Wacoal to amend forecast for fiscal year 2009
Wacoal Holdings Corp reported Consolidated Results for the Six-Month Period Ended September 30, 2008. Net sales for the year increased 6.0 percent on a yen basis to 89.5 billion yen ($845.6 million), compared to 84.5 billion yen a year ago. Operating income decreased 9.4 percent on a yen basis to 8.1 billion yen ($76.8 million) compared with 9.0 billion yen in 2008. Net income increased 118.8 percent on a yen basis to 4.1 billion yen ($38.7 million).
Earnings per American Depositary Share (5 shares of common stock) were 143.1 yen ($1.35) on 28,668,000 average ADS shares outstanding compared to 66.7 yen earnings per American Depositary Share with 28,115,000 shares outstanding in the prior year.
During the second consolidated quarter of the current fiscal year, corporate profits continued to decrease due to the economic slowdown in the U.S. that began with the sub-prime mortgage crisis, steep rises in the price of crude oil and a decrease in exports, all of which have caused a shift in the Japanese economy from deceleration to stagnation.
Domestically, business results have been sluggish across many sectors, including department stores and mass merchandisers, due to a decline in consumer spending as a result of a growing anxiety amongst consumers and increased consumer focus on their basic living needs. Results in the women's fashion and clothing industry have also been sluggish.
In this environment, our group (primarily Wacoal Corp., which is our core operating entity) sought to improve the strength of its products and endeavored to develop products that are responsive to market trends.
Overall sales for Wacoal Corp. slightly exceeded the results from the same period during the previous fiscal year. Profit exceeded the results for the previous fiscal year due to an increase in sales and an improved return on sales.
Consolidated business results for the first two quarters of the current fiscal year were as follows: sales were 89,585 million yen (an increase of 6.0% from the same period of the previous fiscal year); operating income was 8,133 million yen (a decrease of 9.4% from the same period of the previous fiscal year); income before income taxes, equity in net income of affiliated companies and minority interests was 6,610 million yen (a decrease of 35.2% from the same period of the previous fiscal year); on the other hand net income was 4,103 million yen (an increase of 118.8% from the same period of the previous fiscal year).
The overall cost-to-sales ratio in the first two quarters of the current fiscal year improved by 1.3% compared to the previous fiscal year as a result of a reduction in Wacoal Corp.'s inventory, including in stores, and a minimization of losses due to lower valuations. On the other hand, although our sales have increased due to the consolidation of business results of Peach John starting from the current fiscal year, operating income and net income before incometaxes for the second quarter significantly decreased at each level compared to the results from the previous fiscal year.
In addition to the decline in operating results and effects by currency exchange fluctuations, the decrease in our operating income was due to several factors, including an increase of approximately 400 million yen for pension expenses of Wacoal Corp., a loss of approximately 600 million yen in connection with the dissolution of Tokai Wacoal Sewing Corp. as of the end of June and the effect of a one time gain from the sale of fixed assets, valued at approximately 500 million yen, during the same period of the previous fiscal year.
Our income before taxes, equity in net income of affiliated companies and minority interest was affected by approximately 2.2 billion yen of valuation loss on securities held by the Company as a result of the decline in stock prices as well as the effect of a one-time gain from the sale of securities during the previous fiscal year or approximately 600 million yen. On the other hand, net income significantly increased as a result of the loss of 4.7 billion yen of equity in net income of affiliated companies in relation to the shares of Peach John recorded during the previous fiscal year.
These special factors and fluctuation in profits due to one-time events have been incorporated into our forecast of consolidated business results announced on May 9, 2008.