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Wacoal Holdings Annual Report to Shareholders, 'Transition to a Course of Growth'.

Tokyo, Japan, Sept 29, 2006 - (JCN Newswire) - Wacoal Holdings (TSE:3591; NQ: WACLY) has published its Annual Report to Shareholders for the year ended March 31, 2006. The Company reported an increase in consolidated net sales of 2.0% year on year, to JPY 164.1 billion. Operating and net income decreased due to the recording of extraordinary factors, however excluding these factors, operating income was up 57.0% year on year.

Wacoal laid the foundations for new medium-to-long-term growth through initiatives such as the transition to a holding company system and the introduction of a special voluntary retirement scheme. To raise business value by stepping up the pace of growth, the Company vigorously enhanced the operations of existing businesses, expanded its share of Japan's innerwear market, continued to rebuild and strengthen overseas operations, and developed peripheral businesses.

To download the Wacoal Holdings 2006 Annual Report, please visit the Company IR website at

Wacoal Holdings Annual Report to Shareholders, 'Transition to a Course of Growth'

Yoshikata Tsukamoto, Wacoal Representative Director, speaks about the launch of the Holding Company system, strategies for the future, corporate governance and his outlook for the Company in his 2006 Address to Shareholders.

"In October 2005, the Company changed its name from Wacoal Corp. to Wacoal Holdings Corp., which became the parent company of subsidiaries in the Wacoal Group. Under the holding company system, the roles of Wacoal Holdings and such Group operating subsidiaries as Wacoal are clearly defined. The holding company manages the Group and oversees operating subsidiaries, while the operating subsidiaries implement operations. This system enables the holding company to target growth and deploy resources on a Groupwide basis. Also, the delegation of authority and responsibility to the operating subsidiaries enhances the efficiency and dynamism of operational implementation. Moreover, because it facilitates reorganization by business type or function, the holding company system is the most suited to pursuing business tie-ups and mergers and acquisitions aimed at achieving corporate structural reform to reflect the times.

Medium-to-Long-Term Strategies

"At present, Wacoal Holdings and its operating subsidiaries are taking steps based on the Corporate Activation Project 21 (CAP21), which sets out medium-to-long-term strategies for enhancing business value. CAP21 (Medium-to-Long-Term Growth Strategies) formulates new business strategies that will enable the Company to make a fresh start and step up the pace of growth. Our transition to the holding company system resulted from the implementation of one such strategy. Guided by CAP21 (Medium-to-Long-Term Growth Strategies), we are reorganizing and strengthening existing businesses. Those efforts focus on rigorously heightening the efficiency of management systems and operational processes to bolster competitiveness and create an unshakable platform for growth. Further, not limiting ourselves to independent business development, we are cultivating businesses in areas that promise growth through the active pursuit of mergers and acquisitions, strategic operational tie-ups, capital tie-ups, and OEM. For example, in June 2006 the Company entered into an operational and capital tie-up with Peach John Co., Ltd., which mainly conducts mail-order sales of innerwear. Very popular among women in their teens and 20s, Peach John has grown rapidly in recent years.

The Company's overriding management goal is to benefit society at large by enabling women the world over to express their beauty. Also, in our business and management activities we seek to create value and establish a reputation befitting an international brand. Mindful of those management goals, we will implement the strategies of CAP21 (Medium-to-Long-Term Growth Strategies), aiming to surpass consolidated net sales of JPY 200 billion, ROE of 6%, and an operating income margin of 9% by the year ending March 2011. To meet those targets, we will implement a strategy of actively investing in businesses to realize new operational expansion. We aim to increase sales in markets in Japan, the United States, China, and Europe. Moreover, we will mull forays into markets in new regions.

Business Review

"In fiscal 2006, consolidated net sales increased 2.0% year on year, to JPY 164.1 billion, operating income was down 88.7%, to JPY 1.3 billion, and net income decreased 58.5%, to JPY 2.8 billion. The decline in operating income was mainly due to the recording of a government subsidy of JPY 7.1 billion in the previous fiscal year and the November 2005 recording of JPY 6.9 billion associated with special retirement related expenses.

Excluding such temporary increases and decreases in income due to the recording of extraordinary factors, operating income was up 57.0% year on year. The main contributions to higher net sales came from brisk sales of Wacoal-brand Hip Walker and Wing-brand Style Up Pants. Also-a focus of our promotional efforts in winter-sales of innerwear products designed for cold weather were favorable, centered on the Kaiteki NAVI lineup, which we launched in response to the Japanese government's "Warmbiz" environmental initiative to encourage the wearing of thermal business apparel to minimize the use of heaters in winter. On the other hand, net sales growth was held back by generally sluggish sales of mainstay brassieres and continuing weak mail-order catalog sales. Overseas, business grew favorably, with the exception of operations in France, where consumer spending remained flat. Wacoal America, Inc., posted particularly strong growth, with sales up more than 15% year on year.

Corporate Governance

"The basic corporate governance policy of Wacoal Holdings is to continue heightening enterprise value by enhancing the efficiency and transparency of management from the perspective of all of the Company's stakeholders. In 2003, we established the Disclosure Committee to strengthen corporate governance and ensure the reliability of financial and other information that we issue. That committee checks the propriety of internal controls and-pursuant to Section 302 of the U.S. Sarbanes-Oxley Act-the propriety of disclosure with respect to annual reports filed with the U.S. Securities and Exchange Commission and the accuracy of disclosed information.

In 2005, due to the discovery of potential defects in certain products sold, the Company provided replacements or refunds. In addition, there was a leakage of the personal info-rmation of certain customers of Wacoal's Internet shopping service. To restore customer confidence, we strengthened our quality control system through stringent implementation of an ISO quality management system and other measures. Further, aiming to deal with overall management risks, we changed our Crisis Management Committee to the Risk Management Committee, under which we established a subcommittee responsible for measures relating to accidents and disasters. Also, we created a system to counteract information security risks based on the establishment of a new department that is dedicated to addressing such risks.

In addition, by introducing the holding company system we clearly separated the role of the holding company, which undertakes Group management and oversees operating subsidiaries, and the role of the operating subsidiaries, which implement operations. We plan further development of systems for oversight and operational implementation.

Returns to Shareholders

"Our basic policy for returns to shareholders is to continue steady cash dividend payments, invest actively to enhance earnings and business value, and increase earnings per share. The Company intends to invest retained earnings to increase profit, raise business value, and enhance future returns to shareholders. Those activities will concentrate on the creation of new sales areas through the development of SPA shops, the development of new points of contact with customers, aggressive investment in overseas operations, and investment in new businesses.

Despite a significant decrease in earnings associated with such factors as the recording of special retirement related expenses, in the fiscal year under review we maintained cash dividends per ADR at the previous fiscal year's level of JPY 100.


"In Japan, the women's fashion apparel industry promises robust growth as economic recovery bolsters consumer confidence. As the second year of the government's "Coolbiz" environmental initiative, 2006 will likely see stepped-up efforts to encourage the wearing of light business apparel to curb the use of air conditioners in summer. Amid those business conditions, the Company will redouble efforts to develop products that earn customer endorsement by fortifying new strategic product categories, such as Style Science lineups. At the same time, we will decisively implement measures aimed at expanding SPA operations and increasing new points of contact with customers. And, we will accelerate growth by implementing the strategies of CAP21 (Medium-to-Long-Term Growth Strategies).

In the current fiscal year, ending March 31, 2007, we project increases of 2% in consolidated net sales, to JPY 168.0 billion; 9.5 times in operating income, to JPY 12.6 billion; and 2.8 times in net income, to JPY 8.0 billion. The main factors contributing to the significant increase in operating income will be: improved return on sales through the reduction of such items as selling, general and administrative expenses; the absence of the JPY 6.9 billion special retirement related expenses, which was temporarily incurred due to the October 2005 implementation of the special voluntary retirement scheme; the absence of a JPY 0.6 billion additional retirement benefit expense that was recorded in the year under review stemming from the dissolution of Fukushima Wacoal Sewing Corp.; and lower personnel costs resulting from special voluntary retirement."

(Excerpts from the 2006 Wacoal Annual Report to Shareholders)

To download the Wacoal Holdings 2006 Annual Report, please visit the Company IR website at or the JCN Network Annual Report Gallery at

About Wacoal Corporation

Wacoal (TSE:3591; NQ: WACLY) has led the Japanese market for women's innerwear since its establishment in 1949. Still holding a dominant share of the home market, the Company is steadily growing sales in North America, Europe, and Asia. In October 2005, the Company changed its name from Wacoal Corp. to Wacoal Holdings Corp., which became the parent company of subsidiaries in the Wacoal Group. For more information, please visit

Source: Wacoal Corporation

Wacoal Holdings Corp.
Tadahiro Kondo
Tel: +81-75-682-1028
Fax: +81-75-672-3219

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Publication:JCN Newswires
Date:Sep 30, 2006
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