To Our Shareholders
Through a firm commitment to mutual trust and empathy with women as our corporate raison d’être, we will sustain growth.
The Wacoal Group— Empathy with Women and Mutual Trust
The corporate mission of the Wacoal Group has been to “contribute to society by helping women to express their beauty” since its establishment in 1946. As we have pursued this mission through our corporate activities, mutual trust has consistently been the bedrock of our business management. Reflecting the view that cultivating mutual trust contributes to everyone’s happiness, the Wacoal Group’s vision is to create a company founded on respect for human dignity and relationships of strong mutual trust—not only between the Wacoal Group and its customers but also between the Group and its employees, society, and other stakeholders.
During the more than half a century since our establishment, we have grown enterprise value by constantly creating products customers love and developing products meeting the needs of the times. In tandem with these efforts, we have developed corporate social responsibility (CSR) initiatives actively, thereby building mutual trust with the women that use our products.
Over a decade ago, in 2001, the Wacoal Group declared itself “a company empathetic to women.” Empathy with women is the Wacoal Group’s designated role. Manufacturing products that resonate with women is something that also resonates with society. For example, the Wacoal Group’s Human Science Research Center has conducted basic research on women’s physiques for nearly 50 years. In a broad variety of ways, we use the results of this research to develop products that help women to express their beauty. In April 2010, significant interest focused on the Wacoal Group’s announcement of research results on Aging of the Physique and the Principles of Beauty, underscoring the Group’s credentials as a truly unique company.
Through a firm commitment to mutual trust and empathy with women as our corporate raison d’être, we will sustain growth.
Fiscal 2012 Business Results Report
For fiscal 2012, ended March 31, 2012, the Wacoal Group achieved year-on-year increases of 3.8% in net sales, to ¥171,897 million; 135.8 % in operating income, to ¥10,377 million; and 148.2% in net income, to ¥6,913 million.
Regarding sales, in the Wacoal Group’s domestic business, mainstay brassieres and undergarments sold briskly thanks to product rollouts and promotions that appealed to consumers based on the Human Science Research Center’s findings about the how the physique ages. Furthermore, despite currency fluctuation, the Wacoal Group’s overseas businesses posted year-on-year sales increases as businesses in the United States and China grew sales, and Peach John Co., Ltd., achieved a recovery in business results.
Meanwhile, earnings were up significantly year on year. This was attributable to Peach John achieving profitability based on a rebuilt earnings structure and the favorable performance of the Wacoal Group’s domestic business, which offset the deficit of the Group’s business in China and the Lecien Corporation’s loss due to withdrawal from an employees’ pension fund.
AN OVERVIEW OF THE MEDIUM-TE RM MANAGEMENT PLAN PERIOD
April 2010—March 2013
A stronger global presence for the Wacoal Group
Numerical targets (Fiscal 2013)
|Net sales of at least||¥190 billion|
|Operating income of at least||¥8 billion|
GROUP STRATEGIES OVER THE THREE YEARS
- Heighten the overall capabilities of the Wacoal Group through promoting collaboration among Group companies to realize each company's strengths
- Secure and increase earnings
- Restructure operations focusing on innerwear wholesale operations
- Accelerate expansion in growing business areas at home and abroad
- Strengthen system for Groupwide management
TARGET CORPORATE PROFILE FOR FISCAL 2013
- New revenue and earnings pillars established alongside existing innerwear wholesale operations
- Overseas operations such as those in the U.S. and China support growth
- Restructured innerwear wholesale operations see profitability improve
- System for Groupwide management further developed and strengthened
- Meeting CSR and compliance requirements
Progress in the Second Year of the Medium-Term Management Plan
We have completed the second year of our medium-term management plan, launched in April 2010. In earnings, we made steady progress, achieving our targets one year ahead of schedule. Although tasks remain, I am sure the strategic direction of our efforts to achieve our targets is correct. Accordingly, we will continue advancing vigorously.
Domestically, we continued restructuring innerwear wholesale operations. As a result, our earnings structure improved significantly, and operating income recovered significantly. Particularly successful was an initiative that rightsized the deployment of department store sales area personnel and reduced inventory. Further, sales promotions exploiting research on aging reaffirmed the value of Wacoal products and heightened customer endorsement. In addition, the retail business, which operates directly managed stores, and mail-order operations, responsible for such operations as Internet sales, continued growing steadily.
Overseas, businesses performed well, posting an 11% year-on-year increase in sales in the Americas on a local currency basis. In Europe, Wacoal France S.A. moved into the black for the first time in the fiscal year under review. As for our business in China, although sales grew 21% from the previous fiscal year as new stores opened, this was below our target. And, the business recognized a loss due to higher selling, general and administrative expenses reflecting stepped-up store openings. Nevertheless, China remains the most important region for the Wacoal Group’s growth going forward. Keeping our sights set on realizing earnings, we will therefore concentrate efforts on increasing brand visibility in China.
After recording losses for two consecutive years, Peach John achieved a 20% rise in net sales year on year and a dramatic return to operating income. However, these business results remain below expectations given the level of the company’s business results for the fiscal year ended March 2009, when it posted net sales of ¥15.0 billion and operating income of ¥1.3 billion. With this in mind, we will strengthen profitability even further.
In other businesses, Lecien, which became a wholly owned subsidiary in 2010, actually improved earnings significantly if we exclude the loss arising from withdrawal from the employees’ pension fund.
Thus, we are progressing well in reforming the earnings structures of operating companies. However, as net sales show, our growth stills needs to regain momentum. To this end, in the current fiscal year I will focus more on net sales growth as a growth driver while targeting earnings above those of the fiscal year under review.
Measures and Strategies for the Final Year of the Medium-Term Management Plan
The current fiscal year is the final year of the medium-term management plan, themed on change and taking on challenges. We embarked upon this plan determined to realize stable earnings while building new growth engines. I think an objective analysis of our achievements over the past two years vindicates the direction of our strategies and measures. In the final year, we will work toward realization of the plan’s targets unstintingly. Guiding these efforts, our overriding strategies will be returning to basics and reinforcing strengths and strengthening our ability to take measures from a global viewpoint. Moreover, in the current fiscal year we intend to establish a solid platform from which to launch our next medium-term management plan, beginning from April 2013.
Given that the Wacoal Group’s domestic businesses account for the majority of net sales, maintaining and expanding the sales of this business is crucial. In Japan, we will clearly identify priority areas, such as directly managed stores and Internet sales, and accelerate their growth. At the same time, we will begin restructuring the manufacturing area in earnest. Also, emulating the success of its aging research, the Wacoal Group will take advantage of its strengths to ramp up development of products and services offering real value that generates new demand. If these efforts convince customers of the superior value of Wacoal products, I think we can realize our goal of returning to basics and reinforcing strengths.
As I mentioned, overseas businesses are our growth drivers. I believe accelerating expansion of these businesses is important to reach the medium-term management plan’s net sales target and realize our target corporate profile—a stronger global presence for the Wacoal Group. Including affiliates, the Wacoal Group has 30 overseas operating companies, which generate local sales of ¥59.6 billion. This breaks down into ¥10.6 billion from the Americas, ¥1.2 billion from Europe, ¥9.3 billion from China including Hong Kong, and ¥38.5 billion from Asia excluding China. However, this operational scale is only half way toward establishing a stronger global presence for the Wacoal Group.
Aiming to expand and improve our overseas businesses, we will classify them under four regions—the Americas, Europe, China, and Asia excluding China—and pursue strategies suited to each region’s characteristics. Further, to build a stronger position for Wacoal as a global brand, we will establish a structure that enables us to advance businesses more forcefully and optimize overall collaboration among regions.
Among overseas strategies, accelerating our business in China is the top priority. If we consider the size of China’s market, the scope for us to grow is significant. Therefore, while reforming the profit structure of the business, we intend to continue actively allocating management resources to China to heighten the visibility of the Wacoal corporate brand and increase market share.
Meanwhile, in Europe we made Eveden Group Limited, headquartered in Northamptonshire, the United Kingdom, a subsidiary by acquiring all of its shares in April 2012. Eveden manufactures and sells women’s innerwear and swimwear. The group boasts a sales network comprising over 5,000 retailers, principally in the United Kingdom but also in Australia and more than 50 other countries in Europe, North America, Asia, and other regions. Eveden’s product lineup covers areas beyond the scope of our lineup. Including highquality fashionable innerwear and swimwear for a wide range of physiques and sizes, the product lineup testifies to outstanding production technology. As a result, mutually exploiting each other’s management resources promises synergies. Also, this new subsidiary will accelerate the Wacoal Group’s globalization and contribute to achieving medium-term management goals significantly.
The Group’s Overall Capabilities Heighten Steadily
The Wacoal Group has made good progress toward heightening its overall capabilities—one of the medium-term management plan’s Group strategies. The improved profitability of operating companies and intensified collaboration within the Group were major contributors to reaching the operating income target early. For example, the operating company Wacoal Corp. supported the research and development of various companies; Lecien and affiliates provided production support; and Nanasai Co., Ltd., supported sales area development and supplied fixtures. Intensifying such collaboration among operating companies, not only domestically but overseas, will quicken the pace of overseas business expansion, thereby adding momentum to the establishment of a stronger global presence for the Wacoal Group.
As the Group’s holding company, Wacoal Holdings Corp. has an extremely important part to play in this intensified collaboration within the Group. Coordinating the Group laterally, the Company will set out overall goals and explore and advance growth strategies. Other functions will include monitoring the roles and tasks of operating companies, deciding the allocation of resources within the Group, and supporting collaborative efforts. Consequently, the holding company’s decisions will be pivotal in determining the Wacoal Group’s destiny. We will keep this foremost in our minds as we tackle various initiatives going forward.
Peach John, Lecien, and the latest addition Eveden have given the Group a fairly extensive portfolio of business lines. Fulfilling my role as the leader of the holding company, I intend to overview operations, shedding light on structural problems companies have and taking steps to resolve them.
Sure-Footed Steps toward a Stronger Global Presence
The medium-term management plan sets out creating a stronger global presence for the Wacoal Group as a target corporate profile. This is based on a goal of our vision, which also calls on us to “maintain a refined corporate culture based on mutual trust.” I believe one key component of our target corporate profile entails continuing to value mutual trust as the starting point of our business while earning endorsement for our products from women everywhere. In other words, our products should be available in markets worldwide, and Wacoal should be a brand everyone knows. We should put down roots in local communities to become a company everyone loves. To realize this vision, I think we need to reexamine high-quality products with advanced functionality that we have taken for granted as our strength. I want to rebuild the Wacoal Group’s unique strength—the real value it gives customers—so that this value gains recognition the world over.
I remain convinced that advancing CSR initiatives directly related to our mainstay innerwear business realizes our corporate mission, which calls on us to “contribute to society by helping women to express their beauty.”
As we move forward, I would like to ask our shareholders, investors, and other stakeholders for their continued understanding and support.