Wacoal Holdings CorpTSE: 3591

FY2025 First Quarter Business Presentation (Transcription)

Sep 20, 2024 at 3:06 AM UTC · Issued by Wacoal Holdings Corp

FY2025 First Quarter Business

Results Presentation

August 7, 2024

I am Akira Miyagi, Director, Vice President, Executive Officer, and CFO of Wacoal Holdings Corp.

Thank you very much for watching our financial results briefing video.

1. FY2025 1Q Financial Overview

I will now explain Wacoal Holdings' financial results for Q1 of the fiscal year ending March 31, 2025.

Executive Summary for FY2025 1Q (Apr-Jun)

Revenue

46.5 billion yen

＜YoY＞-¥2.3billion（-4.8%）

＜Planning difference＞-¥0.9billion（-2.0%）

EC has been strong for each company, but the number of customers visiting physical stores has been lower than expected and sluggish

Domestic sales of "Synchro Bra Top" increased, but sales of bra items were sluggish
Adjustment of deliveries to optimize in-store inventories as part of structural reforms
Impact of IO's withdrawal from the business in the U.S.: Approx. 6 million dollars (IO's sales in 1Q FY2024)

Business Profit

1.6 billion yen

＜YoY＞-¥0.8billion（-34.2%）

＜Planning difference＞-¥0.3billion（-17.8%）

Despite efforts to control SG&A expenses, business profit fell short of plan due to decreased revenue and higher cost of sales ratio

Gross profit ratio was lower than both the previous year and the plan, due to the impact of decreased revenue and increased raw material price
Gross profit ratio 56.6% (YoY and vs the plan -0.5pt)
SGA ratio 53.2% (YoY +1.0pt and vs the plan +0.1pt)

Operating Profit

3.2 billion yen

＜YoY＞+¥0.5 billion（＋17.6％）

＜Planning difference＞+¥0.3 billion（＋8.7％）

Exceeded both the previous year and the plan figure due to the gain on the sale of the Asakusabashi Building

Please refer to page three. This section provides the summary for Q1 of the current fiscal year.

Sales for all major group companies declined 5% YoY to JPY46.5 billion due to lower-than- expected customer traffic at brick-and-mortar stores, although e-commerce remained strong. Sales were 2% short of the goal.

Domestic sales declined due to sluggish sales of mainstay brassiere products, as well as the impact of delivery volume adjustments that were implemented to optimize retail inventories as part of structural reforms.

In the overseas market, sales in Europe and the US increased as the depreciation of the Japanese yen progressed. However, as a result of the withdrawal of Intimates Online, Inc. from the US market and struggling sales in the Chinese market, total sales decreased.

Business profit was JPY1.6 billion. Despite group-wide efforts to control SG&A expenses in line with sales trends, the impact of lower sales and a higher cost-of-sales ratio was significant. The results came under the previous year's performance and the goal.

Operating profit was JPY3.2 billion, exceeding the previous year's performance and goal due to contributions from the sale of the Asakusabashi Building, which was carried out in line with the asset-lighting policy.

Revenue and Business Profit for FY2025 1Q

（billions of yen）

*Wacoal Europe is calculated excluding brand amortization cost

Revenue	YoY	Planning
difference

Wacoal	- 1.54	- 0.01
business(Japan)


Wacoal	- 0.09	- 0.26
business(Overseas)


Peach John business	- 0.21	- 0.29

Other businesses	- 0.49	- 0.38

46.5

YoY

SGA ratio

FY2024 1Q

FY2025 1Q Results

Gross Profit ratio

FY2024 1Q

FY2025 1Q Results

ratio

change

ratio

change

Wacoal

56.1%

56.3%

+ 0.2pt

Wacoal

57.5%

56.6%

- 0.9pt

Peach John Domestic only

55.6%

59.1%

＋ 3.5pt

Peach John Domestic only

62.8%

59.0%

- 3.8pt

Wacoal International Corp.

43.0%

40.0%

- 3.0pt

Wacoal International Corp.

(U.S.)

51.5%

52.6%

＋ 1.1pt

(U.S.)

Wacoal Europe Ltd.

42.8%

44.8%

＋ 2.0pt

Wacoal Europe Ltd.

56.1%

57.5%

+ 1.4pt

Wacoal China Co., Ltd.

68.2%

71.2%

+ 3.0pt

Wacoal China Co., Ltd.

68.6%

67.8%

- 0.8pt

Business Loss

YoY

Planning

difference

Wacoal

-0.75

-0.03

business(Japan)

Cost of sales

Wacoal

＋0.19

-0.28

business(Overseas)

20.2

Sales Profit ratio

Peach John

- 0.16

- 0.09

YoY

SGA ratio

business

-0.8（-3.6％）

56.6%

53.2％

Planning difference

Other businesses

-0.09

＋0.06

-0.2（-0.8％）

（YoY-0.5pt）

（YoY +1.0pt）

（Planning difference -0.5pt）

（Planning difference ＋0.1pt）

-2.3

（-4.8％）

Planning difference

-0.9

（-2.0％）

Revenue

26.3	SG&A
24.7
YoY

-1.6	YoY
（-5.7％）
-0.8（-3.0％）
Planning difference	Planning difference
-0.4（-1.7％）
-0.8

（-2.9％）

Gross profit

Business Profit ratio

3.4％

（YoY -1.5pt）

（Planning difference -0.6pt）

YoY

-0.8（-34.2％） Planning difference -0.3（-17.8%）

1.6

Business Profit

Please refer to page four.

Actual figures are shown for each item, from sales revenue to business profit.

As mentioned on the previous page, revenue was JPY46.5 billion, lower than both the same period last year and the plan, as all major companies struggled.

Profit on sales was also lower than both the previous year and the plan due to the impact of lower sales and the deterioration of profit margins of Wacoal and Peach John.

For Wacoal and Peach John, the cost of raw materials and unit purchase prices have risen significantly, attributed to the fluctuations in foreign exchange rates. In China, the discount sales rate increased. These factors caused the overall profit margin to shrink.

On the other hand, as for Wacoal International, the profit margin on sales improved due to the withdrawal from the unprofitable business of Intimates Online.

All the group companies committed to controlling SG&A expenses given these sales trends. However, the efforts were not enough to compensate for the decline in sales profit. The business profit fell short of both the previous year's performance and the plan.

FY2025 1Q Profit impact items

Operating Profit： Increased due to gains on the sale of Asakusabashi Building

		Profit and loss from	Income
Gain on sale of			equity method
		investments	tax expenses
Asakusabashi	Finance income
Building, etc.	0.4
	and costs		1.3

			YoY	YoY
			＋0.02
Other income	0.7		＋0.1
	Planning

and expenses			difference	Planning
			±0.0	difference
	YoY		+0.05

	-0.2

（billions of yen）

Non-controlling

interests

-0.02

YoY

1.6

YoY
＋1.3	3.2
Planning
difference	YoY
+0.6
	＋0.5
	（＋17.6％）
1.6	Planning
	difference
YoY	＋0.3
-0.8	（＋8.7％)

（-34.2％）

Planning difference -0.3

（-17.8％）

Planning difference -0.1

Dividend income and decrease in foreign exchange gains, etc.

4.3
YoY
＋0.3
（＋6.6％）	3.0
Planning

difference	YoY
＋0.1	+0.1
（＋2.8％）	（+4.6％）

Planning difference ＋0.07

（＋2.3％）

-0.06

Planning difference +0.03

3.0

YoY

+0.2

（+6.8％）

Planning difference ＋0.04

（＋1.3％）

Business Profit

Operating Profit

Profit before tax

Profit

Profit Attributable

to Owners of Parent

Please refer to page five.

Continuing from business profit to quarterly profit, the main factors behind the difference compared to the same period of the previous year are listed.

Operating profit increased JPY0.5 billion YoY to JPY3.2 billion, mainly due to the gain on the sale of the Asakusabashi Building.

Income before income taxes was JPY4.3 billion. Dividend profit and a decrease in foreign exchange gains had a negative impact, resulting in an increase of only JPY0.3 billion from the same period last year.

As a result, quarterly profit attributable to owners of the parent increased by JPY0.2 billion to JPY3 billion.

(Reference) FY2025 1Q Increase/Decrease in Revenue (YoY and vs the plan)

（billions of yen）

FY2024

results

48.8

Decrease vs FY2024 1Q
About a ¥ 2.3 billion	Fell short of FY2024 1Q plan
（ Excluding the impact of ¥ 2.2 billion
About a ¥ 0.9 billion
yen in foreign exchange, the revenue
decrease would be about ¥ 4.5 billion）	（Excluding the impact of ¥ 0.9 billion
	yen in foreign exchange, this would be a
	¥ 1.8 billion underachievement）

Japan

-1.6

Other

Japan

subsidiaries

and account

±0.０

Adjustments

-0.９

Impacts

-0.2

＋0.1

±0.0

-0.3

Europe

-0.5

＋0.9

-0.2

Nanasai

China

Nanasai

-0.2

Lecien

-0.2

Europe China

Lecien

Other

Impacts

overseas

-0.２

-0.6

+2.2

-0.4

-0.5

Corporations

FY2025

IO Inc.-0.8

-0.7

FY2025

plan

Wacoal America -0.5

47.4

Other

Nanasai-0.6

results

overseas

Nanasai-0.5

Physical Stores-0.5

Corporations

*Nanasai will be excluded

46.5

*Nanasai will be excluded

from the scope of

EC-0.1

consolidation from 2Q due

Wacoal was

to share transfer.

at planned level

Wacoal brand -0.9

Wacoal Hong Kong -0.2

Wing brand -0.7

A/G-Tech-0.2

Synchro Bra Top, etc.+0.2

Overseas segment closing

adjustment difference

Please refer to page six.

For reference, the waterfall chart displays the sales revenue of major group companies, comparing this year's results with both the previous year's results and this year's goal. The chart on the left shows the difference from the same period of the previous year. However, if we remove the impact of the fluctuation of foreign exchange rates, sales declined across the board at all major subsidiaries, resulting in an extremely severe three- month period. The impact of the decrease in sales due to the withdrawal of Intimates Online is approximately JPY800 million.

The chart on the right shows the difference from the plan set at the beginning of the fiscal term. Wacoal almost reached the plan in the midst of the structural reforms. However, all other major group companies fell short of the plan.

(Reference) FY2025 1Q Increase/Decrease in Business profit (YoY and vs the plan)

（billions of yen）

Decrease vs FY2024 1Q	Fell short of FY2025 1Q plan
About a ¥ 0.8 billion
About a ¥ 0.3 billion

Japan

Europe

＋0.1

-0.3

Europe

+0.2

Impacts

-0.2

Nanasai

-0.1China

＋0.2

Lecien

China

Japan

-0.1

Other

Impacts

+0.3

＋0.1

-0.3

-0.1

overseas

Nanasai

+0.03

Corporations

Lecien

-0.1

Other

Wacoal America -0.1

-0.1

overseas

FY2024

Corporations

IO Inc.＋0.3

Other

-0.05

results

subsidiaries

SG&A expenses increased -0.3

2.4

and account

FY2025

Adjustments

Gross profit -1.2

-0.4

FY2025

-0.3

plan

SG&A expenses reduced +0.9

results

Gross profit -0.1

1.9

Elimination of unrealized

1.6

Elimination of unrealized

SG&A expenses reduced ＋0.4

intergroup profits

intergroup profits, etc.

Consolidated adjustment

difference in retirement

benefit expenses

Please see page seven.

This waterfall chart provides the business profit and the gap between the previous performance and the plan.

The chart on the right shows the difference from the plan set at the beginning of the fiscal term. Although earnings for Wacoal and Wacoal Europe exceeded the plan, partly due to the effect of SG&A cost containment, challenging sales in China resulted in a significant decrease. The settlement of accounts adjustment led to a negative impact. As a result, the business profit fell short of the plan by JPY0.3 billion.

FY2025 1Q - Consolidated Statement of Financial Position	（billions of yen）

	End of	Ratio	FY2025 1Q	Ratio	Change
	FY2024

Cash and cash equivalents	33.5		28.8		-4.7	➀ Increase in inventories due to yen
Trade and other receivables	22.1		20.5		-1.6
Inventories	50.0	➀	50.6		＋0.6	depreciation （exchange impact +1.4）

Other	6.5		11.9		＋5.3		Inventories
Total current assets	112.1	38.1	111.8	38.4	-0.4
	Inventory turnover

Property, plant and equipment and Intangible assets	57.4		55.6		-1.8	*Calculated by cost of sales ÷ inventory at end of June
Goodwill	11.8		12.6		＋0.8	0.46
					0.42
		②						0.39		0.40
Other financial assets	54.5	52.7		-1.8				0.37

Other	58.2		58.3		＋0.2	44.1	0.29	44.6	48.3		50.6
Total non-current assets	181.9	61.9	179.2	61.6	-2.6			55.9


Total assets	294.0	100.0	291.1	100.0	-3.0		45.2

	End of	Ratio	FY2025 1Q	Ratio	Change
	FY2024

Trade and other payables	17.4		14.8		-2.6
Borrowings	9.1		9.5		＋0.4	End of June	End of June	End of June	End of June	End of June	End of June
Lease liabilities	11.5		11.0		-0.5	2019	2020	2021	2022	2023	2024

Deferred income taxes	16.9		17.0		＋0.1

	Other	24.0		19.9		-4.1	② Cross-shareholdings decreased due to the

	Total liabilities	78.9	26.9	72.2	24.8	-6.7	decline in market price

	Total equity attributable to owners of parent	211.8		215.5		＋3.7
	Noncontrolling interests	3.3		3.3		±0.0

	Total equity	215.1	73.1	218.8	75.2	＋3.7
8
Total liabilities and equity	294.0	100.0	291.1	100.0	-3.0

Please refer to page eight. I would like to review the consolidated statements of the financial position.

Total assets decreased by JPY3 billion from the end of the previous period. The main factors were a decrease in cash and cash equivalents, mainly due to dividend payments, and a decrease in other financial assets, mainly due to the decline in the market value of policy holdings and the sale of shares.

For reference, the right side of the slide shows inventories and inventory turnover on a three-month basis for the recent six fiscal terms. Inventories and inventory turnover are improving due to the disposal of inventory at the end of the previous period as part of structural reforms.

We will continue to aim for continuous improvement through supply chain management reform efforts and other initiatives set forth in the revised medium-term management plan.

FY2025 1Q -Consolidated Statement of Cash Flows

			FY2023 1Q	FY2024 1Q	Change

	Profit			2.9	3.0	＋0.1
	Depreciation			3.0	3.0	＋0.0
	Impairment charges
	Decrease (increase) in working capital component items
	Decrease (increase) in trade and other receivables	➀	0.8	1.0	＋0.2
	Increase in inventories		➀	-0.4	0.5	＋0.9
	Decrease in trade and other payables			-2.6	-2.3	+0.3
	Decrease in retirement benefit asset or liability	②	-1.7	-0.4	+1.3
	Other		②	-1.0	-5.9	-4.9
	Net cash provided by operating activities			+1.0	-1.1	-2.1
	Purchase of property, plant and equipment and			-1.0	-0.8	+0.2
	Intangible assets


	Proceeds from sale of property, plant and equipment			0.0	1.7	+1.7
	Other			-0.8	-0.5	+0.3
	Net cash used in investing activities			-1.8	0.4	+2.2
	Net increase in short-term bank loans			0.7	0.1	-0.6
	Repayments of lease obligations			-1.4	-1.4	+0.0
	Payments for purchase of treasury stock			0.０	-0.1	-0.1
	Dividends paid to owners of parent			-2.3	-2.8	-0.4
	Other			-0.1	-0.1	+0.0
9	Net cash used in financing activities			-3.1	-4.2	-1.1

（billions of yen）

➀ ✓ Inventories decreased, mainly in overseas businesses

(Cash flow statement shows increase/decrease in inventories without taking into account the effect of exchange rates)

② ✓ Increase in income taxes paid, etc.

Please refer to page nine. I will discuss the status of cash flow.

Net cash used in operating activities amounted to JPY1.1 billion due to the effect of an increase in profit taxes paid as a result of the sale of policy stock holdings in the previous year.

Net cash provided by investing activities amounted to JPY0.4 billion, mainly due to proceeds from the sale of the Asakusabashi Building and policy holdings.

Net cash used in financing activities was JPY4.2 billion, mainly due to dividend payments and repayment of lease liabilities.

FY2024 1Q(Apr-Jun): Business Conditions at Major Subsidiaries（Japan）

Note: The graph shows the monthly figures before the adjustments in settling accounts.（ Including internal sales, Japan only for Peach John ）

Wacoal vs FY2024 1Q	Peach John vs FY2024 1Q
120
	104
100	94

94		93
80	86

76
60
Apr.	May	Jun.

10	"Wing" WEB site

Japan FY2025 1Q revenue trend

Revenue：vs FY2024 1Q -8％	() Excluding the impact of change
in revenue recognition

Underwear, centered on the "Synchro Bra Top," performed well, but bras, a mainstay item, were sluggish
While the physical store channel is struggling, EC grew both in own EC and third- party EC

Revenue by channel (% change)

Department store: -4％ Retail store: -5％

Mass retailer: Wacoal -５％ Wing -６％ Own EC: +9%

Peach John FY2025 1Q revenue trend

Revenue：vs FY2024 1Q -9％	() Excluding the impact of change
in revenue recognition

While third-party EC performed well, both our own EC and retail stores struggled
The effect of promotion of famous celebrities was lower than expected

Revenue by channel (% change)

Own EC: -13％ Third-party EC: +2％

Retail store: - 9％

Starting on page 10, I will discuss the business conditions of our main subsidiaries for Q1 and the first three months of the year.

Both Wacoal and Peach John continued to face a mixture of strong and weak factors specific to products or sales channels, but overall sales remained at a low level.

Details of the business are discussed on the segment results page.