(Filed Under Financial and General Interest News). Wacoal sales in the U.S. fell 1%, on a local currency basis, during the fiscal year ended March 31, 2019. Overall, the Japan-based firm, saw sales drop by 0.8% while net profit plunged 96.5%.

Wacoal explained that “in the United States, while e-commerce sales through our e-commerce website and third-party e-commerce websites were strong, sales were affected by the weak over-the-counter sales at department stores (physical stores) and closings of certain department stores that went bankrupt.”

Overall, Wacoal, which operates in Japan, China, other parts of Asia, Europe and North America, reported earnings of just 341 million of yen (about $3.1 million at current exchange rates) on sales of 194,201 million yen (about $1.8 billion), compared to earnings of 9,745 million yen on sales of 195,725 million yen in the year ended March 31, 2018.

Wacoal addressed the 0.8% drop in overall sales explaining, “while e-commerce sales from our business in China expanded and sales from Nanasai Co., Ltd. showed significant growth resulting from its active construction business, overall sales were affected by the slow growth in our domestic wholesale business of Wacoal Corp. due to weak sales from department stores and decreased revenue from our domestic consolidated subsidiaries.” It added, “consolidated operating income decreased by 58% as compared to such consolidated operating income for the previous fiscal year. This decrease was due to the impact of the recognition of the impairment charges on goodwill and other intangible assets with respect to Peach John, while Wacoal Corp. recorded an increase in profit as a result of a record-high gross profit rate with improved business efficiency and our overseas business recorded an increase in profit as a result of an increase in revenue. Ever since 2008 when Peach John became a wholly owned Wacoal subsidiary, the demand for undergarments, which strongly reflects consumer trends, decreased, and the size of the market for catalog mail-order business declined, and due to failure to achieve the anticipated growth expansion, we have recorded impairment charges on intangible assets several times. Although we have formed a growth plan under which we have made efforts to change the brand image, strengthen product development, invest resources into our retail sales and e-commerce sales, as well as expand our business overseas, we did not achieve profitability. As a result of our reevaluation of fair value of goodwill and trademarks in connection with our consideration of the current forecast of business results, we ended up recording impairment charges of 5.64 billion yen [about $51.4 million] on intangible assets after a series of assessments.”

Addressing some of its other businesses outside of Japan, Wacoal reported sales “increased by 2% from Wacoal Europe, and increased by 10% from Wacoal China Co., Ltd. as compared to such corresponding sales for the previous fiscal year.” The company continued, “e-commerce sales in Europe showed significant growth along with the strong sales of our plus-size brand “elomi,” despite the impact of the inventory adjustments at certain department stores in the United Kingdom, where business conditions deteriorated. In China, we enhanced our customer data marketing and distribution system, and expanded growth through third-party e-commerce websites. Over-the-counter sales at department stores were also strong as a result of our successful sales promotion conducted during China’s high-demand seasons.”

By far the largest portion of Wacoal’s sales comes from Japan, which accounted for 143,196 million yen of the overall total in the year ended March 31, 2019. 21,057 million yen in sales came from Asia/Oceania and 31,472 million yen (about $287 million) came from Europe and North America combined. — NM

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Published 05-16-2019 by Nick Monjo