UBS Japan Cosmetics: Inbound Traffic Still Weak, While Premium Spending Holds Up
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UBS reviews Japan's cosmetics industry against persistently weak inbound tourism. Chinese visitor arrivals fell 54.6% year over year in Q1 2026, 58.2% in Q2 and 57.5% in July–August, yet resilient premium demand and higher spend per customer supported duty-free sales, up 5.7% year over year in the first eight months. August duty-free sales grew 4.6% despite a 9.5% drop in buyers, as spend per customer climbed 15.5%; Q2 cosmetics and fragrance spend per customer rose 1.9%, with Chinese visitors up 31.6%. Department store cosmetics sales reached ¥330.8 billion in the first eight months, up 0.4%, improving from -4.6% in Q1 to +3.2% in Q2 and accelerating to +4.8% in July–August. In China, September online beauty sales fell 17% month over month on pre-Double 11 purchase deferrals, though premium brands should keep outperforming. Hainan and Korean duty-free sales rose 4.3% and 4.6% respectively in July–August. UBS keeps Shiseido (4911.T) at Neutral, with the shares last closing at ¥3,286, watching its Double 11 performance and travel-retail recovery. Q3 travel retail is expected to improve on strengthening airport channel momentum; key risks include weaker-than-expected inbound demand, soft premium beauty spending and intensified competition.
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