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Japan-Update

Shiseido to spend $2.8bn on capacity and tech upgrades

Japanese cosmetics maker aims to nearly double online share of sales in three years

Shiseido's capital investment plans include updates to retail counters.

TOKYO -- Shiseido is planning more than 300 billion yen ($2.83 billion) in capital expenditures through fiscal 2020, with a focus on increasing output capacity and internet sales.

The Japanese cosmetics company announced the outlays Monday as part of its medium-term plan. Supply capacity is not keeping up with demand, so resolving the situation is vital, President Masahiko Uotani told reporters.

The company's upscale products have gained popularity thanks to strong demand from foreign visitors to Japan. But output is not keeping pace.

Shiseido will set aside 130 billion yen to increase capacity. The company has already disclosed plans to spend a combined 95 billion yen to build factories in Tochigi and Osaka prefectures as soon as next year. It will add capacity at existing locations as well.

Another target is information technology, considering the sharp growth in online demand. Shiseido will earmark 27 billion yen for IT infrastructure to strengthen connections with major e-retailers around the world. The aim is to increase the online share of company sales to 15% in fiscal 2020, up from 8% in fiscal 2017.

Other capital expenditures will include 57 billion yen on retail store counters and 32 billion yen on a research and development site to open by the end of this year in Yokohama.

Shiseido also plans to spend 120 billion yen on marketing efforts, including advertising and sales promotion at retail stores.

The company's goal is to increase operating profit by 50% from fiscal 2017 levels to more than 120 billion yen in fiscal 2020. With an eye toward reducing its dependence on the Japanese and Chinese markets, Shiseido will strengthen its money-losing operations in the Americas by opening retail stores for the mainstay bareMinerals brand in the U.S. and stepping up online sales.

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