(Filed Under Financial and General Interest News). Wacoal Holdings Corp.’s income for the year ended March 31, 2013 rose 10.3% while sales rose 3.1%, despite “an impairment loss with respect to the intangible fixed assets of our subsidiary Peach John Co., Ltd. as well as its subsidiaries.”
For the year, Wacoal earned 7,623 million yen (roughly $93 million) on sales of 177,154 million yen (roughly $2.2 billion) compared to net income of 6,913 million yen on sales of 171,897 million yen for the year ended March 31, 2012. Looking ahead at the current year ending March 31, 2014, Wacoal said it expects net income to rise to 8,000 on sales of 192,000 million yen.
Peach John is a Japanese mail order retailer of lingerie and women’s apparel that was acquired by Wacoal during the last decade. The company said in an announcement a few days prior to the year end release of results that “Because we utilize U.S. accounting standards, the impairment loss will be recorded as an operating expense affecting our operating income.” In a statement on January 31, 2013 Wacoal had said it expected operating income for the year to be 11,500 million yen. “The effect on our net income will be a decrease of 1,349 million yen,” it added.
According to Wacoal, “We examined potential impairment losses on intangible fixed assets when we reviewed the financial results of Peach John for the fiscal year ended March 31, 2013, and in light of our forecast of financial results at this time. As a result, we have determined that the fair value of the intangible fixed assets has declined, and accordingly, we will record an impairment loss of 2,852 million yen in total (1,587 million yen in respect of the trademarks, 68 million yen in respect of the list of customers and 1,197 million yen in respect of goodwill, all of which are recorded as intangible fixed assets).
At Peach John, for the year, the company reported an operating loss of “2,701 million yen (as compared to 529 million yen of operating income incurred for the previous fiscal year).”
Despite its problems with Peach John, Wacoal emphasized in its annual statement that “overall sales increased as compared to the previous fiscal year mainly due to the expansion of sales attributable to our businesses in the United States, and also due to the inclusion of the business results of Eveden Group Limited.”
Speaking directly about its North American operations, the company explained, “we made aggressive efforts in expanding our U.S. market share and enhancing our product lineup mainly at department stores, which are our major clients, as well as in expanding our sales areas and channels. Sales exceeded the results for the previous fiscal year as a result of favorable performance shown by our core brassiere products and the growth achieved in our internet sales and business in Canada. With respect to profitability, operating income exceeded the results for the previous fiscal year following an increase in sales. The exchange rate in the fiscal 2013 was 82 yen per dollar (compared to 78 yen per dollar for the previous fiscal year).”
Meanwhile, the company’s business in Japan remained stable. “In summary, overall sales attributable to Wacoal Business (domestic) remained unchanged from the results for the previous fiscal year, due to steady performance of our core operating business within Wacoal Corp. With respect to profitability, our operating income exceeded the results for the previous fiscal year due to improved profit margins from Wacoal Corp.”
It was a difficult year for the company in China. “We made efforts in strengthening our product lineup and improving the retention rates of in-store sales representatives. Although sales showed slowed growth due to the economic slowdown and the anti-Japan rallies that took place in China, overall sales from our business in China exceeded the results for the previous fiscal year due to the improved sales force and expansion of store openings. In addition, sales of our new fashionable and price-competitive brand La Rosabelle, targeting the middle-class market, showed strong performance after opening two stores in Beijing. With respect to profitability, we recorded an operating loss as a result of an increase in labor costs and the impact of the anti-Japan rallies, despite our efforts in reducing costs.”
Wacoal again acknowledged problems with its Eveden subsidiary. “While operating income from Eveden was less than initially expected due to the impact of the economic slowdown seen in European countries and currency fluctuations, sales exceeded our initial plan on a local currency basis as a result of favorable expansion generally in the United Kingdom and North America.” The company reported sales of “26,444 million yen (an increase of 27.2% as compared to the previous fiscal year)” and operating income of 947 million yen (an increase of 301.3% as compared to the previous fiscal year).” That roughly corresponds to operating income of $11.5 million on sales of $322 million.
In the year ahead, the company said it expects both Wacoal and Eveden products to be a significant part of its U.S. growth plans. “Mainly in the United States, we will make efforts to further enhance our product lineup, including by launching new products, and to increase our sales and improve profitability, by expanding sales channels and regions by utilizing the resources of Eveden.”
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