Despite positive overseas growth, Wacoal's sales drop 0.1 percent

During the current fiscal year March 31, 2018, Wacoal Holdings Corp. said that the company’s consolidated sales for the current fiscal year fell by 0.1 percent to 195,725 million yen (1,771.6 million dollars) compared to the previous fiscal year. While consolidated sales of the domestic business fell by 2 percent due to difficult wholesale business environment, consolidated sales from the overseas rose 7 percent as a result of strong e-commerce sales and steady sales at the existing stores in Europe, the United States, and China.

Consolidated operating income increased by 13 percent to 12,534 million yen (113.4 million dollars). The company said, in addition to the initiatives to improve business profitability in the domestic business, an increase in sales profit resulting from increased revenue from its overseas business contributed to this increase. Also, consolidated operating income increased as a result of recognition of compensation income from leaving a factory space occupied by its subsidiary and the absence of non-recurring expenses related to the liquidation proceedings for the company’s French subsidiary.

Financial review of Wacoal’s full year results

Consolidated income before income taxes and equity in net income of affiliated companies fell by 14 percent for the year under review. Sales from our wholesale business, mainly composed of wholesale business from the Wacoal brand operation division and the chain store operation division, decreased by 2 percent compared to the previous fiscal year.

Over-the-counter sales at department stores remained at about the same level as the previous fiscal year due to weak sales in the provincial cities of the Kanto, Koshinetsu, and Hokuriku regions, although sales expanded in Tokyo and the Osaka area as a result of consumption by inbound tourists. Over-the-counter sales at general merchandise stores also remained flat due to poor sales of men’s innerwear products and nightwear. With respect to over-the-counter sales of core brassieres products, while sales of our Wacoal brand products increased by 6 percent due to strong sales of Gococi, sales of its Wing brand products only increased by 1 percent.

In the retail business, sales only increased by 1 percent as a result of closing 11 underperforming stores, while minimizing the number of new shop openings. Sales of our cross-store common products among directly managed retail stores Bragenic increased by 54 percent against the prior year, which accounts for approximately 20percent of the overall sales, and the number of registered shop members, mainly from the company’s core directly managed retail stores, Amphi reached over 660 thousand.

Sales from wellness business fell by 5 percent due to 9 percent decrease in core Cw-X brand products, which were impacted by the termination of business with certain sport specialty stores. Sales of Success Walk, the company added, were strong. In web sales business, sales increased by 1 percent and sales from Wacoal’s webstore business increased by 14 percent. On the other hand, sales from catalog sales business decreased by 4 percent.

Sales from Ai Co. Ltd. were weak, which decreased by 8 percent, while sales from core swimwear business decreased by 4 percent. Sales from the underwear business were also weak and decreased by 14 percent as compared to such sales for the previous fiscal year due to closure of underperforming stores. As a result, sales attributable to domestic Wacoal Business segment decreased by 2 percent as compared to such sales for the previous fiscal year.

Highlights of Wacoal’s overseas business

Sales from Wacoal International Corp., the United States increased by 3 percent due to overall sales driven by e-commerce sales through the company’s as well as third-party websites, which showed strong sales growth, as well as the positive impact of initial product delivery due to an increase in the number of department stores handling Wacoal brand products during the first quarter of the current fiscal year. However, although over-the-counter sales were steady at department stores, sales for the second half of the current fiscal year fell by 3 percent.

Sales on a local currency basis for Wacoal Europe increased by 3 percent as compared to such sales for the previous fiscal year. This was due to steady sales through third-party e-commerce websites which specialize in selling luxury lingerie and specialty stores in the major markets in the United Kingdom and the United States, while sales in France declined due to the effect of loss of sales that could have been recorded from the brands which were liquidated. In addition, sales in Germany and Spain achieved a double-digit increase.

In the company’s underwear business, sales of plus-size brand Elomi products posted an increase of 20 percent and sales of swimwear products under Fantasie and Freya also increased 17 percent, respectively, contributing to sales growth in various countries.

In China, sales on a local currency basis increased by 10 percent due to consumers becoming more sensitive to fashion trends and enhanced sales initiatives, including openings of specialty stores during China’s high-demand seasons such as the Chinese New Year, International Women’s Day and China National Day. As a result, sales per department store increased by 8 percent. In addition, e-commerce sales through third-party e-commerce websites increased by 29 percent.

Wacoal’s sales performance by brands

Sales of Wacoal brand products increased by 10 percent and sales of Peach John brand products, including ‘Cover Cleavage Strapless’ bras, increased by 51 percent. As a result, the overall sales attributable to ‘Wacoal business (overseas)’ segment on the Japanese yen basis increased by 7 percent. The overall operating income attributable to ‘Wacoal business (overseas)’ segment on the Japanese yen basis increased by 26 percent.

Overall sales attributable to ‘Peach John business’ segment fell by 3 percent due to weak sales from domestic mail-order catalogue business, while operating income attributable to Peach John business segment increased by 18 percent as a result of an improvement in the gross profit rate in Japan, as well as an improvement in profitability of Chinese business. Sales from domestic business, specifically from retail stores, remained flat. Although sales from premium themed ‘Salon by Peach John’ increased by 31 percent due to new shop openings, sales of ‘Peach John’ products decreased by 2 percent.

Sales from mail-order catalogue business decreased by 12 percent, while sales from wholesale business, particularly for the third-party e-commerce websites increased by 4 percent. Sales from the overseas business were strong as demonstrated by the sales from Taiwan Peach John - 8 - Ltd., which, after commencing operations in May 2017, achieved sales over budget by 56 percent.

Sales from Lecien Corporation decreased by 16 percent impacted by sales of core innerwear business, which was down 13 percent, due to a decrease in the number of orders received for our private brand products sold at major general merchandise stores, a reduction in the number of products handled and weak shop sales. In addition, sales from Art & Hobby business decreased by 4 percent, due to poor sales of sewing fabrics, despite steady sales of handcraft products.

Sales from material business also decreased 13 percent due to a decrease in demand for garment laces. Further, sales from apparel business significantly decreased by 47 percent due to the withdrawal of our private brand business sold at major general merchandise stores and the impact of weak sales from teleshopping. Sales from Nanasai Co., Ltd. fell by 2 percent.

Wacoal announces guidance for current fiscal

Wacoal expects net sales for the current financial year to reach 200,000 million yen (1,808 million dollars), a rise of 2.2 percent, operating income of 10,000 million yen (90.4 million dollars), a decrease of 20.2 percent, income before income taxes and equity in net income of affiliated companies of 13,000 million yen (117.5 million dollars), a drop of 9 percent and net income attributable to Wacoal Holdings Corp of 10,000 million yen, a rise of 2.6 percent compared to the prior year.

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