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Japan's Kose seen with 10% profit gain on sales to tourists

U.S. brand Tarte, which Kose acquired in 2014, performed well.

TOKYO -- Kose's group operating profit likely grew 10% on the year in the April-September half on healthy sales of high-end cosmetics to visitors from outside Japan.

The Japanese cosmetics maker apparently logged around 20 billion yen ($192 million) in profit, beating the 18.3 billion yen estimate and setting a first-half record. Sales are seen rising 10% to almost 130 billion yen, exceeding the forecast of 7% growth to 124 billion yen.

High-end brands such as Cosme Decorte and Jill Stuart performed well, as did subsidiary Albion. Demand was brisk for high-margin skin care products and makeup sold at department stores and specialty outlets.

Sales to foreign tourists in Japan apparently underpinned profit. Growth in this area was slower than in 2014 and 2015, but demand for pricey cosmetics bought in bulk remained strong. The consumable nature of cosmetics, which typically last around three months or so, has led to repeat buying on subsequent visits to the country. There is also apparently a strong business buying up Kose products in Japan for resale in China.

U.S. brand Tarte, which Kose acquired in 2014, performed well in the half. Awareness of the brand is growing, and same-store sales are on the rise. The products are also at more branches of chains such as makeup seller Sephora. Revenue gains have helped make the business more viable, offsetting the impact of a stronger yen and goodwill amortization.

Kose's sales to South Korean duty-free shops climbed as well.

The cosmetics maker could upgrade earnings estimates for the year ending March 2017 in light of the better-than-projected first half. At the end of July, sales for the fiscal year were seen growing 4% to 254 billion yen, with operating profit expected to climb 4% to a record 36 billion yen. But the company plans to spend more on marketing in the second half, and seems to have conservative expectations for overseas visitor demand.


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