmetics world, clean category, consumer needs and values are becoming stronger. And we need to put this in the core. And also, this may make an overlap, but taking this opportunity, business and brand portfolio, we would like to restructure this proactively, how the business is, how the brand is and how the regional strategies are. There are differences. Some are profitable, some not. I'm not sure if we should leave business and divest noncore businesses, we would like to proceed with this as well. And strategic M&As should be performed.
As Mr. Coombs-san explained earlier 3 major category: like skincare, makeup, fragrance. And these are our portfolio the significance of skincare, this is very big. We were able to recognize this. This is Shiseido's strength as well, and it's profitable as well. Highly profitable. So we would like to enhance the skincare category going forward.
And [ DX ]. So digital transformation and business models. China's recovery started in March, and the new impressive model started. That is people working in department stores are beauty consultants at department stores. They are like KOLs and they're sending that messages online. And to make the consumers purchase at the department stores' counter and live streaming was done, they have contributed to this. And beauty consultants are being trained in Japan. We're trying to do the same, and this is omnichannel -- online, offline are merged, integrated. This is a new trend we're seeing in Alibaba's initiatives. We would like to enhance more in beauty tech personalization. Without contacting people, various services can be received, purchases can be done.
We would like to shift our movements more towards this. And if this is how the situation would be, open innovation. Instead of doing everything on our own alone to diversify risks and also to create value, collaborating with other companies could be done in, for example, separating R&D. And it is open innovation, and we can collaborate with other companies, and we can share the costs together. We would like to be proactive in taking such measures.
Last of all, looking at company, basically, we are not just in Japan, in EMEA, Americas. We want to secure employment. And we go into beauty. We are not going to take actions such as a layoff in a short period of time. We want to secure employment from employees all around the world. They are appreciating this initiative very much. And when the business recovers, we have very great power to utilize.
And in terms of working style, consumers new style living as well as working style. We started remote working from February 26. For example, meetings. Well before, people used to gather in both meetings, but only relevant people could attend, and concise and efficient work can be done. I think we can do this global conferences, as long as times suggested, we can hold meetings online.
But on the other hand, face-to-face meetings, meeting other people, seeing other people's faces, such an emotion should be felt. And they want to work that way some, people are saying. We want to diversify the way we work. Diversity, which we have been engaged in from before and gender as well. Not only that, people from various countries, various ways of working diversity, we want to enhance this, to be able to build resilient company.
And the last page shows in this very challenging situation, and looking at the forecast for this fiscal year, I apologize, we cannot come up with a forecast guidance right now. We want to overcome this kind of situation now, and we want to become a very strong global winner with our heritage for the coming 3 years. We want to have this in our minds all the time. And thank you very much.
Now we'd like to start the Q&A session. Daiwa Securities, Katsuro Hirozumi, please.
I'm Hirozumi from Daiwa Securities. I have 2 questions, right? In the document, VISION -- Page 22, starting from scratch in 3 years. So you'll start a structural reform, the fundamental reform. Is that what you meant?
[Interpreted] Michael, please?
Well; we won't -- well, obviously we'll be starting from scratch. But when we talk about fundamental reforms, we want to ensure that the recovery in China serves as a real engine of our growth. There are clearly structural reforms that we do need to undertake. And I believe that COVID-19 has provided us with a renewed impetus to do those.
However, in terms of immediate actions that we can take there are a number of cost management measures that we are implementing, as I speak. We are also, of course, working to ensure that we invest appropriately behind the recovery of China, which is happening right now. And as we do that in parallel, of course, formulating our overall new vision.
[Interpreted ] Up until now the reform we have been undergoing, it's not that we feel that it was mistake. Everything -- things are going well. For example, Prestige area, high-value area, brand -- enhancing brands. We don't have the intention to change this. But looking at the contents, our vision of becoming a integrated company, we have fragrance and others as well, and with the trigger of what is happening. Looking at the market and the consumers importance of skincare market, the assets of Shiseido, we will be able to utilize that, I think, more. We feel the potential.
And in that sense, in the coming 3 years, for example, enhancing skin care category more, more than we had expected or planned before. Such a strategy change. We want to enhance this. So this is what we want to do. China market, of course, remains to be important.
Also, PL was mentioned and the first quarter was very abnormal this year. But looking at the business structure itself, our company has high SG&A ratio. When I joined 5 to 6 years ago, it was very high and it's gone down now. And looking at other mass business company, it's 40% plus or so. And we don't have the intention to lower it that much. But looking at our business, B2C sales approach, if you utilize this more, SG&A ratio, maybe HR cost can be -- ratio can be reduced more. And this is a challenge that we had recognized.
But we would like to proceed with this more, taking this opportunity. Drunk Elephant was mentioned earlier. And America, there was a lockdown and there's nobody in the town. But more than 50% our website and dot com, we were able to sell and when a contents are created, and I'm a member. So I receive messages every time. Timely contents are provided to enhance the ramp. That's what they're doing, and they're growing double digits. Want to take such initiatives more, and we would like to rebuild the structure.
[Interpreted] So this will be my last question, I think other people want to ask. E-commerce, in Japan and specialty store channel, what -- how are you going to address them? That's my last question.
[Interpreted] Consumers are becoming diversified, especially in Japan, middle to elderly aged persons. The market is clearly very big still, and specialty stores. The environment we want to capture the local customers and grow. And there are specialty stores, cosmetic specialty stores, that want to do cosmetics.
And under the new environment, how can we grow more with collaboration? We need to identify that. We want to identify that. It's not 0 or nothing or 1, 0 or 1 world.
And on the other hand, our market drugstores, JMS, personal care category, the competition is pretty severe. Haircare is a spread ocean, big players are there, cost competition is very severe. It's hard to win. The priority needs to be lowered in such an area, clearly, and we would like to rebuild these initiatives in Japan.
And I am also in charge of Japan region business, and we are holding bold discussions about this. Thank you very much.
Goldman Sachs, Yamaguch-san, please.
[Interpreted] I'm Yamaguchi. My first question fundamental, structural reform restructuring. This is currently most applicable to EMEA business profitability improvement. Please tell me very specifically and more about the commitment the channel is changing, market is changing, maybe fragrance is the core. And there's disruptive initiatives required. But for this fiscal year or next year, what kind of specific measures are you thinking about? I would like to ask Mr. Uotani.
[Interpreted] In your question, you are probably thinking about something, which I probably want to proceed with. We were probably thinking on the same thing. Looking at EMEA, Americas market, especially Americas market, the challenges we're facing, as I mentioned, is brick-and-mortar department stores or other purpose. And we were doing business mainly there. And retail margin is very high, because prestigious products are sold. So even with a similar progress, compared to Europe, Americas, the category margins are lower.
And against this backdrop, the makeup is one of the characteristics of American market. There are new products born, created. And Shiseido is, from a perspective, a comprehensive beauty company. And licensed the products and at the right way. We have acquired a company, Drunk Elephant and skincare is very strong, the way they do sales. Without much intermediary cost, the profitability is high. There are a lot of learnings from this. And this is a delicate discussion. It's hard for me to say specifically, but our -- the business size in Americas, EMEA and how much they can grow potentially going forward. Well, fixed cost is high. And this is a major tackle.
But having said that, Americas, especially, IT -- innovations in IT are happening. And if you look at them -- themselves, they are shown as costs. But we should think about this separately for the whole world as a part of that R&D. Then we should look at it from a different perspective, from the perspective of profitability. And I would like to stop here today at this level.
[Interpreted] Earlier, you talked about securing employment. And the number -- or securing salaries as well. And fixed costs. I think the big portion of that is labor costs. But other than that, what other costs can you reduce? And what -- when would we be able to see that?
[Interpreted] One thing I can say is securing employment. For this year, under current environment that the world is suffering and our business management stance is we want to attach importance to people, and that's why we're seeing this. When the industry start to recovery -- recover and when there's more flexibilities, maybe we can think differently. But fundamentally -- strategically, fundamental review of the portfolio, we want to do this, I said. And the business divestiture can lead to a reduction in fixed costs. This is one perspective.
And also, another point is that our business, looking at it from the top to bottom, cost of goods, how to manage COGS? This is very important. Cosmetics business is a high-margin business, high gross margin business. We want to make improvements step by step. So this is a transformation in supply chain. Supply chain has economies of scale. For example, in Japan, in beer industry, they have joint distribution ourselves, not on our own alone, together with other companies, or with a third-party you can partner more. The purchasing logistics, we can review this as well.
And when this will become visible, is your second question. Originally, '23 plan, we were planning to create the statement this year. But we would like to reflect all of these things this year or at the beginning of next year, we would like to develop a new 3-year plan. That's all for me.
[Interpreted] And the second question is related to China. So there are different numbers for selling and customer purchase. In the first quarter, China, Mainland and Hong Kong, how are they? And Prestige in China, it grew, I think it said so in the document. But Mainland China, per price category growth rate, how were the growth rates per category in China. And how is the recovery in March and April?
[Interpreted] Michael, please.
Let me see if I can address that in a reasonably concise way. Overall, China consumer purchases dropped by 20% in the quarter, whereas external sales were only down 12%. And I think that's the question. The biggest part of the reason for the drop in consumer purchases was really the impact of Hong Kong as well as our AUPRES business in China.
We did accelerate shipments in March, mainly on Prestige brands because of, as we know, we had Women's Day on the 8th of March and also preparing for the April recovery. So that's one of the reasons why our external sales were ahead of consumer purchases in the month of March specifically. We did give some numbers earlier for the recovery that we were seeing. And specifically, in March, you might remember, I said that our online Prestige had grown by more than 160%.
What we're seeing in April, as I said earlier, is a return to pre-COVID growth rates with -- especially on Prestige, with growth rates in excess of 40%. So that puts us back in a very good position as we really solidify the recovery.
[Interpreted] Next from Jefferies, Miyasako-san, please.
[Interpreted] I'm Miyasako from Jefferies. Japan, first, there's several digit negative growth in Japan, how much was it? And your sales dropped bigger compared to the market, especially the premium dropped significantly. Can you explain about this?
[Interpreted] Michael, please.
Specifically with regard to Japan and the market, overall the market dropped by low teens in the quarter. Our consumer purchases were down by just over 20% in the first 3 months of the year. When we go into the details of that, it's really a story of 2 different movements. One is, of course, local consumers and the impact from their drop. And then a much bigger impact in percentage terms from the decrease in the number of inbound shoppers.
So the biggest impact for us, across our business in total, really, we had a huge impact from the overall decrease in Chinese shoppers. But in our Japan business, particularly the deterioration was especially significant. As I showed on the earlier page -- I'll just let the interpreter do that first piece.
When we look at the total amount that we lost from our Japan business in the first quarter, around 2/3 of that loss was lost because of local shoppers, and approximately 1/3 was because of the decrease in inbound. So a significant impact from that.
[Interpreted] And I would like to supplement. Premium drugstore, as you pointed out, fell significantly. One of the reasons is ANESSA. People are not going outside and therefore, sun care was impacted significantly. This is the case in Japan as well as China. And China, Hong Kong was asked earlier. Looking at the Chinese market, Prestige is recovering significantly at a high pace, going back to pre-COVID-19. And cosmetics sun care, it's still challenging because people are not going out. People are wearing facial masks. Various factors exist. And therefore, drugstore channel, premium, so these are the reasons why they fell. But now the weather is very good, and when people are able to go out after restart, we believe this will recover. That's all from me.
[Interpreted] And then more than the market, your -- you fell, and this is because of the higher weight of inbound and also the sun care. Are there some reasons for the bigger drop compared to the market?
[Interpreted] That alone is not enough I think, but that's what you're seeing. Well, we can look into the details of the brand. But overall, the basis is that the inbound ratio in drugstore is very high as well, and that fell.
[Interpreted] I see. And also, in Q2, sales operating profit, how should I expect that. In sales, in China, you explained about that. But can you explain about other areas roughly as well?
I can give a very quick update of our business in the month of April by covering a few of our regions.
In Japan, the month of April was particularly severe, and we think that the local sales will probably be worse than Q1, especially as we look at preliminary data for department stores. It's quite possible that the data for inbound sales will be very close to 0. Let's say Japan...
I think I covered China earlier with Yamaguchi-san's question, so I'll talk about Asia Pacific, where we're seeing some good signs of recovery in Taiwan. In Korea, we continue to feel the boycott effect as well as some COVID-19 impact.
And then in Europe and the Americas, I'm talking specifically about April rather than the second quarter, but we had a number of logistics operations that had stopped due to lockdowns, and that obviously had some business impact as well.
And then lastly, in terms of our Travel Retail business, the number of flights worldwide are down so significantly, and the number of Chinese tourists continue to be down. And we expect that to further worsen from Q1. So Travel Retail for the month of April is also going to have some fairly tough results.
We're obviously hoping for some recovery in May and June, but I'm not able to really give any perspective on those 2 months. So really, everything I said was for the month of April. We are not able to give a perspective on what the quarter will look like at this stage.
[Interpreted] Sales op for the Q2, how do you expect the sales to be in this Q2? Can you explain.
[Interpreted] Next, Mitsubishi UFJ Morgan Stanley, Sato-san, please.
[Interpreted] This is Sato. We also like to ask, not about the short term, but rather about the new opportunities that Mr. Uotani is thinking about, it depends on the timing, but how things will recover?
So I think this is very important in a long-term perspective. For example, in the midterm, lifestyle changes, and then makeup. Well, I think the mid-term growth will change as well. And maybe cost and plan will come ahead. But when we think about the sales growth model, of course, skincare is okay but skincare, makeup, fragrance. Other than that as well, other peripheral beauty categories, do you need to add any other categories? Or you still have the sales channel already, which D2C is a case in point. But also, do you need to add another new business model?
I think if you potentially think about those things, for example, what's our consent is beauty supplements. Do you have such ideas of doing that? Or do you have any plans? Are you going to review that as well? And for the time being divestiture comes first, how is your plan?
It's both. This is a question for Mr. Uotani.
[Interpreted] So we are not just a beauty company, but health and beauty. Looking at the current environment, they're highly relevant. And in that sense, Shiseido, shall we stay in just the cosmetics area, or shall we look at a broader perspective going to relevant categories? Well, there are various categories that are related. Those supplements, especially in western [indiscernible] holistic, so inside and outside as well. And this time, immunity -- immune cosmetics like Ultimune. So based on science, beauty category.
We'd like to broaden our categories like this. It's difficult for me to mention anything else, but we are cooperating with other companies. We want to broaden our domain. And as was mentioned earlier, we want to enhance the skincare acquisition.
And also as for the sales model, even without COVID, sales approach, service approach to consumers will be diversified using technology as well. And we have technology. And taking this opportunity we would like to accelerate, to diversify and broaden. We like to avoid a situation to depend on specific categories only because it makes us vulnerable. So we want to not depend on single, but broaden the areas. But that requires investment. And investment was mentioned earlier, we need to manage cash. And in order to generate cash, divest noncore businesses, for example, and make sure that we will be able to spend cash as needed.
[Interpreted] My second question. So in short period of time, in 1 or 2 years' time, this is high level. But for example, business trips will firmly decline. Over time, costs will go down as well. There are various cost reductions, but how much of the current fixed cost, how much would you like to reduce at a level in the 1 or 2 years' time, including divestiture and without divestiture as well? So do you have any rough estimates as of now?
[Interpreted] So numerically, I would like to refrain from talking about numbers now. But for example, looking at the past, well, I'd like to talk about the developments. 2014 P&L, back then, cost of goods, which is the top, it was worse than now. And we are -- have made a lot of improvements here. And marketing, as you know, it was underinvested. We have increased that to 15% to 16%. We don't need to make that 30%, 35% now.
Other costs in general, HR cost, fixed cost, I myself believe only a few percent can be cut here. So without this, we will not be able to achieve 15% margin, which is our vision. So which area and how much percent we plan to reduce, we're not at that stage to talk about that yet, but a few percent reduction or rather, the ratio should be dropped. And without that, we will not be able to achieve the [indiscernible].
[Interpreted] So you are going to target that and divest. You'll be selecting what to divest based on this, right?
Yes.
[Interpreted] Almost time. I would like accommodate the last question JPMorgan, with Tsunoda-san, please.
[Interpreted] I'm Tsunoda. It's already [indiscernible] minute past. I'm going to ask about China January to March, China Mainland only, excluding Hong Kong. China Mainland premium cosmetics growth rate from January to March, can you tell me that? And also, your company's Q1 global e-commerce ratio and the growth rate. And also the premium ratio and the growth rate, can you share those, please.
Tsunoda-san, I'll give you a few data points for Q1. The first point I'll highlight is the growth in our overall e-commerce, where our e-commerce ratio in China went from low 20% to the high 30% within this quarter compared to last year. That's why our -- for our overall business, when we look at Prestige itself, for the quarter, in aggregate, our Prestige business in China grew by 5%.
But within that number, e-commerce grew by more than 100%. So it's important to note that what held it back was the brick-and-mortar. And then as I mentioned earlier, we saw a significant acceleration in April back to the pre-COVID levels, specifically on Prestige.
Michael, my first question is with regards to your premium category in China for the first quarter. Premium, not Prestige.
Do we have premium for China? The categories that we look at the market in, in terms of -- we're just looking to see whether we specifically have premium because I -- my breakdown is more Prestige, cosmetics and personal care. We're just pulling that number Tsunoda-san, if you could bear with me.
Yes. We do only, at this point, we have Prestige, cosmetics and personal care for China. We don't have a premium number to share with you
[Interpreted] I cannot share the specific numbers with you now, but premium for us in China, premium -- Japanese brands ELIXIR and ANESSA, these are the biggest brands. And in China local, AUPRES is also positioned as premium. And these categories are more challenging, much more challenging compared to Prestige. ANESSA, especially people are not going up now, and therefore, there is a very big plummet. Category in January to March was plummeting. And you talked about EC globally, been around 10%. China is high. Therefore, the average is pushed up. Japan is low, including Americas, EMEA, around 10% it used to be. But now it's mid-teens. And with this trend by the end of 2020, it will probably account for around 20% of the overall sales globally.
[Interpreted] You're talking about the EC ratio, right?
[Interpreted] Yes. E-commerce ratio, and luxury part.
[Interpreted] The ratio of the company and the growth rate in March period. How was it?
[Interpreted] Prestige -- you mean the makeup and Prestige, collectively?
[Interpreted] Yes. Growth rate and the percentage.
[Interpreted] In numbers?
[Interpreted] I don't [indiscernible] numbers, but your -- Americas, they only have Prestige only and they have dropped, and there's a shutdown and there is significant impact, especially in March. And depending if there's very -- it's very different ups and downs.
[Interpreted] And -- oh, I would like to confirm that before giving you the answer.
[Interpreted] The reason why I'm asking is because when we compare globally, the profit decline compared to the sales decline is faster, much faster. I'm concerned about this. Premium or Prestige is performing strongly. But overall, there are some brands that are not so strong. And the performance was as it is now. And that's something you can change rapidly, you're going to go through transformation. But 2023 in the coming 3 years, is going to take time?
Well, before, sales growth. You talked about sales growth very much before. But now, rather, you want to restructure to enhance resilience of the performance. That's shifting your focus. I would like to confirm this, Mr. Uotani.
[Interpreted] Two points. First, looking at the first quarter, 17% decline in sales and OP declined more than 8%. Wanted to control this by a few billion of yen more, so gross profit declined by JPY 40 billion or so. And it was more than JPY 10 billion or so. So we were able to reduce only by JPY 7 billion on our own. And Prestige fell Shiseido, [indiscernible] China market. And they are the reasons. Consumers in China, they are not going out, they did not spend, they did not buy. So this is the reason, exactly the reason.
But when things like that happen, what we reflect on is that expanding this COVID strain, starting from China to Japan and other areas, EMEA, Americas, when it happened -- when this happened, it started in China, we should have controlled the costs in each of the markets much faster. And we were behind in doing this. Especially in Japan, we had purchased media so we cannot cancel in Japan. We believe we need to be more agile in addressing such a change.
And the second point, we will go through the restructuring, taking time. But it's not that -- well, I mentioned that we would like to go through the fundamental reform based on worst case. But it may sound like our sales, the profit growth we're going to back out from that. You might think that, but that's not what it is. There are 2 -- 2 challenges in Shiseido, big challenges. One is growth. Before VISION 2020, we want to grow the top line with 8% growth. Also, invest more. This model, it's not that I'm denying this at all. 8%, maybe a bit lower, but -- and the second challenge, big challenge we're facing, is the profitability or productivity. I think we can say it that way.
For this cost, what is the value of the return? Again, it's very low. We need to improve this. Otherwise, we cannot have resilience. We need to take that into corporation to change 2021 and 2022. Well, unfortunately, this year is like this. I'm not going to give up on the OP margin, we have mentioned before. And resilience has many perspectives. And as was asked before, diversity to be able to bear various changes, broadness of the portfolio, the organizational capabilities, we need to enhance them at the same time. Otherwise, it will impact the growth after 2023. Please understand it that way.
[Interpreted] I see. And therefore, you will not be canceling the building of factories. That's where your comment came from.
[Interpreted] Yes, exactly.
[Interpreted] I think I have received other questions, but it's already time to finish. We would like to close the Q&A session. And last of all, I would like to ask a word from Mr. Uotani.
[Interpreted] Well, this is not expected, but the world is full of these unexpected things. I'd like to give a word as a closing. Mutual scenario closures will be released and lifted one after another, and stores will be operating on a full-fledged basis in Americas, EMEA and Japan as well, department stores will start to open. And in the second half, we would like to be able to recover. In 2024, we would like to get back on the recovery trend. Various marketing initiatives are planned, and that will be carried out. And that's neutral. But plan B, by planning for plan B, taking this opportunity, the world after 2021 will contribute to making Shiseido stronger.
So it's not that we do one or the other, but we want to do both of these scenarios. And we want to be resolute for carrying this out. And this closes the telephone conference. Thank you very much.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]