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Kao targets 10% operating margin in cosmetics biz

TOKYO -- Japanese consumer products maker Kao aims to lift the operating margin of its cosmetics business to 10%, and operating profit there to more than 30 billion yen ($294 million), by fiscal 2020.

The business suffered losses until last fiscal year from a 2013 scandal surrounding a Kanebo brand product that caused skin discoloration. Kao seeks to improve profitability through Asian expansion for main brands.

Double-digit operating margins are common at cosmetics companies. Kao's 10% target falls short of the 14.2% projected by Kose for fiscal 2016 but exceeds the 3.5% forecast by Shiseido, which is restructuring.

The 30 billion yen profit goal is also a move to inch closer to Kose's 36 billion yen and Shiseido's 30 billion yen.

Kao will shoot for cosmetics sales of 300 billion yen in fiscal 2020, up from last year's 254.7 billion yen, the company told investors Monday. This year's changeover to international accounting standards will also likely help operating profit, since goodwill will not be amortized under those rules.

The company will draw a clear distinction between its Kanebo and Sofina brands as well as make changes in such operations as product development. It will also add more Kanebo and Kate Tokyo flagship stores in Asia.

(Nikkei)

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