"What is beauty?" "What does Shiseido mean to you?"

When I became CEO in January 2025, I posed these questions to every employee. These questions stemmed from a challenge I had come to recognize during my two years as President and COO: while navigating external environmental changes, I realized important issues to be tackled lies internally-our inability to fully adapt to evolving market conditions. Shiseido has repeatedly overcome external challenges throughout its 150 years of history. In a highly volatile external environment of today, it is more important than ever to reaffirm our corporate mission, BEAUTY INNOVATIONS FOR A BETTER WORLD, and to ask ourselves how our business can contribute to society. I wanted to revisit our approach towards value creation and share this pursuit with our employees.

My vision for Shiseido is to create value that touches hearts and enriches lives. Beauty has the power to uplift spirits and spread kindness. The beauty of cosmetics is its ability to inspire confidence and positivity. We believe in the power of beauty that creates value to enrich our lives and will stay committed to creating social and economic values by delivering high-added-value products and services. While AI and other technological advancements make imitations easier than ever, we must establish our own unique way of value creation, driving high-added-values that reflect our ultimate core values.

We strive to create unparalleled value that nourishes people’s lives and society by combining our unique knowledge and technology that encompass skin, body and mind with aesthetic values and culture that have been cultivated throughout our history.

Towards 2030, Shiseido aims to create value for a sustainable society where everyone can enjoy a lifetime of happiness through the power of beauty.

We are committed to fostering a diverse and inclusive society where every individual feels respected and empowered, while ensuring that beauty coexists harmoniously with nature.

Shiseido has long embraced a "PEOPLE FIRST" philosophy, fostering an inclusive environment where employees—the source of our value creation—can thrive and bring their diverse backgrounds to work. The key to unlocking their potential and driving transformation lies in Diversity, Equity & Inclusion (DE&I). In today's uncertain business environment, continuous value creation depends on embracing different perspectives. At Shiseido, we embrace DE&I as a powerful asset and take on the responsibility to drive change in Japan. We launched the Shiseido DE&I Lab, which explores the relationship between diversity and corporate value. Our goal is not only to drive internal changes but also to share our insights with society, paving the way for broader transformation.

We are also committed to leading the industry in sustainability. By leveraging our culture and technology, we aim to inspire behavioral shifts among consumers. For instance, our revolutionary "Sun Dual Care" technology goes beyond UV protection—it converts sunlight into light that is beneficial to the skin, embodying coexistence with nature. We have also partnered with JFA to provide sun care education for children in Asia, helping them understand the benefits of sunlight for their physical and mental well-being.

To ensure sustainable growth, we must confront the challenges of today's business environment and implement fundamental solutions to shape the society we aspire to create. While we are making solid progress in our ongoing structural reforms, core operating profit declined for a second consecutive year in 2024, and our net profit turned negative. Free cash flow was also negative, forcing us to make the difficult decision to reduce dividends. While the post-pandemic market directly impacted our performance, the fundamental issue lies in our organization's inability to respond effectively to external changes.

In terms of the business structure, it is essential to establish a well-balanced regional mix for both sales and profits. Over the past two years since 2023, the lackluster performance of our China and Travel Retail Businesses has significantly impacted overall business. This is due to an imbalanced portfolio with a high reliance on Chinese consumer demand and lower profitability in other regions.

In terms of profit structure, heavy fixed costs pose a major challenge. A cost structure where profitability is highly sensitive to sales fluctuations poses risks in an ever-changing market. Addressing this is an urgent priority for long-term financial stability.

In future planning, we will shift our focus from market growth and sales expansion to more agile approach that allows us to make strategic adjustments by reviewing our business plans according to the changes in market conditions in order to ensure consistent profitability.

The structural reforms in the Japan Business to tackle these underlying challenges have delivered tangible results. Since 2024, as Japan Region CEO, I have also been more engaged in the field, focusing on our business transformation plan: "Mirai Shift NIPPON 2025." In 2024, our key brands and hero products saw significant growth through our selection and concentration strategy, driving overall revenue growth of approximately 10%. Additionally, we improved gross profit margins through a better product mix and cost savings from structural reforms. These reforms included optimized operations, reduced indirect expenses, and an early retirement incentive plan for approximately 1,500 employees. As a result, we achieved a significant year-on-year increase in core operating profit of over 25 billion yen, with the margin recovering back to approximately 10%.

The key to this success was strategic resource allocation. This meant deciding what to stop doing. As a result, we have been able to streamline our processes and organization, clarify priorities at the frontline, and evolve the business so that each employee's actions now directly contribute more effectively to our profit. In our communications with employees, we stressed the importance of having a healthy sense of urgency.

I believe that this driving force of transformation only emerged because employees themselves dared to challenge the status quo.

In addition, we have continued to reorganize our China Business by closing unprofitable stores and optimizing our human resource allocation. We are transitioning to a profit model that remains resilient against external factors, allowing us to achieve profit growth even in the face of declining revenue due to the challenging conditions in 2024.

With these insights, we have developed the "Action Plan 2025-2026," which aims to complete structural reforms and build a resilient business model that can achieve stable profit growth amid market volatility over the next two years—no matter what it takes. Our strategy is anchored on two key pillars: reinforcing our brands and rebuilding a profitable foundation. To support this, we will further enhance operational governance, including financial and management capabilities.

When I first joined Shiseido, the workplace was incredibly free-spirited. Senior colleagues were constantly exploring new ideas, asking how they could delight consumers or make things more exciting, fostering an environment where bold, innovative ideas were brought to life. I am committed to upholding our spirit of daring to share the ideas that inspire us.

We believe in recognizing true beauty for what it is and in continuing to share bold, inspiring ideas with the world and nourishing society.

As CEO, I will lead with conviction, driving a two-year period of intensive reforms from 2025 to 2026 to rapidly establish a foundation for growth. Shiseido will move forward with greater agility and resilience, continuously challenging itself with unwavering commitment to enrich people’s lives and society through the power of beauty.