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We will build a foundation to restore growth for the Wacoal Group through the united efforts of executives and employees based on the revised medium-term management plan that embodies our determination to see things through, not put things off

Dramatically revising downward its net income forecast for fiscal 2024, the Wacoal Group announced on November 9, 2023, that it projects to post a net loss for the second consecutive fiscal year. At the same time, the Group announced that it would conduct an overall review of the medium-term management plan formulated in April 2022 and implement fundamental structural reform. The forecast of a net loss for fiscal 2024 is the result of stagnant net sales in major regions, expenses related to structural reform of the Japanese business, and impairment losses due to the withdrawal from the U.S. business. I am keenly aware that this will cause major concerns for all stakeholders, including shareholders.
We revised the medium-term management plan as a result of dramatic changes in the business environment and consumer needs. Since around 2015, the Group’s performance has continued to gradually trend downward because of the closure of department stores and mass retailers, our main sales channels for the Japanese business, and changes in business conditions. Furthermore, the consumption tax hike in 2019 and spread and extended duration of the 2020 COVID-19 pandemic further undercut sales, which led to a rapid deterioration in profitability. For various reasons, including changes in the people’s values following the pandemic, greater-than-expected inflation, volatile interest rates, and China’s weak economic growth, the Group continues to face a harsh business environment. In an era of growing uncertainty, we determined that unless we change our business model, we do not have a future, which is why we are undertaking this structural reform.
I became Representative Director, President and CEO in June 2023. When asked about taking the position, I understood the perilous state of the company and the role expected of me, and although the environment is not promising, I realized that taking responsibility for putting the company back on a firm footing is what I could do, and decided to accept the position. The current medium-term management plan with updated content (revised medium-term management plan) was formulated without worrying about the pain and discord that will arise during the reform nor putting off efforts to resolve the problems we face. With an eye toward fiscal 2026, the final year of the plan, we will move forward with structural reform with a determination to see it through.

Shift to Growth Trajectory by Implementing Cost Structure Reform and Increasing Brand Power, Customer Royalty, and Workforce Capabilities

The Wacoal Group systematically compiled a corporate philosophy in 2022. Having positioned Our Culture, Our Promise, and Our Values, as elements of our Founding Principles, we newly created a Mission that the Group should achieve in modern society. “VISION 2030,” our medium- to long-term management strategy framework lists the issues that we should tackle by 2030 in order to achieve our Mission, and the medium-term management plan is one milestone toward VISION 2030.
The revised medium-term management plan outlines a return to growth through cost structure reform and strengthening of brand power, customer loyalty, and workforce capabilities while temporarily putting aside the issue of performance. At the same time, we will reinforce our business management infrastructure, increase management efficiency, and improve capital efficiency by introducing ROIC management.
I think that the Group’s strengths are its manufacturing capabilities and the trust we have built up with customers over the years. Our greatest competitive advantage is that we possess not only the various components of the value chain, including research, planning, production, and sales, but also the ability to create high quality products based on body type data accumulated by the Human Science Research & Development Center and 3D measuring service. However, we must evolve those strengths into a form appropriate for the current times. The value we provide will not change with the times but we will deliver that value to customers in a more evolved form. This will lead to customer satisfaction, and thus, all stakeholders, including employees, can benefit from this value. I think that it is our mission to maintain this.
The four main policies outlined in the revised medium-term management plan are those listed below. We will work to improve profitability and capital efficiency by steadily implementing these measures in line with the plan.

Rebuilding the Supply Chain and Meeting Diverse Customer Needs

Implementing SCM reforms that make it possible to accurately respond to changes in customer needs is an important initiative to achieve the Group’s mission to “empower people with the confidence that comes from looking and feeling their best and welcome everyone into our caring community built on mutual respect, diversity, and inclusion.” However, at the current time, we are unable to smoothly provide products that meet consumer changes because the development lead time for products is more than one year. Through SCM reform, we will work to strength our ability to meet changing needs by optimizing in-store product lineup, shifting to production methods appropriate for demand, and shortening production lead time. The Group’s SCM was constructed over its long history, and in order to implement these measures to update our methods, we must change how we think. To evolve into an organization that takes into consideration overall optimization, starting with customers, and makes it possible to undertake improvement activities that are not limited to a particular department, we will support employees’ efforts to acquire new skills. Furthermore, we think that we should listen more carefully to the opinion of not only beauty advisors (BA) who work hard every day at stores but also customers, and we will analyze those opinions with digital technology and use them to evolve the value we provide.
As for the brand strategy for Japan, we organized market segments from a unique perspective and created a brand portfolio for segments we are strong in. In fields other than innerwear, we also aim to expand the “beauty, comfort, and health” business, and this will involve such activities as reinforcing 3D measurement services, personalized services that leverage customer data, and sports businesses, including CW-X. I try to closely communicate my intentions to Wacoal Corp. President Kawanishi on a regular basis. As the holding company, we will clearly indicate such items as policies and expectations while Wacoal Corp. takes responsibility for implementing the reforms. Furthermore, I consider monitoring progress in implementing these reforms as important for increasing the effectiveness of related efforts. External directors, too, have expressed the opinion that reinforcing our supervision functions is necessary to increase effectiveness, and we will confirm progress of initiatives so that our plans are not a mere pipe dream.
As for the overseas business, we expect conditions, including geopolitical risks and high inflation, to remain uncertain for some time. Therefore, through fiscal 2025, we will work with each country to build a management foundation and implement the growth strategy with an eye toward the next medium-term management plan.

Fostering Awareness of Capital Efficiency by Introducing ROIC Management

As explained at the beginning, the Wacoal Group is plagued by a low ROE as it has been unable to achieve initial plans for many years. We consider this the result of a deterioration in our business management infrastructure, and have decided to introduce ROIC management in order to increase capital efficiency and achieve a robust corporate structure. It is the Group’s mission to deliver products that support the “beauty, comfort, and health of each customer,” and allocate cash obtained from that activity to investments in growth fields and human resources who support those activities and to pay all shareholders an appropriate return. Using ROIC as a management indicator that supports sustainable growth and recognizes multiple stakeholders will lead to the creation of corporate value.
We will also move forward with reducing assets through the revised medium-term management plan. With an eye toward improving the efficiency of assets and capital, we have set a basic policy of liquidating assets that do not enhance corporate value, and as we liquidate those assets, we will search for investment opportunities that contribute to business growth, and those investment decisions will be based on ROIC. Moreover, in order to reduce assets, we will primarily look at inventories, cross-shareholdings, and real estate holdings when examining and revising asset holdings.
Our aim is to achieve an ROE of 7% during the period of the revised medium-term management plan by moving forward with our business and financial strategies. We are aware that our cost of shareholder equity is around 6%, which has resulted in a PBR less than one, and want to correct this situation. I do not want to be satisfied with a PBR that exceeds 1 but want to continually strive to raise our PBR through sustained initiatives to improve profitability and capital efficiency starting with the next medium-term management plan in order to achieve VISION 2030.

Reinforcing Response to Human Rights and Environmental Issues

Environment problems, such as climate change, and human rights problems are growing more serious, and the international community and customers are calling loudly for initiatives to achieve a sustainable society. To reinforce our response to important sustainability problems, the Group not only established the Sustainability Committee, an advisory body to the Board of Directors, and four promotion subcommittees, but also formulates concrete measure to address those problems, monitors the state of progress in implementing those measures, and evaluates the state of achieving those.
In terms of human rights, we revised the Wacoal Group Human Rights Policy in April 2022 so that it complies with the Guiding Principles on Business and Human Rights stipulated by the UN. While already accurately ascertaining the state of compliance with items stipulated in the Wacoal Group CSR Procurement Guidelines and running through a cycle that leads to continuous corrections and improvements, we will prevent and mitigate negative impacts on humans rights throughout the supply chain and work to reinforce initiatives related to respect for human rights based on the idea of human rights due diligence compliant with UN Guiding Principles on Business and Human Rights.
As for the environment, we announced in September 2021 that we support the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and disclosed related information in June 2022. We are now moving forward with formulating a concrete action plan to reduce greenhouse gas emissions and promoting such initiatives as increasing the percentage of materials that are environmentally friendly, reducing the disposal of old products, and conducting recycling activities. It can be argued that our initiatives to increase sustainability is one part of implementing our corporate philosophy. In addition to increasing profitability and implementing our growth strategy, we will transition to a structure that can achieve sustainable growth by reinforcing initiatives related to human rights and the environment.

Resolutely Moving Forward By Taking a New Look at Customers and Changing our Corporate Culture

Having positioned the period of the revised medium-term management plan as a reform period, we will work to improve profitability and capital efficiency by steadily implementing the various measures in line with the plan. Starting with the next medium-term management plan, we plan to reap the benefits of these reforms in the foundation and growth period and implement a strategy to generate additional growth. When formulating the revised medium-term management plan, we held deliberations from various perspectives. It is clear what the Group needs to tackle, and the only thing left is for all executives and employees to see related initiatives through. For twenty years, we posted weak performance, and in the business environment at that time, we tended to have a negative attitude toward everything, and it is important that we establish a cycle that boosts motivation for routine operations. It is also important that we actually feel that we are making forward progress, and if that is possible, we can maintain motivation to accomplish everything we want. Since announcing the revised medium-term management plan, we have held briefing sessions for employees and townhall meetings. The role of the executive management team is to provide leadership so that all employees view the revised medium-term management plan as our code, possess their own opinions, and can propose improvements. I would like to continue to dialogue with all employees until they have a proactive attitude toward what they must do to address the crisis that the company faces.
My vision for the company is for it to become a company in which its employees throughout the world enthusiastically take on challenges and provide new value while staying close to customers and society I envision a company that wins the trust of diverse people throughout the world and provides products and services that make people throughout the world happy. That is precisely why we have to change. We will take a new look at customers, change our corporate culture, and work to implement the revised medium-term management plan with determination.
I truly hope that all stakeholders continue to support the Group.

Representative Director, President and CEO (Group CEO)
Wacoal Holdings Corp.
Masaaki Yajima
PAGETOP