Wacoal : FY2023 First Quarter Business Presentation Transcription

FY2023 First Quarter

Business Results

Presentation

August 10, 2022

Wacoal Holdings Corp.

Hello, everyone. Thank you very much for joining us today. I am Akira Miyagi, Director, Vice President, Executive Officer, and CFO of Wacoal Holdings Corp.

Thank you very much for attending this information session.

I will now explain Wacoal Holdings' financial results for Q1 of the fiscal year ending March 31, 2023.

(Supplementary material) Changes From the Same Period of the Previous Year

1. Implementation of International Financial Reporting Standards (IFRS)

• IFRS has been applied on a voluntary basis from 1Q of FY2023 in order to provide more useful information and improve convenience
• "Business profit," calculated as revenue less cost of sales and selling, general and administrative expenses, is newly disclosed
• Fluctuation risk in net income is reduced as fluctuations in stock market value, except for some stocks, will no longer affect the profit and loss statement
• Results of all subsidiaries are disclosed as if the fiscal year ended in March as required by IFRS accounting standards where the fiscal years of all group companies must be unified
• The figures for the cumulative consolidated term in 1Q of the previous year are also disclosed according to IFRS

1. The Impact of the Change in Revenue Recognition at Wacoal

• Sales of consumption transactions in department store, etc., were changed to an over- the-counter price basis in the period under review
• Because this change will increase sales revenue and SG&A expenses by the same amount, operating income will not be affected.
• This change has boosted 1Q sales revenue by approximately JPY1.4 billion (main

2	factor of boost in sales revenue and SG&A expenses).

Please refer to page two. This covers a change from the same period of the previous year.

As mentioned, we are applying IFRS on a voluntary basis from this time forward. As mentioned earlier, prior period figures have also been reclassified to IFRS. In addition, we are newly disclosing business profit, which is revenue less cost of sales and selling, general, and administrative expenses.

Since IFRS requires the unification of fiscal years among group companies, the results of all subsidiaries, including Wacoal China Co., Ltd., which closes its books in December, are disclosed as if the fiscal year ended in March.

Until last year, a three-month gap was allowed. In addition, changes in the market value of stocks, which used to be a major variable factor in net income for the Company, no longer affect periodic profit and loss in principle.

The second is the change in revenue recognition at Wacoal.

Sales of consumption transactions in department stores and so on were changed to an over-the-counter price basis in the period under review. This change has pushed up Q1 sales revenue by approximately JPY1.4 billion, but since SG&A expenses have also increased by the same amount, there is no impact on each profit. Furthermore, no retroactive adjustments have been made.

Executive Summary for FY2023 1Q Accounting Period (Apr-Jun)

	Revenue	At the planned level due to continuing strong performance in
	Europe and improved domestic sales
	49.0 billion yen
		The number of customers returning to Wacoal's stores are low and the revenue is only slowly recovering.
		 In addition to poor performance in China, revenue in the U.S. has slowed down. Meanwhile, revenue in Europe
	＜YoY＞ +¥6.6 billion（+15%）		has been strong while the continuing depreciation of the yen against key currencies also contributed
＜planning difference＞ +¥0.03 billion（+0.1%	）	Despite their struggling EC sales, Peach John performed about the same as the same period of the previous year
			with store expansions and sales of Nanasai and Ai improving

Business Profit

2.4 billion yen

＜YoY＞ +¥0.4 billion（+21%）

＜planning difference＞ +¥0.6 billion（+34%）

Exceeded the plan due to improved domestic sales and SG&A expenses control

• Exceeded the amount of the same period of the previous year thanks to the reduction in fixed costs as part of the restructuring of Wacoal's earnings structure
• Decreased due to losses from Intimates Online, Inc. (IO)'s operations in China and the U.S.
• Peach John maintained a high level of profit, although profits were reduced due to increased sales promotion expenses and other factors

Operating Profit

2.5 billion yen

＜YoY＞ +¥0.01 billion（+1%）

＜planning difference＞ +¥0.6 billion（+36%）

About the same as 1Q of the previous year due to the inclusion of restructuring costs.

• Other expenses include restructuring costs incurred by the subsidiary, Lecien Corporation.

3

Next, please refer to page three. I will now explain the Q1 results.

Revenues for Q1 totaled JPY49 billion, a 15% increase YoY. Business profit was JPY2.4 billion. In addition to the effect of increased revenues, progress in profit structure reforms and other factors resulted in a 21% increase in profit YoY.

Operating income was JPY2.5 billion, about the same level YoY, due in part to restructuring costs incurred by a subsidiary, Lecien Corporation, specifically, costs related to production at the subsidiary.

Against the plan, sales revenue landed almost at the planned level due to a cautious outlook based on struggles in China and the slow recovery in Japan. Business profit and operating income were also cautiously estimated for the same reasons, but they have exceeded the plan due to further cost reductions and other factors.

Revenue and for FY2023 1Q Accounting Period

While progress is being made in domestic structural reform, both the U.S.'s poor percent in return on sales and SG&A ratio, have worsen.

Revenue YoY	（billions of yen）
Wacoal		+5.0
Wacoal Europe Ltd.		+0.9
Nanasai・Lecien・Ai		+0.6
Other overseas Corporations		+0.6
Peach John		Same as
	previous period
Wacoal International Corp. (U.S.)	ー 0.5
Wacoal China Co., Ltd.		ー 1.2
FX Impacts		+2.3

Sales margin	FY2023 1Q	FY2022 1Q
Wacoal	59.2%	60.6%
(Without the effect of settlement adjustments)	56.5%	56.8%
Peach John Domestic only	67.6%	68.2%
Wacoal International Corp. (U.S.)	54.4%	57.1%
Wacoal Europe Ltd.	57.5%	57.6%
Wacoal China Co., Ltd.	68.5%	68.0%

SGA ratio	FY2023 1Q	FY2022 1Q
Wacoal	56.4%	63.2%
Peach John Domestic only	51.8%	49.3%
Wacoal International Corp. (U.S.)	48.5%	42.4%
Wacoal Europe Ltd.	44.1%	41.8%
Wacoal China Co., Ltd.	83.8%	64.8%

Note: Wacoal Europe is calculated excluding brand amortization cost

Business Profit YoY	（billions of yen）
Wacoal		+1.2
Other overseas Corporations	+0.1

		Cost of sales
			Sales Profit ratio
	20.3
49.0	58.5%
			（ー0.1%）
vs FY2022 1Q
＋6.6 (＋15％)

28.7

SGA ratio

53.7％

（ー0.3%） 販管費

26.3

Nanasai・Lecien・Ai	+0.2
WEL	Same as
previous period
Peach John	-0.1
Wacoal China Co., Ltd.	-0.4
WIC	-0.7
FX Impacts	+0.1

Effect of change in	vs FY2023 1Q
revenue recognition to	＋3.8 (＋15％)
Wacoal sales revenue
is JPY 1.4 billion
FY2023 1Q	FY2023 1Q
Revenue	Sales margin

4

VS FY2022 1Q	Business Profit ratio
＋3.4 (＋15％)
		4.9％（+0.3pt）
Effect of change in revenue	2.4
recognition to Wacoal SG&A

expenses is JPY 1.4 billion

FY2023 1Q

Business Profit

Next is page four. This shows the main factors behind the YoY differences from sales revenue to business profit.

Sales revenue increased JPY6.6 billion YoY. While Wacoal's improved sales, continued strong performance in Europe, and the ongoing depreciation of the yen against major currencies contributed to this result, China suffered a significant decline in sales due to the re-expansion of infectious diseases and other factors, and the US also suffered from a reverse of the rapid recovery in the same period last year and a slowdown in consumption due to concerns about economic uncertainty.

In addition, Intimates Online, Inc., hereafter referred to as IO, acquired in August 2019, also experienced a significant decline in sales, as attempts to revamp marketing activities to attract new customers failed to produce results.

Profit on sales increased by JPY3.8 billion on the back of increased sales. The sales profit ratios in principal countries are as stated. In the US, the sales profit ratio deteriorated due to a change in the sales channel mix and higher labor costs.

Business profit increased due to contributions from Wacoal and other businesses, although the SG&A ratio in the US deteriorated due to the sluggish performance of IO.

FY2023 1Q Profit impact items

Operating income is similar to the same period of the previous year due to restructuring costs (other expenses) being included

Temporary expenses from restructuring are included and consist of:

• Recording of expenses in relation to the liquidation of a subsidiary of Lecian Corporation.
  ・Loss on sales of noncurrent assets, etc.

Increase in finance income (foreign exchange gains and revaluation of marketable securities gains and losses) and investment gains and losses by the equity method

Finance income

and expenses

Corporate income

tax expenses

（billions of yen）

Other income and

1.11

1.11

Non-controlling

expenses

3.58

interest

vsFY2022

0.06

0.09

1Q

vsFY2022

2.38

vsFY2022

2.47

＋0.67

2.47

2.40

1Q

（＋149％）

1Q

＋0.68

vsFY2022

-0.4

vsFY2022

（＋23％）

vsFY2022

vsFY2022

（-82％）

1Q

1Q

1Q

1Q

＋0.42

＋0.01

＋0.83

＋0.78

（＋21％）

（＋1％）

（＋51％）

（＋48％）

FY2023 1Q

FY2023 1Q

FY2023 1Q

FY2023 1Q

FY2023 1Q

Business Profit

Operating Profit

Profit before income taxes

Profit

Net Profit Attributable

and equity in net profit of

to Owners of Parent

5

affiliated companies

Please refer to page five.

Continuing from the previous page, from business profit to quarterly profit, the main factors behind the YoY differences are listed.

Operating income was flat YoY, due in part to other expenses, including restructuring costs at subsidiary Lecien.

Quarterly income before income taxes increased by JPY0.7 billion. The main financial income items are dividends received and foreign exchange gains. As a result of the above, income attributable to owners of the parent company increased JPY0.8 billion to JPY2.4 billion.