INTEGRATEDREPORT 2020

Wacoal Holdings Corp.
29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan
https://www.wacoalholdings.jp/en/

CONTENTS

CONTENTS

02 Group Philosophy
Our Corporate Website

04 RENEWED GROWTH

44	ESG	 04 	COVID-19: Impact and Measures	 46 	Human Resources Management	 06 	Reforming Ourselves to Win Out during

	 48 	Sustainability

and after the COVID-19 Pandemic

	 08 	Evolving Our Value Creation Processduring and after the COVID-19 Pandemic

	 10 	Specific Value Chain Reform Initiatives

	 50 	Management Team	 52 	Corporate Governance

Wacoal Holdings Corp.’s Website
https://www.wacoalholdings.jp/en

Investor Relations

Sustainability

https://www.wacoalholdings.jp/en/ir

https://www.wacoalholdings.jp/en/sustainability/	 58 	Dialogue	 12 	A Message from the President	 16 	A Message from the Director
in Charge of Finance62	FACTS	 20 	Medium-Term Management Plan
(Fiscal 2020–Fiscal 2022)

64 Consolidated Financial Highlights
66 Financial Highlights by Segment
67	Share of Sales by Channel(Principal Subsidiaries)

22	STRATEGY

68 11-Year Financial Summary	 24 	Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)

	 34 	Anticipating a Post-COVID-19 Society(3) Other Businesses	 42 	Anticipating a Post-COVID-19 Society(4) Production System Realignment

Sustainability
Sustainability Policy
The Wacoal Group’s Basic Policies on CSR and
Relations with Stakeholders
Group Philosophy
A Message from the President
Material Issues in Wacoal’s Business Activities
Integrated Report

IR News

Focus Areas of Our Initiatives (ESG Issues)
CSR Procurement
Corporate GovernanceCompliance
Risk Management

70 Management’s Discussion and Analysis
76 Consolidated Balance Sheets78 	Consolidated Statements of Income
Consolidated Statements ofComprehensive Income(2) The Wacoal Business (Overseas)	 40 	Anticipating a Post-COVID-19 Society

Investor Relations
Management Information
Financial Indicators
Monthly Sales Data
IR LibraryDividend and Share Repurchase
Shareholder Benefits
Stock Information

79 Consolidated Statements of Equity
80 Consolidated Statements of Cash Flows81 	Notes to Consolidated Financial Statements
114 Principal Subsidiaries
116 Corporate Information
117 Investor Information

Editorial Policy
In accordance with international norms for integrated reporting, the Wacoal Group has
been issuing integrated reports since FY2011 as part of its communication with shareholders and other investors. This integrated report explains the Wacoal Group’s value
creation activities not only through financial information but also through nonfinancial
information about unique, significant assets and other facets of the Group’s business.
Further, the website of Wacoal Holdings Corp. includes a wide range of information
about the Group. We hope that referring to this integrated report in conjunction with thewebsite will further understanding of the Group. Going forward, we will continue
pursuing an editorial policy that responds to changes in reader expectations.
Forward-Looking Statements
Statements contained in this integrated report that are not historical facts are forwardlooking statements, which reflect the Company’s plans and expectations at the time ofwriting. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or
achievements to differ materially from those anticipated in these statements.

INTEGRATEDREPORT 2020

Wacoal Holdings Corp.
29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto, 601-8530 Japan
https://www.wacoalholdings.jp/en/

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 202001

Group Philosophy

O u r M i ssi o n

We will contribute to society by helping women
to express their beauty.

Our VisionWe, the employees and management of Wacoal,
will maintain a refined corporate culture based on
mutual trust and will continually strive to
make the Company a global leader in the industry.

Our Value

1. Create products loved by customers
2. Develop new products that meet the needs of the times
3. Conduct business in a fair manner with a forward focus
4. Build a better Wacoal through better human resources

Viewing the COVID-19 crisis as providing a favorable
opportunity to move forward dramatically in a new era,
we will advance bold self-reform.
—Enabling Wacoal to create the value customers want in a new era—

Since the early months of 2020, the spread of COVID-19
has been wreaking havoc globally. As a corporate groupwith businesses worldwide, the Wacoal Group has been
severely affected by the COVID-19 pandemic. Although
the way out of the crisis and the direction in which theworld will develop after the crisis remain unclear, we must
convert these difficulties into a favorable opportunity tomove forward dramatically in the coming new era.
Historically, Wacoal has overcome unprecedented crises
through concerted Companywide efforts. After emerging
in the United States in the 1960s, the women’s liberation
movement spread to Japan, taking the form of a no-bra
movement in the 1970s. In response to the serious impactthat this movement was having on Wacoal at the time, its
founder Koichi Tsukamoto delivered a stirring message toemployees, emphasizing that the Company would not beable to overcome the crisis unless all of its employees
forged ahead with determination and solidarity. Further,to impart his sense of crisis to employees he had his hair
cropped short and vowed to relaunch Wacoal. Thisurgency proved very persuasive and heightened employee
solidarity, which then became a significant driver ofgrowth. For example, the unification and mobilization of
employees led to the creation of a seamless cup bra, amajor hit product that captured the hearts of womenseeking greater expression of their identity in a new era.
In regard to self-reform, I believe we have reached amoment of truth that will show whether we can create thevalue needed in a new era and thereby remain a company
society views as truly essential. Without fail, we will overcome the current challenges by scrutinizing existing business models and undertaking bold reform that is
unconstrained by the past or by established practices. In
conjunction with these efforts, anticipating the rapidchange in values that is stemming from the COVID-19
crisis, we will foster personnel who are able to put theGroup Philosophy into practice through the creation of
products loved by customers and the development of new
products that meet the needs of the times. Further, we willproactively develop a corporate culture that is conducive
to bold risk-taking for growth.
By ensuring that Group employees worldwide have ashared sense of crisis and a common vision of the futureand by building relationships of mutual trust with all
stakeholders, we will become an entity that society needs
more than ever. For this reason, I would like to ask all
stakeholders for their continued support.


September 2020

5. Fear not failure and boast not of successYoshikata Tsukamoto
Chairman and Representative Director
Wacoal Holdings Corp.

Founder Koichi Tsukamoto (1970)02

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

03

RENEWED GROWTH

RENEWED GROWTH

COVID-19:

Impact and Measures

Steps aimed at preventing the spread of COVID-19, such as the suspension of store operations and restrictions on going outdoors, are having an extremely significant effect on the Wacoal Group’s business activities. While giving first priority to thehealth and safety of customers, business partners, and employees, we are increasing the pace of digital transformation initiatives launched before the pandemic and revising existing measures and expenditure plans. By objectively analyzing changes in
consumer values and distribution channels and by undertaking selection and concentration of businesses Groupwide, we willreform ourselves into a business organization that generates stable profits.

The Wacoal Group’s Monthly Sales and Measures in Japan and Overseas (2020)(%)

Wacoal Corp. (Japan)
120
Wacoal America(excluding Intimates Online)
Wacoal Europe
100Wacoal China(YoY change, on a productdelivery basis)

109

109

100

103

97

98

90

111
95

96
91
90

89
84

75

80
73

71
60

63
50

52

50

76

45
45
31
28
27

25

19
0

Jan.

Feb.

Mar.

Apr.

Reopens most stores

Apr. 20: Reopens all stores acoal AmericaW(excluding Intimates Online) ockdown. Suspends store operations,Lexperiences prohibition on going outdoors,
conducts telecommuting

Apr. 29: Begins steadily reopening stores

Wacoal Europe

Lockdown. Suspends store operations,experiences prohibition on going outdoors,
conducts telecommuting

Suspends store operations, except those ofcertain stores in Australia

Mar. 1: Implements staggered commuting
and telecommuting (office workers)
Mar. 2: Announces countermeasures(telecommuting, business trip
prohibition, etc.)
Manufactures masks at plant in Kyushu anddistributes them to all employees

Apr. 3: Restricts store fittings
Apr. 7: Furloughs non-office workers(working or living) in regions coveredby state of emergency declaration(suspends operations)Apr. 8: Establishes a weekly suspension-ofoperations day (office workers)
Apr. 17: Suspends operations at all department stores and specialty stores(continues operations at all generalmerchandise stores), furloughs
non-office workers

Mar.

Apr.

Wacoal China

Jan. 23: Closes 10 stores in Wuhan,
furloughs sales and marketing
personnel, suspends operations at
60% of stores and shortens
business hours at 40% of storesJan. 24: Prohibits travel to Wuhan andrefrains from business trips toother regions of China
Jan. 31: Directs sales personnel to wear
masks (notification on website)

Mid-Feb.: R eopens operating bases andplants, has half of personnel
telecommute, suspends operations at 30% of stores andshortens business hours
at 70% of storesFeb. 19: Refrains from business trips andprivate trips overseas
Feb. 21: Establishes the COVID-19
TaskforceWacoal Corp. (Japan)

May

Jun.

Second half of May: Reopens 60% of stores

Jul.

Jun. 29: Reopens most stores

Opens all stores

Jun. 15: Begins steadily reopening stores

Mid-Jul.: Reopens most stores

May 1: Begins “support illumination” of
Shin-Kyoto Building
May 26: Reopens stores
Factories: Suspends operations in Kyushu
and Hokuriku and continues
partial operations in Niigata

Jun. 15: Ends weekly suspension-ofoperations day, sees attendance of50%, ends prohibition on domestic
business trips, and prohibits
overseas business trips in principle
Factories: Suspends operations four days
per week in Kyushu and Hokuriku
and conducts operations in
NiigataJul. 1: Seeks biweekly telecommuting
Factories: Conducts operations (Kyushu,
Hokuriku, and Niigata)

May

Jun.

The Impact and Developments of the COVID-19 Pandemic (2020)
Jan.

Developments Worldwide

Developments in Japan

04

Feb.

Jan. 20: In China, new type of pneumonia is recognized as official disease.
Jan. 23: W uhan is locked down.
Jan. 30: W
 HO declares global health emergency.

Feb. 11: W
 HO names the virus COVID-19.
Feb. 25: O nly 30% of small and medium-sizedcompanies in China restart operations.

Mar. 11: W
 HO declares global pandemic.
Mar. 24: IOC announces postponement of the Tokyo
2020 Olympic and Paralympic Games.

Apr. 3: Number of infected people worldwide
surpasses 1 million.
Apr. 8: Wuhan lifts lockdown.

May 21: Number of infected people worldwide
surpasses 5 million.

Jun. 28: N umber of infected people worldwide
surpasses 10 million.

Jan. 15: F irst infected person is recorded in Kanagawa
Prefecture.
Jan. 28: J apan classifies COVID-19 as designatedinfectious disease.
Jan. 31: M inistry of Economy, Trade and Industry
establishes taskforce.

Feb. 3: Diamond Princess berths at Yokohama.
Feb. 13: In Kanagawa Prefecture, first COVID-19 deathis confirmed.
Feb. 25: G overnment approves Basic Policy for Novel
Coronavirus (COVID-19) Control, calling fortelecommuting and other measures.

Mar. 9: J apan restricts admission from all regions ofChina and South Korea.
Mar. 14: J apan enforces revised New Influenza
Special Measures Act.
Mar. 19: N ovel Coronavirus Expert Meeting isconvened.

Apr. 7: State of emergency declaration is issued(seven prefectures).
Apr. 8: Department stores and other businesses
temporarily suspend operations.
Apr. 16: Nationwide state of emergency declaration
is issued.

May 1: The Ministry of Economy, Trade and Industry
starts accepting requests for the Subsidy
Program for Sustaining Businesses.
May 3: Number of infected people in Japan surpasses
15,000.
May 14: State of emergency declaration is lifted by
39 prefectures.
May 21: State of emergency declaration is lifted bythree prefectures in Kansai.
May 25: State of emergency declaration is lifted by
five prefectures.

Jun. 2: F irst Tokyo Alert calls on city’s residents to be
vigilant.

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

Jul.

Jul. 7: C umulative number of infected people in Japansurpasses 20,000 (excluding infected people
from Diamond Princess).
Jul. 17: P
 CR tests and other measures become
available for people without symptoms.

05

RENEWED GROWTH

RENEWED GROWTH

Reforming Ourselves to Win Out during
and after the COVID-19 Pandemic

Worldwide, Wacoal creates offerings with the aim of helping women to express their beauty. The most significant form of valuethat we provide is through the continued creation of products loved by customers and new products that meet current needs.
Given that customers’ behavior and values have changed in many different ways due to the COVID-19 pandemic, we are changing how we view our research and sales capabilities as value-creating assets. By leveraging digital transformation to realize
customer-focused value chain reform, we will evolve our capabilities as an organization.

Our Unique Capabilities
as an Organization

Distribution channel
trendsResearch & Development

Product Planning bundant physiqueA­measurement dataAccumulated knowledgeof the Human Science
Research Center nique designing for optiU
mal wearing comfort
An integrated manufacturing system responsive tomarket feedback xisting distribution
E
channels decliningShift to e-commerce
accelerating
Role of stores changing

Implementation ofCustomer-Focused
Self-Reform

Utilization of­customer data

Integration andcoordination of
online and off-line
operations

Livecommerce*
AI-enabled­customer services*A combination of
livestreaming and e-commerce, which has become
popular in Asia,
particularly in China

Telecommuting spreadingDress becoming informal
Consumption becoming
budget-minded igital transformationDaccelerating
Importance of customerfocused digital marketing
increasing

Services for­customers’
contactless needs

Products andservices catering
to new lifestyles

Changes among
consumers

Technologicalinnovation

TRANSFORMATION

Dramatic Changes due tothe Pandemic

WITH / AFTER COVID-19

Production /Quality Control

 dvanced sewing skillsAA unique quality control
systemSales

DigitalTransformati on(DX)

Evolving Our
Unique Capabilities
as an Organization

3D body scanners

 ystemized sales training
SPowerful brands

Chat consulting

Industry and industry
structure trends

Smart factories

RFID-enabledlabor savings

 idrange to high-end
Mapparel market slumping
and industry shakeout
accelerating
New country risk emerging(in relation to the establishment of materials procurement networks)

Telecommuting

Smart logistics
warehouse
operations

Collaboration withother industries

Seamless online /­off-line shopping
experiencesWork-style reform,
productivity
enhancement06

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

07

RENEWED GROWTH

RENEWED GROWTH

Evolving Our Value Creation Processduring and after the COVID-19 Pandemic

The Group will maximize and optimize the various assets that it has developed—including physical, financial, trust-related,* andorganizational assets—and advance medium- to long-term growth strategies to resolve material issues and enhance enterprisevalue even further. Through rigorous, customer-focused value chain reform as well as the evolution of our value creation
process, we will continue bringing to market products and services that enrich society.
* Wacoal defines “trust-related assets” as assets that are comparable to human assets or customer assets because they increase or decrease depending on relationships of trust with
the Company. Trust-related assets differ from organizational assets, which are entrenched in our organization and not dependent upon such relationships as employment or business
transactions.

Materiality

Value chain

Customer-focused value chain reform and evolving the organization’s unique capabilities
through digital transformation

Provide safe, dependable,
high-quality products andservices

Changes inexternal andbusiness
environments

Value provided by Wacoal

Business strategies
Implement the mediumterm management plan
Take maximum advantage of management
resources
Deploy capital optimally

Create a business organization and culture that are fairand in which people areambitious and enjoy their
work

Contribute tosociety by helping
women to express
their beauty

Changes incustomer
needs

R&D

Ensure breast care support
for women around the world

Build CSR procurement
partnerships founded on
mutual trust andcooperation

Product Planning

Procurement

Production

Sales / Marketing

Assets and competitive
advantages developed

Physical Assets
 roup factories in JapanG
and overseas
Appealing sales areas
and a rich product lineup

New products meeting current needs

ESG activities

Tangible Assets
Continue the enhancementof corporate governance

Organization’s
evolved, uniquecapabilities

Products loved bycustomers

Financial Assets
Abundant capitalStrong financial
foundations

Intangible Assets
Trust-related Assets

Organizational Assets

 xtensive and diverse
E
groups of specialists
Trusted brands andrelationships withcustomers
Social contribution
through businesses
Favorable business
partnerships

Abundant physique
measurement data andaccumulated knowledgeof the Human Science
Research Center
Original design andmanufacturing technologies and quality control
systemThe beauty advisor
training system

Toward sustainable
development
Toward a society thatleverages diversity
Toward highly transparent
organizational systems

Group Philosophy

Our Mission

Our Vision

Business management based on mutual trust08

Our Value

Helping women to express their beauty

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 202009

RENEWED GROWTH

RENEWED GROWTH

Specific Value Chain Reform Initiatives

Anticipating the changes in consumer society that are likely to stem from the COVID-19 pandemic, we are reforming our value
chain to evolve our unique capabilities as an organization.
In advancing many different types of initiatives, the Wacoal Group is clearly establishing their connection to six material
issues, which it identified in light of the Group Philosophy and mutual trust-based business management—a core management
approach since the Group’s founding. As a result, the unique capabilities of our organization are evolving in ways that enhanceenterprise value and contribute to the overall progress of society.

Value Chain

Priority Tasks

R&D / Product Planning

Procurement / Production

Evolve a customer-focusedvalue chain

Establish a global production and procurement
systemAdvance responsible
procurement activities

Utilize innovative technology to realize sustainablegrowthSales / Marketing

Strengthen measures in
response to structuralchanges in distribution

Six Material Issues
Contribute to society by helping women to express their beauty

Provide safe, dependable,
high-quality products andservices

Create a business organization and culture thatare fair and in whichpeople are ambitious andenjoy their work

Measures Going Forward

Ensure breast care
support for womenaround the world

Build CSR procurement
partnerships founded on
mutual trust andcooperation

Details

Continue the enhancement of corporate
governance

Related Material Issues

Step up innovation that resolves the issues of customers and heightens theirsatisfaction

Use purchasing data and 3D measurement data as the basis for developing new products and services and hypothesis verification

Develop new products catering to changes in customers’ purchasing behavior

Develop new products catering to the demand resulting from telecommuting and other aspects of new lifestyles

Reorganize brands and optimize inventories to reflect changes in points of contact
with customers

Reduce brands and product groups by approximately 30% (Wacoal Corp.)

Introduce new high-value-added products that are borderlessUtilize the findings of human science research globally and expand amphi in the Chinese market

Advance business activities and product development that reduce environmental
burdenDevelop environment-friendly materials and incidental materials and take measures to eliminate plastic packaging

Strengthen quality assurance efforts continuously

Strengthen management of the in-house system for the examination of labeling expressions with a view to eliminating serious quality problems

Strengthen production planning and management systems that span the Group
laterally

Establish a highly efficient production system through capacity management that spans factories

Coordinate the Group’s materials procurement capabilities

Procure common materials for the Group and unify quality standards

Increase technical support to enhance the quality and technical levels of overseas
Group factories

Develop technicians and realize a flexible production system

Build a logistics system that can adapt to changes in the retail environment

 xpand logistics center with the aims of boosting the growth of the in-house e-commerce business and increasing the efficiency of shipping operations (scheduledE
to start up in autumn 2022)

Advance procurement activities that encourage the addressing of labor issues andrespect for human rights

Continue to conduct on-site audits and extend the coverage of CSR-focused procurement activities

Advance environment-friendly procurement activities

Advance procurement of environment-friendly materials and analyze environmental activities throughout the supply chain

Conduct relationship management that utilizes customer data

Utilize customer data to increase the “lifetime value” of customers

Utilize innovative technology to realize sustainable growth (strengthen measures
for the health and safety of customers and employees)

 ccelerate the introduction of 3D body scanners and AI-enabled customer service systems
AExamine and advance new customer service systems, including remote customer services
Advance contactless customer service formats through the introduction of the aforementioned

Strengthen measures in response to changes in distribution channels

Increase in-house e-commerce sales and promote the transition to directly managed sales areas

Integrate and coordinate online and off-line operations

Expand the network of customer-focused services and maximize store value

Conduct personalized marketing activities

Strengthen efforts to build digital marketing strategy on a global basis

Advance activities that lower environmental burden and address social issues

 educe the discarding of unsold products and reduce shopping bags
R
Promote breast care activities at operating bases worldwide

Strengthen the information security system even further

Advance data security and the protection of privacy even further

Shift to highly profitable business management and increase capital efficiency

 educe the fixed costs of Wacoal Corp. and reform the businesses of underperforming domestic subsidiaries, etc.
R
Reduce working capital and reduce strategic shareholdings

Realize highly effective corporate governance

Develop compensation systems that increase the effectiveness of plans and develop succession plans further
Continue to conduct effectiveness evaluations and improve evaluation methods and processes

Advance risk management and compliance activities even further

Prepare business continuity plansUse the pandemic to prompt redevelopment of the risk management system
Ensure widespread awareness of compliance and the management philosophy at subsidiaries in Japan and overseas

Strengthen disclosure and communication activities

Create further opportunities for dialogue with stakeholders
Increase and enhance disclosure in relation to ESG initiatives and hold meetings on ESG initiatives

Establish various types of systems suited to new work styles (telecommuting, etc.)

Revise the personnel evaluation system in accordance with the increase in telecommutingBuild a new compensation system based on clearly delineated job responsibilities

Strengthen personnel management continuously ontinue managing and verifying the effectiveness of a new personnel training system that emphasizes specialization, global viewpoints, and continuous careerC
growthRebuild personnel recruitment methods (analyze and implement mid-career hiringand year-round hiring)Increase the use of mid-career hiring and introduce measures to secure diverse personnel through referral hiring

Increase productivity through the implementation of human resources planningIncrease productivity per employee by optimizing human resources quantitatively and qualitatively and by conducting rigorous Companywide management of thenumber of new hires

Advance the empowerment of women and respect diverse work styles

Establish telecommuting environments (increase the number of eligible employees)

Advance health and productivity management

Promote health literacy and encourage healthy habits among all employees

Foundations Underpinning Our Value Chain

Business Management

Shift to highly profitablebusiness management

Optimize human resources
qualitatively andquantitatively

Personnel

Heighten productivity
per employee
Develop a corporate culture
conducive to job
satisfaction

10

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

11

RENEWED GROWTH

RENEWED GROWTH

A Message from the President

With our sights set on a “Global Wacoal,”
we will move forward tirelessly to enhanceenterprise value.
A Summary of Our Medium-Term Management Plan’sFirst Fiscal Year

Hironobu Yasuhara
Representative Director, President andCorporate Officer; Representative Director
and Chairman of Wacoal Corp.
Wacoal Holdings Corp.

Our Policies for Coping with the Spread of COVID-19
Basic policy
Give top priority to the health and safety of customers, employees, and business partners. (We recognize that the balance
between maintaining such services as trial fittings and consideration of health and safety is especially important.)
Short-term policy
Thoroughly reduce costs and ensure the stability of theCompany’s financial base with the deteriorating business­conditions in mind
1. C arry out a review of the measures and expenditure plansthat have been implemented so far across all businessdomains
2. S trengthen liquidity on hand in preparation for the prolongation of the COVID-19 pandemic
3. A djust production to avoid excess inventory caused by adecline in sales

12

Medium- to long-term policies
Thoroughly inspect the value chain and implement reforms: A
turning point toward a highly profitable management structure
1. Review the current cost structure (Promote initiatives toreduce fixed costs)
2. Accelerate our digital transformation efforts both in Japanand overseas
3. Review and reorganize points of contact with customers (torespond to the changes in major sales channels)
4. Develop products and services that customers expect in newlifestyles and strengthen our ability to respond to new customer needs and sales styles

IN T EG R AT ED R EPORT 2020

In June 2019, the Wacoal Group announced a three-year
medium-term management plan, ending in fiscal 2022, as
well as long-term management targets for fiscal 2028. We
established the current management plan to serve as amilestone for achieving these management targets. With
this in mind, we will look squarely at reality, expedite boldreform, and get on track for robust growth in Japan andoverseas during the plan’s term.
Against this backdrop, in the plan’s first fiscal year revenues declined while profit rose. Consolidated net sales
decreased 3.8% year on year, to ¥186.8 billion, coming up
short of our ¥200.0 billion target. Although operating income
was up 35.9% year on year, if the previous fiscal year’s recognition of impairment charges on intangible assets ofapproximately ¥5.8 billion (mainly impairment charges on
goodwill for a subsidiary) are taken into account, effective
operating income decreased year on year and was roughly¥4.4 billion below our target of ¥11.0 billion.
The main reasons for nonachievement of the operating
income target were a decrease in revenues that reflected
stagnant consumer spending following a consumption tax
hike in October 2019, the incorporation of an operating
loss and the recognition of one-time expenses due to theacquisition of Intimates Online, Inc., and the recognition of
an impairment loss on fixed assets accompanying thesluggish business performance of a materials company inThailand. Moreover, in the fourth quarter the Group’s business activities worldwide were significantly affected by
curfews and the suspension of store operations that
accompanied the spread of COVID-19.
COVID-19 Pandemic: Impact and Outlook
I believe that a little more time is required before we canreasonably assess the extent to which the COVID-19 pandemic is likely to affect our medium- to long-term performance. While I have been engaged in corporate

management for many years, this is the first time that I
have experienced a situation in which all of the countries
and regions around the world where our business operates
have been impacted simultaneously. Furthermore, given
the marked differences in the situations of each country
and region, the manner in which some type of normality
will return remains uncertain.
In such circumstances, analysis of how customers’
awareness and values are likely to change is important.
However, as things do not always go as predicted, we needto base decisions on somewhat longer time frames.
Further, in respective countries and regions there are differences in the spread of COVID-19 as well as in patterns ofconsumption. Therefore, rather than focusing on hasty
reactions to individual situations, I am currently developinga wide range of scenarios and proceeding with preparations so that we can respond quickly to whichever scenario
eventually materializes.
Any consideration of long-term business conditions
post-COVID-19 must be premised on an understandingthat things will not “return to normal.” Consequently, thenew business conditions will not only call for significant
changes in products, marketing methods, and points ofcontact with customers but also in Wacoal as a corporategroup. We must consider whether approaches once
believed to be advantageous are now fit for purpose. For
example, will sales through consultations with beauty
advisors—which have been one of our differentiating
strengths—be feasible in a post-COVID-19 world? The
status of attributes that until now we have viewed asassets or as having value may be shifting. Therefore, weneed to reassess our value chain exhaustively.
On the other hand, witnessing the dramatic changes
resulting from COVID-19 has clarified what we should do
and what we should stop doing, enabling us to step up thepace of reforms aimed at realizing our long-term vision.
Rather than seeing the current situation in an exclusively
negative light, I am committed to doing everything in mypower to ensure that we can present a reborn Wacoal to all
stakeholders in the aftermath of the crisis.

I N TEG RATE D RE P O RT 2020

13

RENEWED GROWTH

RENEWED GROWTH

Wacoal’s Management Philosophy and Existential Value
The COVID-19 crisis has given me an opportunity to reevaluate Wacoal’s management philosophy and the Company’svalue to society. Given that the post-COVID-19 era may seetransformed lifestyles and values, we have to ask ourselves important questions. Where should we aim to go?
What should we change? Also, what must not be changed?
Endeavoring to contribute to society by helping women
to express their beauty expresses our founding spirit and isat the core of our management philosophy. No matter
what type of social change or crisis occurs, this mission
will never change. Wacoal has created a unique innerwear
culture by adding new value to innerwear, an item once
little more than a commodity. Through the development
and marketing of pioneering products that garner the loveof customers, we have helped create a society in which
women are lively and radiant. The aforementioned achievements represent existential value that the Group must
continue to protect.
That said, the definitions of female beauty, as well as thetypes of beauty women seek, change with the times. For
this reason, our products and services will not earnendorsement if they stay the same. In particular, it is notdifficult to envision a post-COVID-19 society in whichchanges in women’s lifestyles lead to changes in the typesof innerwear sought. Further, Wacoal might be able tosupport women’s day-to-day beauty and vitality in fields
beyond innerwear. In other words, we should steadily promote business development that is aimed at heightening
our existential value by, for example, creating innerwear
based on novel concepts or by developing businesses
outside the innerwear field.

Our Vision of a “Global Wacoal”
1.	The Wacoal Group’s products and services and efforts toaddress social issues are highly trusted by customers and allother stakeholders in markets worldwide.
2.	The number of countries and regions in which we operatecontinues to increase.
3.	Under our Group network, we are operating businesses in acoordinated manner on a global scale.
4.	We always provide pioneering products to the world andcontinue to lead the industry of innerwear culture.
5.	The Group mission and philosophy are instilled in employees
across the world.

Through business activities stretching back more than
70 years, Wacoal has accumulated many different types ofintangible assets. By leveraging such assets, we will provide society and customers with value in the form ofbeauty, comfort, and health. With these facets as key
themes, we will take on ambitious initiatives and new business fields, thereby providing women with new value.
Long-Term Vision and Growth Strategy
Last year, we prepared a long-term vision to coincide withthe launch of our medium-term management plan. At thesame time, we set out a new target profile by announcing
our vision of a “Global Wacoal.” This redefined target profile
is based on the vision at the time of our founding, whichcalled on us to continue forging ahead tirelessly toward a“Global Wacoal.” As with the management philosophy mentioned earlier, our vision is something that will not change.
Even though business conditions remain highly uncertain due to COVID-19, Wacoal’s Group companies worldwide have to carefully monitor their situations and thentake timely, precise measures accordingly. With our vision
providing them with both a guide going forward and acommon Groupwide slogan, Group companies will redouble collaborative efforts to advance initiatives for growth.
More specifically, they will learn from each other’s experience and know-how and share examples of successful
initiatives.
The overriding goal of our current management plan is
to cater to the growing trend toward digitization and personalization. Post-COVID-19, this trend is expected toaccelerate around the world. For several years, Wacoal has
been advancing an omni-channel strategy that integrates
online and off-line operations. For example, May 2019 saw
the opening in Tokyo’s fashionable Omotesando area of astore incorporating a leading-edge customer service
system enabled by 3D measurement and AI technologies.
This new store has established a positive reputation
among customers. Subsequently, we introduced thesystem to five other stores (as of March 31, 2020). In
spring 2020, we were just about to verify the benefits ofthe system and speed up investment when stores suspended operations due to COVID-19. As a result, we expect
the progress of this initiative to be slightly delayed.
Nonetheless, looking over the global innerwear industry,none of our peers have evolved digitization to the extent
we have. In this field, we will continue steadily building ourlead. Moreover, as companies look ahead to theCurrent Medium-Term Management Plan: Initiative Going Forward

With an eye on the next three-year plan, decisively implement “profit structure reform”
during the current medium-term management plan period
Current Medium-Term
Management Plan:
2nd Fiscal Year (FY2021)

Current Medium-Term
Management Plan:
Final Fiscal Year (FY2022)

New Medium-Term
Management Plan
(FY2023–FY2025)

Decisively implement profit structure reform(build a foundation for the next medium-term management plan)
Ascertain future demand,and determine what to“change” and what to“discontinue”

Start as the “Reborn Wacoal”

Complete structural reform
aimed at realizing a highly
profitable management
structure

post-COVID-19 era, “contactless” is becoming a watchword. Consequently, we have been receiving inquiries fromcompanies in an array of different industries that want touse our 3D measurement technology. Moreover, we will
strengthen open innovation initiatives to develop new
sources of profit.
Other initiatives include the bolstering of the e-commerce business through the 2019 acquisition of Intimates
Online in the United States, our main overseas market. In
recent years, the company has been growing rapidly in the
country’s innerwear sector thanks to the popularity of digitally native vertical brands (DNVBs) among millennials.
Plans call for increasing the business scale of the newGroup company and moving it into the black as soon as
possible. Going forward, the Wacoal Group will introduce
the company’s business model to other Group companies
worldwide. Surveying the global market, I believe differences among countries and regions will emerge in terms of
the speed and nature of changes in the roles of off-line andonline operations. However, the digitization trend itself isirreversible. By ensuring that we are strictly customeroriented and by proactively leveraging digital technologies,
we will realize the provision of new services and value.
Growth Scenario and Performance Forecast
At the end of July 2020, we announced a performance
forecast for the fiscal year ending March 31, 2021. The
forecast includes a 15.0% year-on-year decline in consolidated net sales to ¥158.0 billion and an operating loss of¥5.0 billion. However, taking into consideration the extreme
unpredictability of COVID-19’s ultimate impact as well as
concerns over a potential slump in consumer spending

Start the new three-yearplan with a “lean” corporate
structureand deterioration in the employment market and personal
income, these performance forecast figures have inherently high levels of upside and downside risk.
In the current fiscal year, which is likely to be a very challenging 12 months, we will carefully analyze the effects of
the COVID-19 pandemic and firm up measures in anticipation of the post-COVID-19 era. Allow me to repeat that weare already advancing initiatives in response to the emergence of a major trend toward digitization and personalization in the market. While we have extended the periods forverifying the benefits of several initiatives already introduced, we intend to steadily increase the speed of suchinitiatives. Further, in the post-COVID-19 era the lifestyles
of women and the products and services that they seek
are sure to change significantly. Therefore, based on anticipation and painstaking analysis of such changes, we willconsider what types of added value and services we are
best qualified to offer.
As for the Wacoal Group’s profit structure, we are in the
midst of reforming the businesses of underperforming
subsidiaries. Due to the effects of COVID-19, however,more time is needed to verify the benefits of these efforts.
Nonetheless, in cases where benefits are already clear, we
will move forward with reforms decisively.
Upon completion of these reforms in the current fiscal
year, in fiscal 2022, which is the final year of the current
management plan, we will rapidly lay the foundations forour next three-year plan.
In closing, I would like to ask all of our stakeholders fortheir continued support and understanding, particularly
with regard to the challenges we face in achieving nearterm business results that fulfill their expectations.


14

IN T EG R AT ED R EPORT 2020

Establisha highly­profitable
management
structure

I N TEG RATE D RE P O RT 2020

September 2020

15

RENEWED GROWTH

RENEWED GROWTH

A Message from the Director in Charge of FinanceAnticipating the post-COVID-19 era, we will advancefinancial strategy with a strong sense of crisis.

Akira Miyagi
Director and Managing Corporate Officer
Wacoal Holdings Corp.

Fiscal 2020 Business Results Evaluation
In fiscal 2020, the year ended March 31, 2020, consolidated net sales and operating income did not reach our
initial targets or the revised targets we announced in
January 2020. The primary reason for missing these targets was a lackluster performance by the Wacoal Business(Domestic). A consumption tax hike in October 2019
entrenched a long-term slump in consumer spending,which was then compounded by a drop in store visits anda decrease in demand from visitors to Japan as the public
refrained from going outdoors due to the spread of COVID19 from March 2020 onward.
Thus, the external environment undoubtedly had a significant impact on our performance. However, I believe theperformance revealed a more fundamental issue that
stemmed from the delay in reforming the Wacoal Group’s
profit structure. Launched in fiscal 2020, our current
medium-term management plan calls on the Wacoal
Business (Domestic) to realize renewed growth. To thisend, we worked to enhance the operating margin. I view
our actual business results—which were a long way fromrenewed growth—as representing an extremely unfavorable performance that merits serious reflection.
Given that COVID-19 is wreaking havoc worldwide andthe prospect of bringing it under control has yet to emerge,
we will inevitably experience a significant impact on our
performance in fiscal 2021, the year ending March 31,
2021. Thus, we face a challenging situation, the likes ofwhich we have not experienced before. As the director in
charge of finance, I have a weighty responsibility thatobliges me not only to enable the Wacoal Group to overcome this unprecedented crisis but also to use it as atransition phase that fundamentally strengthens theGroup’s profitability.
Last year, the Group celebrated its 70th anniversary.
After suffering many difficulties in establishing the Group’s
financial foundations, our founder Koichi Tsukamoto andhis colleagues managed to build the robust financial position we enjoy today. Passing on the trust and innovationfocused mindset that our predecessors cultivated is one ofour main duties. With this in mind, we will tackle reforms
with a strong sense of crisis.
Fiscal 2021 Emergency Measures
While giving first priority to the health and safety of ourcustomers, business partners, and employees, we will takeemergency measures in response to the challenging

16

IN T EG R AT ED R EPORT 2020

environment. Specifically, we will reduce advertisingexpenses and other business expenses as well as fixed
costs and reschedule the implementation of new investments. Further, a meeting of the Board of Directors convened in May 2020 approved a resolution to lower thecompensation of the directors and Audit & Supervisory
Board members of Wacoal Holdings Corp. and Wacoal
Corp., excluding that of outside directors. By drasticallyrevising expenditure plans through such steps and by enlarging facilities for borrowing from financial institutions, we are
securing liquidity on hand for Group companies. At the sametime, we are adjusting production at all subsidiaries so thatlower sales do not lead to excessive inventory levels.
Further, envisioning the post-COVID-19 era, we will clarify the things we should do, the things we should change,
and the things we should stop doing. By eliminating excess
and heightening productivity even further, we will raise theoperating income that each employee produces andthereby restore profitability Groupwide. Meanwhile, fordomestic subsidiaries that have been seeking rejuvenation
through fundamental reform of their businesses, I believethat even more drastic measures are needed. Since lastyear, we have been reforming the business models ofdomestic subsidiaries. Partly due to COVID-19, it has
become apparent that we have even less time left toreform these subsidiaries. During the current fiscal year,
we will identify businesses whose surrounding environments have clearly changed as well as businesses that
may be unable to maintain their independence amid ageneral slump in consumer spending, rigorously evaluate
these businesses from the viewpoint of Groupwide optimization, and then set definite time limits for withdrawal andreform. Prepared and willing to recognize the one-timelosses that such drastic reform will entail, we will complete
Consolidated Performance Overview
Net Sales

Operating Income(Operating Margin)(¥ billion)

2020/3
results

FY2020 target(versus target)

FY2020 revised
target*(versus target)

186.8

200.0 (–13.2)

191.0 (–4.2)

6.6

11.0 (–4.4)

7.0 (–0.4)(5.5%)(3.7%)(3.6%)Net Income
Attributable to Wacoal
Holdings Corp.

3.5

9.0 (–5.5)

6.5 (–3.0)

ROE

1.6 %

—

—

* Announced in January 2020

I N TEG RATE D RE P O RT 2020

17

RENEWED GROWTH

RENEWED GROWTH

the reform of domestic subsidiaries during fiscal 2022, thefinal year of the current management plan.
As we move forward with such measures, it is essential
for the senior management team to cultivate a healthy
sense of crisis in the Group through proactive communication with all employees. At the same time, we must returnto our management philosophy and ensure that it isshared and internalized by all Group employees. Regarding
the post-COVID-19 world, we are not expecting a return toour previous environment. We need to adopt a medium- tolong-term perspective; anticipate changes in customers,
markets, and our employees’ work styles; and take measures accordingly. To facilitate these measures, moreover,the Group must make a concerted effort to revisit its spiritof mutual trust.
Progress in Relation to Capital Policy
Our current plan sets out the following three basic objectives of capital policy.

Basic Objectives of Capital Policy
1 Increase shareholder value by improving ROE
2 Maintain a sound balance sheet(shareholders’ equity levels)

3 Implement measures for enhanced shareholder

returns

As we endeavor to maintain financial soundness, theimprovement of ROE to a level above equity cost remains apressing task. From a short-term viewpoint, it has to besaid that improving ROE will be difficult due to the effects
of COVID-19. In the long term, however, our target of raising ROE above 10% has not changed. Our main
approaches to enhancing ROE entail improving profitability
and asset efficiency. In these efforts, we are placing aparticular emphasis on advancing long-term growth strategies to increase the operating margin. Accordingly, we will
establish a highly profitable business structure by expediting reforms that anticipate the post-COVID-19 era.
The outlook for the domestic innerwear business isextremely uncertain. Sales channels may undergo radicaltransformation. However, as I mentioned in last year’s
report, by advancing personalization initiatives that takeadvantage of digitization, we will renew our customer relationships so that they are not only more interactive but
also deeper, broader, and longer. For example, these initiatives will strengthen the integration of online and off-line
operations and roll out omni-channel services in earnest.
The building of relationships in such ways is undoubtedly
the challenge we must tackle to reach a new growthphase, and I think the COVID-19 pandemic has made thisfact clearer than ever. Without being constrained bycurrent circumstances, we will take on reforms with evengreater speed and determination.
In fiscal 2020, we advanced the omni-channel strategy
and personalization initiatives within the scope of

FY2020 progress in relation to financial policies

Implemented growth investments to strengthen e-commercein the U.S.; kept the total payout ratio above 100%

Net income for
FY2020*FY2019 shareholders’ equity

216.5 billion¥

ROE 0.2%(4.2% in real terms)

18¥6.5 billion

Depreciation for
FY2020¥6.0 billion

Sale of strategicallyheld shares for
FY2020¥15.3 billion

FY2020 total cash creation: ¥27.8 billion* Impairment loss on intangible fixed assets andvaluation gains and losses on marketable securities
and investments have not been taken into accountin the calculation of net income.

IN T EG R AT ED R EPORT 2020

• Dividends• Purchase of treasury
stocks¥12.6 billion• Investment inexisting businesses• Investment for growth¥16.2 billion

FY2020 shareholders’ equity

205.4 billion¥

ROE 1.6%(3.0% in real terms)

FY2020 cash outflow:¥28.8 billion

investment plans and other plans. Further, total investmentin the first fiscal year of the current management plan rose
to approximately ¥16.2 billion because our acquisition ofIntimates Online, Inc., in July 2019, was not a prospectwhen we were preparing the current management plan.
While the aforementioned initiatives are not yet at a stage
where they can produce benefits, we must not slacken the
speed of efforts focused on ambitious goals. For thisreason, we will continue to give priority to investments ingrowth strategies. Furthermore, the Group will implement
M&As if they promise to enhance its business value.
Meanwhile, with respect to asset efficiency improvement,
we will dispose of strategic shareholdings worth at least¥20.0 billion during the three fiscal years of the current
management plan. In the plan’s first fiscal year, we disposed of strategic shareholdings worth ¥13.6 billion (Thisfigure was calculated by using the book value on March 31,
2019. Actual proceeds from the sale were ¥15.3 billion.).
As for returns to shareholders, our policy of providing
stable dividend payments and purchasing treasury stock
flexibly is unchanged. In fiscal 2020, acquisition of treasury
stock was close to ¥7.7 billion. Partly due to the effects of
the COVID-19 pandemic, however, dividends per sharedeclined ¥12.00 year on year, to ¥60.00 per share. Rather
than resorting to extreme measures, we are placingemphasis on the continued provision of stable dividend
payments. We want to continue providing dividend payments that maintain the confidence of shareholders. In
addition, we will make decisions on the acquisition of treasury stock in light of in-depth situational analysis.
Going forward, continuing to seek a level of ROE that is
above equity cost, we will reduce equity cost by utilizing
debt and other measures within a scope that does notcompromise balance sheet soundness. In conjunction withthese efforts, we will improve inventory turnover rates tominimize increases in inventories. The Group will advanceinitiatives aimed at realizing an optimized balance sheetthat enables business expansion and which is highly profitable and lean.
Toward Our Target Profile
At the beginning of fiscal 2020, along with releasing thecurrent management plan, we announced the achievementof consolidated net sales of ¥300.0 billion, including thesales of equity-method affiliated companies (overseas
joint ventures), and the lifting of the operating margin and
ROE above 10% as long-term management targets forfiscal 2028.

With the senior management team responding to challenging conditions by fostering a Groupwide sense of crisis,in the area of finance we must demonstrate a similarly keensense of crisis as we implement strategies in pursuit of ourtarget profile. While it goes without saying that we need toadvance growth strategies, we must also ramp up the paceof business reform. The current environment makes it evenmore important that the Group does not pass on a negative
legacy to the next generation. Admittedly, the Group’s robust
financial position led to some complacency in-house, but
I believe the COVID-19 pandemic has provided us with anexcellent opportunity to eliminate the possibility of leaving
behind a negative legacy.
As the Wacoal Group responds to the present environment’s unprecedented challenges by launching a concerted drive toward the realization of its target profile, I
would like to ask shareholders, investors, and all of ourother stakeholders for their continued support.


I N TEG RATE D RE P O RT 2020

September 2020

19

RENEWED GROWTH

RENEWED GROWTH

Medium-Term Management Plan (Fiscal 2020–Fiscal 2022)

Fiscal 2020 Performance Overview

Target Profile

A Globalized Wacoal Group
Medium- to Long-Term Targets(Fiscal 2028 Targets)

Overview of the New
Management Plan

Consolidated

Net Sales

Net Sales: ¥300.0 billion (including equity-method affiliated companies’ sales)

Operating Margin and ROE: Above 10%¥

Face reality, identify future demand, reform boldly, and focus on growth

Operating Income

186.8 billion¥

Basic policy
Give top priority to the health and safety of customers, employees, and business partners
	(We recognize that the balance between maintaining such services as trial fittings and consideration of healthand safety is especially important.)
Thoroughly reduce costs and ensure the stability of the Company’s financial base with the deteriorating business conditions in mind
Carry out a review of the measures and expenditure plans that have been implemented so far across all business domains
Strengthen liquidity on hand in preparation for the prolongation of the COVID-19 pandemic
Adjust production to avoid excess inventory caused by a decline in sales

Initiatives Already Underway

Initiatives About to Begin

Initiatives Planned

OverallRevise expenditure plansAnalyze the optimal role of domestic companies
Strengthen the competitiveness of domestic
sewing factories
Wacoal Corp.
Reorganize to reflect environmental changes
Strengthen initiatives to coordinate online andoff-line operations
Review the sales area environments of department stores and transaction terms
Advance human resources planning

OverallPrepare the next three-year plan and establish KPIs
Reorganize or withdraw underperforming
businesses
Strengthen the competitiveness of domestic
sewing factories
Wacoal Corp.
Verify the new organization and adjust course
Strengthen initiatives aimed at coordinating online
and off-line operations
Begin new strategies for brands and optimize
inventories
Advance human resources planning and curb the
number of new hires

OverallRevising expenditure plans
North America, Europe, and China
Continuing to strengthen e-commerce businesses
Integrating the logistics operations of Intimates
Online (United States)
Continuing to coordinate with Japan in relation to
products (China)

Asia (excluding China)
Discuss and revise regional strategies
Begin developing an e-commerce business
Overseas factories
Increase the percentage of products(for Japan) manufactured in the ASEAN region

United States
Maintain the strong growth of Intimates Online
EuropeStep up development in the eurozone
Asia (excluding China)
Reorganize as required
Material companies (Thailand)
Strengthen competitiveness and begin supply to
the Group

OverallRevising expenditure plans
Peach John and Lecien
Verifying the results of reforms implemented until
Other Businesses
the previous fiscal year
Strengthening coordination between online andoff-line operations (Peach John)

Underperforming subsidiaries
Analyze future demand carefully from the viewpoint of overall optimization
Analyze subsidiaries’ optimal roles in the Group
Overseas business and factories
Analyze future demand and regional strategies
carefully

20

IN T EG R AT ED R EPORT 2020(¥ billion)

FY2020 target(versus target)

112.8

Wacoal Business(Domestic)

5.8(–0.8)(–0.9)

51.5

Wacoal Business(Overseas)

1.5(–2.5)

10.4

Peach John Business(0.4)(–0.6)

2020/3 results

FY2020 target(versus target)

Wacoal Business(Domestic)

109.7

116.2

Wacoal Business(Overseas)

50.6(–4.9)

Peach John Business

10.5(–1.1)

Other Businesses

16.0(–0.7)(–0.3)

16.3

Other Businesses(0.3)(–0.5)

Total

186.8

(–13.2)

200.0

191.0

Total

6.6

(–4.4)(–6.5)

55.5
11.6
16.7

(–3.1)(+0.1)(–4.2)

6.6
4.0
0.2
0.2

11.0

FY2020 revised
target*(versus target)

6.1(–0.3)

1.3(+0.2)(0.3)(–0.1)(0.1)(–0.2)

7.0(–0.4)* Announced in January 2020Consolidated(¥ billion)

2022/3OverallRevising expenditure plansAdjusting production to avoid surplus inventories
Discussing the future role of domestic factories
Wacoal Corp.
Verifying effectiveness at stores that haveintroduced 3D body scanners
Coordinating the marketing of both directly
managed stores and e-commerceAnalyzing personnel deployment and methods ofmanaging the profit and loss of stores
Advancing human resources planningWacoal Business(Overseas)

Operating Income (Loss)

Fiscal 2021 Full-Year Forecast

Reforming earnings structures decisively during the term of the current plan in preparation for the next three-year plan
2021/3

1.6 %FY2020 revised
target*(versus target)* Announced in January 2020

Segment Initiatives under the Current Medium-Term Management Plan

Wacoal Business(Domestic)(¥ billion)
2020/3 results

Thoroughly inspect the value chain and implement reforms: A turning point toward a highly profitable management structure
Review the current cost structure (promote initiatives to reduce fixed costs)
Accelerate our digital transformation efforts both in Japan and overseas
Review and reorganize points of contact with customers (to respond to the changes in major sales channels)
Develop products and services that customers expect in new lifestyles and strengthen our ability to respond to
new customer needs and sales styles

3.5 billion¥

By Segment

Our Policies for Coping with the Spread of COVID-19

Medium- to long-term policies

ROE

6.6 billion

Net Sales

Short-term policy

Net Income Attributable
to Wacol Holdings Corp.

Underperforming subsidiaries
Withdraw from, spin off, or reorganize
Overseas business and factories
Reorganize as required
Strengthen competitiveness and strengthen
coordination within the Group

2021/3 target

YoY

Net Sales

158.0

–28.8

Operating Loss

(5.0)

–11.6

Net Loss Attributable to Wacoal Holdings Corp.

(3.7)

–7.2

By Segment
Net Sales(¥ billion)
2021/3 target

YoY

Wacoal Business(Domestic)

92.0

–14.1

Wacoal Business(Overseas)

41.5

Other Businesses

Total

Operating Loss(¥ billion)
2021/3 target

YoY

Wacoal Business(Domestic)

(2.1)

–8.2

–9.1

Wacoal Business(Overseas)

(1.8)

–3.3

24.5

–5.6

Other Businesses

(1.1)

–0.1

158.0

–28.8

Total

(5.0)

–11.6

* Change in segmentation as of the fiscal year ending March 31, 2021

I N TEG RATE D RE P O RT 2020

21

ST R AT E G Y

ST R AT E G Y

STRATEGY
24	Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)
28 Wholesale Business
30 Retail Business
32 The Structural Reform of Wacoal Corp.

34	Anticipating a Post-COVID-19 Society(2) The Wacoal Business (Overseas)
36 Businesses in the United States (Wacoal America, Inc.)
37 Businesses in the United States (Intimates Online, Inc.)
38 Businesses in Europe
39 Businesses in China

40	Anticipating a Post-COVID-19 Society(3) Other Businesses
40 Peach John
41 Lecien / Nanasai

42	Anticipating a Post-COVID-19 Society(4) Production System Realignment
42 Production System Realignment

22

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

23

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)
Looking Back at Our Plan’s First Fiscal Year

We will rigorously analyze the diversifying lifestyles ofcustomers and consumers and create real value thatmeets the needs of a new era.

Tomoyasu Ito
Director, Vice President Corporate Officer
Wacoal Holdings Corp.
Representative Director, President and Corporate Officer
Wacoal Corp.

Returning to a growth trajectory and improving profitability are
the overriding goals of the current medium-term management
plan, which we began in fiscal 2020, the year ended March 31,
2020. To these ends, Wacoal Corp. will enhance productivity torealize solid growth. Moreover, we will establish robust brandvalue by building deeper, broader, and longer relationships withindividual customers.
In fiscal 2020, we concentrated on enhancing the customer
experience through such initiatives as the introduction of 3Dbody scanners and AI-enabled customer service systems tosix stores.
Further, we progressed steadily with the building of an
original omni-channel strategy and a related “lifetime value”
strategy. These efforts entailed coordinating and integrating
online and off-line operations by utilizing customer databases
more efficiently. Specifically, we completed the construction ofa system that enables us to directly manage data on approximately 3.0 million customers held by directly managed stores,
in-house e-commerce operations, and department stores.
As for business results, the operating income of the retail andonline sales businesses surpassed targets. However, these
performances were outweighed by a greater-than-expected
decrease in the revenues of the wholesale business—particularly in the department store sales channel—due to sluggish
consumer spending in the wake of a consumption tax hike.

Other downside factors included the effects of the COVID-19
pandemic and higher IT costs. Consequently, Wacoal’s net sales
and operating income declined year on year.
Remaining Essential in a New Era
In such crises as the current COVID-19 pandemic, revisiting
our management philosophy—our starting point in otherwords—becomes particularly important. I believe that rigorously discussing market characteristics and redefining
Wacoal accordingly is extremely important if the Company isto achieve renewed growth. We must analyze the types ofbeauty and products that customers will want and love in the
coming era. Also, with a view to providing such value in the
new era, we must consider which aspects of Wacoal must
and must not change.
The format of customer service in stores is a good exampleof how we must retain some elements while changing others.
The painstaking customer service and consultations thatbeauty advisors provide will remain a major competitive
advantage. However, in anticipation of a post-COVID-19 society, we have to ensure the safety of beauty advisors and customers. With this in mind, we can cater to the needs ofcustomers while shortening the time they spend in stores byintroducing a customer service format with a self-service
component. More specifically, we can proactively introduce 3Dbody scanners and AI-enabled customer service systems andInitiatives that should be implemented in an accelerated manner during the current medium-term management plan
Preparing a foundation for a return to growth over the next three years
and using the pandemic as an opportunity to accelerate business structural reform scertain future demand with an eye on the “with” and “after” coronavirus periodsAIn line with channel reform, transition to a “self-managed business”(directly managed stores, own e-commerce)Fuse and blend store and e-commerce operations (improve customer experience)Develop and evolve a unique business model via efficient use of customer data
Accelerate initiatives aimed at improving profitability(decrease the fixed cost ratio, which remains high)Net Sales, Operating Income, and Operating Margin

Fiscal 2020 Performance(¥ billion)

(%)

120

Net sales

Operating income

Operating margin¥99.2 billion (–3.1% YoY)
¥3.1 billion (–38.4% YoY)

3.2% (–1.8pt YoY)

8

107.9
100

106.5

104.6

6.2

99.2
6

5.2

80

102.4

5.0

4.6

60

4

3.2

40

2
20

6.7

0

2016

Net sales

24

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

5.5
2017

Operating income

4.9

5.1

2018

2019

3.1
2020

0
(FY)

Operating margin

25

ST R AT E G Y

ST R AT E G Y

encourage customers to use them in combination with theservices beauty advisors provide.
Further, changes in lifestyles and work styles, such as
refraining from going outdoors and working from home, arechanging consumption patterns. That is to say, people aregathering in completely different “places.” For example, if
shopping near one’s home becomes more common than
shopping downtown, our points of contact with consumers
will change. As a consequence, product lineups will also haveto change. Furthermore, as working from home becomes
popular and opportunities for going out become fewer, values
with respect to beauty may change. Setting its sights on the
new era that such changes will bring about, Wacoal will takemaximum advantage of the assets that it has developed bothas a company and as a brand to provide customers in a wide
range of life stages with new value focused on helping women
to express their beauty.
Accelerating the Structural Reform of Businesses
Our operating environment remains challenging due to the
public’s continued reluctance to visit downtown and a slump
in consumer spending because of the COVID-19 pandemic.
Given these conditions, in fiscal 2021, the year ending March
31, 2021, we will accelerate the measures of the current management plan in anticipation of a post-COVID-19 society while
putting the safety of customers and employees first. Acrossthe board, Wacoal will steadily advance priority strategies,

including revamping the brand portfolio to reflect the relationship between sales channels and brands, implementing anomni-channel strategy that leverages the characteristics ofonline and off-line operations, improving profitability throughthe relocation of sales areas and through the revision of transaction terms, and repositioning non-innerwear products. Also,
we will enhance productivity by implementing strict inventory
control and by promoting work-style reforms that allow each
person to work in their own way. CHART A
As the roles of and relationships between online and off-line
operations evolve rapidly, in implementing the aforementioned
omni-channel strategy our top priority is to expedite the establishment of a service network that is based on the customer’s
viewpoint. In these efforts, we will optimize our portfolio interms of brands and points of contact with customers by
analyzing customer behavior and determining which brands
and product lineups should be carried by the online, retail,directly managed store, or department store sales channels.
At the same time, we will leverage data on approximately 3.0
million customers to implement relationship marketing. Also,
we will maximize the differentiated value that brick-and-mortar
stores provide while stepping up the pace of measures toboost profitability by introducing digital tools and redeploying
personnel. By decisively integrating and coordinating online
and off-line operations, our measures will grow in-house
e-commerce sales as a percentage of net sales from thecurrent level of 5% to around 20% in three to five years’ time.
CHART BCHART A

Building a Transformative, Customer-Data-Driven Business Model
Improve store value

Improve customer
experience via DX

Work-style reform via DX(RFID utilization, etc.)
Workforce planning
management

Customer data:
About 3 million people
Online store members /Shop members /Department store
customers, etc.

Return to domestic growth
Online and off-line
collaboration

Increase averagecustomer spending,
Increase purchasefrequency (set new KPIs)

Brand
reorganization

Nurture loyal
customers

Increase no. of
new customers

Strengthen
e-commerceOmni-channel strategy= Improve LTV (lifetime value)

Scrap-and-build
unprofitable stores

Collaboration with othercompanies (open innovation)

Establish a highly profitable
management structure

CHART B

Shifting Toward Directly Managed Retail Operations That Integrate and Coordinate Off-Line and Online Operations

Have online operations account for 25% of net sales,
and have directly managed stores account for 40% of theoff-line portion
Approx.

25%

FY202085%

Self-managed
business

FY2025Off-line

Approx.

IN T EG R AT ED R EPORT 2020

FY2020

FY2025 target

Directly managed
stores(Including tenant store
openings in department
stores)Approx.

Approx.

Approx.

Approx.

20%

40%Department stores

75%

Wholesalebusiness

OnlineOff-line

GMS supermarkets

80%

60%

Specialty stores

Redeploying Personnel and Optimizing Organizations

Realizing Renewed Growth

As I mentioned, approximately 3,400 beauty advisors play a
crucial role in our sales activities. Specialized knowledge andadvanced skills in the provision of services that match customer needs make Wacoal’s beauty advisors indispensable forcustomers’ selection of products as well as for the cultivationof points of contact with customers. Nonetheless, we need toadapt the roles of beauty advisors to reflect changes in customer-service methods and the structural reform of businesses that are resulting from the COVID-19 pandemic.
Looking ahead, we will increase the efficiency of store operations by introducing digital tools. Further, we will rightsize ourpool of beauty advisors to heighten the profits attributable toeach person. That being said, we recognize that beauty advisors have the best understanding of customer needs. With theaims of extensively utilizing the experience and expertise of
beauty advisors and enabling them to play even more important roles in our businesses, we are establishing and introducing human resources systems that encourage beauty advisors
to realize diverse careers and work styles. The number offormer beauty advisors engaged in fields other than in-store
customer service is already increasing. For example, many
former beauty advisors now work as managers in the sales
division or respond to customer inquiries via the chat servicesof our online stores.
The aforementioned initiatives are making maximum use of
beauty advisors’ experience and expertise while helping to
improve cost structures through personnel redeployment.
Naturally, our efforts are not just focused on beauty advisors.
We are also reassessing a variety of other in-house jobs andredeploying personnel in pursuit of an optimal organizational
structure.

As the operating environment remains particularly challenging,
the term of the current management plan will have to be
devoted to laying the foundations for the next three-year plan.
However, we will use this period as a favorable opportunity toaccelerate the structural reform of our businesses.
Since its establishment, Wacoal has provided consumers
with added value suited to the needs of each era by partneringwith clients, suppliers, and many other stakeholders to build aunique value chain that encompasses research, development,
production, and sales. Further, the physique data that the
Human Science Research Center has accumulated over its
55-year history has enabled the development of an array ofdifferent products. Moreover, new physique data obtained
through 3D body scanner technology promises to be useful ina wide variety of ways. In addition to the relationships withcustomers we have cultivated through beauty advisors, theutilization of the purchasing data of roughly 3.0 million customers will enable us to develop these relationships evenfurther. Thus, we are a real manufacturer and a genuine specialty store retailer of private label apparel (SPA) that conducts
integrated management of operations from manufacturing tosales. Furthermore, Wacoal is a data-driven company. Taking
pride in our status as a creative company, we will movetoward a great future by accomplishing reform without fail. In
tandem with these measures, we will rigorously analyze thediversifying lifestyles of customers and consumers and create
real value that meets the needs of a new era without restricting ourselves to the fields of existing products and services.
As we transform, I would like to ask all of our stakeholders
to continue their support in anticipation of a promising future
for the Wacoal Group.


26

ChannelApprox.

15%

Approx.

Ratio
Business model

I N TEG RATE D RE P O RT 2020

September 2020

27

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)

Fiscal 2020 Achievements and Issues

Wholesale Business

Viewing the irreversible changes resulting from the COVID-19
pandemic as an opportunity for renewed growth,
we will achieve reforms with unwavering resolve.

Masaaki Yajima
Director, Managing Corporate Officer
General Manager of Wholesale Division
Wacoal Corp.

Fiscal 2020 Performance

Net Sales, Operating Income, and Operating Margin*(¥ billion)

(%)

100

Net sales¥78.3 billion (–5.0 % YoY)

25

88.7

86.0

80

16.3

Operating income*¥13.6 billion (–11.1 % YoY)
17.4 % ( –1.2 pt YoY)

17.6

82.3
18.6

78.3
17.4

15

40

10

14.5

14.3

15.0

15.3

13.6

0

0
2016

Net sales

5

2017

Operating income

2018

2019

2020

(FY)

Operating margin* The Wholesale Business Division was established through a reorganization in fiscal
2019. For ease of comparison, figures for fiscal 2016 through fiscal 2018 have been
calculated based on the supposition that said reorganization was implemented infiscal 2016.

Roles of the Wholesale Business28* Sales personnel expenses as a percentage of net sales at department stores (excluding discount sales)

Measures Going Forward in Anticipation of Post-COVID-19 Conditions* Before transfer of company expenses

In addition to the core brands Wacoal and Wing, the Wholesale
Business Division handles a portfolio of other brands, including
the sportswear brand CW-X. The division is responsible for wholesale operations that supply mainstay sales channels, namely,
department stores, general merchandise stores, specialty stores,
and the operators of e-commerce malls. For many years, Wacoal
Corp.’s organization comprised separate product planning andsales functions for each brand. By competing with each otheralmost as rivals, the departments in charge of each brand provided customers with high-value-added products and establishedlarge market shares.
However, inefficiencies emerged in our previous businessmodel as changes in sales channels and consumer behavior
forced many department and general merchandise stores to close

division. As of August 2020, a second wave of infection, overwhich there was concern, has caused downtown department
store sales to flag once again. A prolonged pandemic is sure tochange consumer sentiment and behavior. For this reason, wemust take forward-looking measures to survive. We must accelerate existing initiatives, such as the maximization of store value by
integrating and coordinating off-line and online operations and by
introducing 3D body scanners to more stores. At the same time,
we need to evolve value chain systems so that we can expedite
the provision of products sought in a new era.

20

60

20

Operating margin

16.6

85.0

In the general merchandise store sales channel, sales benefited
from the integration of the Wacoal and Wing sales systems, which
entailed flexible redeployment of sales personnel. In addition, thesales margin improved steadily thanks to the timely delivery of
products in appropriate volumes. Nonetheless, the current organization is not producing favorable results, reflecting the significant
impact of a series of department store closures, particularly inregional cities. Further, non-innerwear product lineups for which
department stores have been the primary sales channel, such asnightwear (pajamas), products for children, maternity products,
and sportswear continue to face challenging conditions.
In fiscal 2020, the year ended March 31, 2020, the spread of
COVID-19 from March onward coupled with the prolongation of aslump in consumer spending due to a consumption tax hikeresulted in a significant year-on-year decrease of 5% in net sales,to ¥78.3 billion. The downward trend in net sales has been difficult
to halt, with the CAGR (compound annual growth rate) declining
4% over the past two fiscal years. Consequently, in fiscal 2020
sales personnel expenses as a percentage of net sales* rose to
the extremely high level of 26.3%, presenting the Wholesale
Business Division with a major issue.
Also, changes in customer behavior accompanying the COVID19 pandemic are proving to be an additional challenge for theor change business formats. In responding to these changes andmaintaining robust profitability amid a shrinking market, we
needed to reform our verticalorganization and make effective
use of management resources
across brand boundaries. With thisin mind, we set out the measuresof the previous medium-term
management plan and reorganizedmultiple businesses to form theWholesale Business Division in
April 2018.

IN T EG R AT ED R EPORT 2020

The COVID-19 pandemic has caused irreversible changes in thebusiness environment. Adopting the attitude that there is nogoing back to the way things were, we will have to achieve
renewed growth by revamping existing business models andadapting to the new environment with greater flexibility andspeed. Until now, we have mainly provided the Wacoal and Wing
brands to clients on a wholesale basis. However, increasing
e-commerce as a percentage of net sales is imperative. Moreover,given the likelihood of further changes in department store business models and consumer behavior, plans call for strengthening
our development of directly managed stores and other directly
managed operations.
Additionally, measures for integrating and coordinating operations are set to become even more important. Since its previous
medium-term management plan, Wacoal has been advancing an
original omni-channel strategy with a view to catering to customers’ diversifying purchasing behavior more flexibly and rapidly. As
of July 31, 2020, 10 stores have introduced our new 3D smart &try customer service system, which utilizes 3D body scanners and
AI. We have also digitized information on approximately 700,000
customers who purchased our products at department stores.
Other initiatives include unifying inventories and establishing links
between Wacoal’s e-commerce websites and clients. By maximizing store value and managing customer databases efficiently, we
will provide a shopping environment where there are no barriers
between off-line and online operations. Through the aforementioned initiatives, we will increase customer acquisition and retention and return to a growth trajectory.

Meanwhile, we will improve profitability by reforming the underperforming department store business. Through the rightsizing of
our sales personnel workforce and adjustment of new hire intake,we will lower sales personnel expenses as a percentage of net
sales from its persistently high current level to 20% or less by
fiscal 2023. Further, we will strategically negotiate transaction
terms with the aim of improving profitability by raising wholesale
prices as a percentage of retail prices and changing over to shoka
agreements whereby the manufacturer retains ownership ofmerchandise until its retail sale. We have already launched an
in-house project tasked with deliberating transaction terms, andwe will commence negotiations before the end of this year.
Although some may have misgivings about the ability of ahistoric business to achieve such reforms, we see the current
pandemic as a favorable opportunity to reform ourselves, and wewill tackle reforms with unwavering resolve.

I N TEG RATE D RE P O RT 2020

29

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)

Fiscal 2020 Achievements and Issues

Retail BusinessWe will become the Group’s domestic growth engine by steadily
improving customer retention through the continued creationof products that earn the endorsement of millennials and theutilization of stores as the bases for integrating andcoordinating online and off-line operations.

Hidehiko Imaizumi
Director, Senior Managing Corporate Officer
General Manager of Retail Operation Division
Wacoal Corp.

Fiscal 2020 Performance

Net Sales, Operating Income, and Operating Margin(¥ billion)

(%)

20

Net sales

Operating income*¥17.4 billion (+2.6 % YoY)

15

¥1.9 billion (+0.7 % YoY)

16

16.5

15.8

16.6

17.0
10.9

17.4
10.7

7.5

10

5.8

10.7 % (–0.2 pt YoY)0

* Before transfer of company expenses
Net sales

8

4

0.9

0.9

1.2

2016

2017

2018

Operating income

1.9

1.9
0

2019

2020

(FY)

Operating margin

Roles of the Retail BusinessIn 2001, when railway station buildings and fashion-themedcommercial facilities were becoming increasingly prominent,
we began opening directly managed stores to attract young
customers, who were underrepresented in our customer mix.
At present, we have a network of approximately 150 stores
across Japan comprising four store formats: AMPHI, ourmainstay store; WACOAL The Store; Brara; and Wacoal FactoryStore, which operates in outlet malls.
Themed on reasonably priced lingerie, AMPHI stores offer
the amphi brand, focused on providing “new and cute” value,
as well as the BRAGENIC brand, which is carried by all of ourdirectly managed stores and features brassieres with an average price of between ¥3,000 and ¥4,000—a more affordable
price range than that of Wacoal brand products. Meanwhile, as
boutiques featuring a selection of brands, WACOAL The Store30

and Brara sell products developed by the Retail Operation
Division as well as Wacoal brand offerings. Products developed by the division are also sold through Wacoal’s in-house
e-commerce website, WACOAL WEB STORE. In fiscal 2020,
the year ended March 31, 2020, e-commerce sales increased
1.7 percentage points year on year to account for 8.2% of thedivision’s net sales, excluding those of Wacoal Factory Store.
Low profitability was an issue for the retail business formany years. However, the value of brands has risen, and profitability has improved dramatically as a result of measures toreduce product varieties, roll out products common to all
directly managed stores, and curb discount sales, which were
implemented under the previous medium-term management
plan between fiscal 2017 and fiscal 2019.

IN T EG R AT ED R EPORT 2020

tered with our store membership programs.
Another achievement in fiscal 2020 was the beginning ofefforts to lay the foundations for marketing that caters precisely to customer needs by transcending the boundaries ofstores and in-house e-commerce. In providing convenient,
comfortable shopping experiences that transcend sales channels, we must change the mindset of sales personnel. To thisend, we began building a system that, when a store does notcarry a product or it is not in stock, provides sales personnel
with incentives for introducing customers to in-house e-commerce websites that are similar to incentives sales personnel
receive for in-store
sales. By continuing tobuild a sales style that
integrates off-line andonline operations andheightens customer
satisfaction, we willrealize top-line growthand increase profitability even further.

5.7

5

Operating margin

12

In fiscal 2020, despite the challenging environment producedby the spread of COVID-19 and lackluster consumer spending
in the wake of a consumption tax hike, the Retail Operation
Division continued achieving solid growth, posting a 2.6%
year-on-year increase in net sales, to ¥17.4 billion. However,operating income rose only 1.0% year on year as an increasein sales personnel and the recognition of store opening andremodeling expenses outweighed sales margin improvements
realized through a reduction in discount sales.
The most noteworthy achievement of the retail business inthe fiscal year was the construction of a management systemfor efficient marketing to customers who belong to store
membership programs. We have been stepping up efforts toacquire such members for some time. In fiscal 2020, we
added 300,000 new members, giving a membership of 1.2
million at the end of March 2020. This large membership not
only provides access to the profiles and purchase histories ofcustomers but also enables us to analyze their purchasing
behavior and provide each individual with timely, useful information accordingly. After the consumption tax hike in October
2019, new customers temporarily dipped. However, we wereable to minimize the lull following last-minute demand throughthe successful strengthening of marketing to customers regis-

Measures Going Forward in Anticipation of Post-COVID-19 Conditions
Given the new lifestyles stemming from the COVID-19 pandemic, as mentioned earlier, we must reform the roles performed by off-line and online operations and combine them
dynamically. With this in mind, in fiscal 2021, the year ending
March 31, 2021, we will take on the challenge of seamlessly
linking off-line and online operations by discarding the view ofstores as simply places for selling merchandise and by beginning to develop them into information hubs. Through these
initiatives, we will enhance customer experience. While heightening store capabilities and brand value, if we can create
environments that allow customers to make purchases
regardless of whether they are shopping off-line or online,
in-house e-commerce will naturally grow to account for alarger share of net sales. The medium- to long-term goal of
the Retail Operation Division is to have in-house e-commerce
generate approximately half of net sales, excluding those of
Wacoal Factory Store. As the first step toward this goal, we
will raise in-house e-commerce sales to 15% of revenues infiscal 2021. Also, in anticipation of the integration with online
operations, we will revise the break-even points of brick-andmortar stores. Other initiatives will continue enhancing ourability to develop highly competitive products, analyze purchase data, and disseminate information. At the same time,
we will establish environments that enable sales personnel
and planning and development managers to communicate
directly with customers through apps and SNS.
Due to the COVID-19 pandemic, the outlook is uncertain.
Nonetheless, by revamping the retail business to better reflect
the needs of customers and by building relationships withthem that are deeper, broader, and longer, we will fulfill ourrole as the Group’s domestic growth engine.

I N TEG RATE D RE P O RT 2020

31

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(1) The Wacoal Business (Domestic)

The Structural Reform of Wacoal Corp.
Given predictions that the effects of the COVID-19 pandemic may be prolonged, the business environment could not only remainchallenging but also undergo major structural change. In response to this uncertain environment, Wacoal Corp. will sustain
growth and ensure competitive superiority going forward by tackling fundamental structural reform. We will revamp underperforming businesses and rebuild sales channels to establish highly profitable business management and to realize the investment needed for our return to a growth trajectory. In conjunction with these efforts, we will heighten cost competitiveness andproductivity through the rightsizing of our workforce.
Our structural reform initiatives will focus on three main goals: (1) revamping underperforming businesses, (2) reorganizing
brands and optimizing inventories, and (3) reducing fixed costs by rightsizing our workforce. We will reflect these goals in operational plans and steadily advance initiatives accordingly.

1. Review low-profit businesses

Strengthen profitability
and build an organizationthat can adapt tochanges in the businessenvironment

 educe the number of brands/groups (start from autumn/winter of 2021
R
with the decision to reduce about 30%)
Examine the role and positioning of products other than innerwear, andimplement further consolidation(Reorganization scheduled
for implementationin April 2021)

3. Reduce fixed costs by optimizing personnel deployment
 he total personnel expenses as a percentage of net sales exceed 30% due toTthe decline in the top line (including the labor costs for manufacturing personnel)
Implement planning management for personnel (optimize personnel allocation by taking stock of operations and adjust hiring accordingly)
Reduce total personnel expenses as a percentage of net sales to 25% orlower during the next three-year plan (fiscal 2023–fiscal 2025)

Revising Cost Structures to Reduce Fixed Costs

47.1%

23.0%

24.8%

5.1%

32

FY2018−0.5pt+1.0pt+0.1pt−0.6pt

46.6%

24.0%

24.9%

4.5%

FY2019FY2020−1.9pt44.7%−0.7pt44.0%+0.5pt24.5%+0.7pt25.2%

Personnel
expenses+1.0pt25.9%+1.8pt27.7%

Generalexpenses+0.4pt4.9%−1.8ptIN T EG R AT ED R EPORT 2020and by optimizing personnel resources quantitatively and qualitatively,
we will build a sound corporate culture and achieve robust profitability.

Takahiko Hasegawa

MISSION

2.	Reorganize the brand and optimize inventory in line with touchpoint changes

FY2017

By pursuing systems that heighten the job satisfaction of each employee

Corporate Officer in charge of Group Personnel
Wacoal Holdings Corp.
Director, Corporate Officer
General Manager of Personnel
and Administration Division
Wacoal Corp.

Analyzing Our Value Chain Rigorously to Heighten Management Efficiency

 epartment store business: Review the sales floor environment and terms
Dand conditions, and optimize the number of sales staff
Other low-profit businesses: Ascertain future demand, and decide on which“businesses should be terminated” and execute accordingly

INSIGHT

3.1%

Costs

Operating income

Optimize personnel resources quantitatively and qualitatively through human resources planningAdvance systems that heighten the job satisfaction and personal fulfillment of each employeeLower total personnel expenses as a percentage of net sales from 30% to 25%
In fiscal 2020, the year ended March 31, 2020, as a result ofa decrease in sales accompanying the spread of COVID-19
and sluggish consumer spending following a consumption
tax hike, Wacoal Corp.’s total personnel expenses as a percentage of net sales were around 30% (including the laborcosts of manufacturing operations). For some time, we haveviewed the persistently high level of this percentage as an
issue. Therefore, we have been considering the incorporationof human resources planning*1 since preparing the current
medium-term management plan.
In fiscal 2020, we examined work in all divisions and, witha view to realizing medium- to long-term growth, classified
duties as work that is essential, work continued as a matterof custom, and work that does not add value. Further, weverified the type and number of personnel needed for workthat is essential. In fiscal 2021, the year ending March 31,
2021, when we were about to implement human resources
planning in earnest, the COVID-19 pandemic emerged unexpectedly. Consequently, the reform of total personnel
expenses as a percentage of net sales has become a morepressing issue than ever. Accordingly, we must redouble thespeed of measures based on human resources planning.
By optimizing human resources quantitatively and qualitatively and by painstakingly managing the number of newhires Companywide, we will reduce the total number of
employees while enhancing the productivity of each
employee. Through these measures, we will reduce total
personnel expenses as a percentage of net sales to 25% or
below during the term of the next medium-term management plan.

Further, to optimize the benefits of human resources
planning, we will fundamentally reform work styles and takesteps to heighten job satisfaction. We will also steadily
restructure systems to remove as far as possible restrictions on work locations and hours as well as barriers
between job categories and to enable the flexible redeployment of personnel. Meanwhile, in producing results in avolatile era, assembling a workforce with diverse values andexperience that can cooperatively tackle and resolve issues
is critical. With the aim of securing personnel who have ahigh market value, Wacoal has begun revising its hiring
methods to shift the emphasis from the hiring of new graduates toward the hiring of mid-career personnel. In addition,
we are diversifying personnel through the introduction ofreferral hiring*2 and an alumni system.*3 Going forward, we
will reform our personnel evaluation system to reflect theincrease in telecommuting and build a new compensation
system based on clearly delineated job responsibilities.
Personnel measures must adapt flexibly to reflectchanges in business conditions and the job market. At thesame time, each employee’s implementation of the Group
Philosophy will contribute to Wacoal’s sustainability. Withbusiness management based on mutual trust as a corevalue, we will establish a robust corporate constitution bystrategically implementing human resources planning andfostering a corporate culture that is conducive to job satisfaction and personal fulfillment.
*1 The planning of staffing needed to realize business plans, including theplanning of personnel hiring*2 Recruitment based on the recommendations of employees who workat a company*3 A system for using former employees as a management resource

I N TEG RATE D RE P O RT 2020

33

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(2) The Wacoal Business (Overseas)

Through concerted Groupwide
initiatives, overseas businesses
will expand and grow.
Mitsuru Sekiguchi
Corporate Officer in charge of GroupInternational Business
Wacoal Holdings Corp.
Director and Corporate Officer andGeneral Manager of Global Division
Wacoal Corp.

Fiscal 2020 Performance

Net Sales, Operating Income, and Operating Margin(¥ billion)

(%)

60

Net sales

Operating income¥50.6 billion (–4.8 % YoY)

16

51.9

48.4

51.9

53.1

30

¥1.5 billion (–67.4% YoY)

12

8.5
6.3

8.6

7.4

15

Operating margin

3.0% (–5.6pt YoY)

4.4
0

Net sales

Achievements and Issues in Our Plan’s First Fiscal Yearand Initiatives Going Forward
In fiscal 2020, the year ended March 31, 2020, the overseas
business recorded extremely disappointing results, I am afraid
to say. Although its e-commerce businesses are growing
steadily in countries worldwide, the overseas business issimilar to domestic businesses in that it has a structure­centered on department stores, general merchandise stores,
specialty stores, and other brick-and-mortar stores.
Consequently, in respective countries the management of theoverseas business was severely impacted by a slump in its

8

3.0

2016

34

50.6

45

3.1

3.9

4.6

2017

2018

2019

Operating income

1.5
2020

4

0
(FY)

Operating margin

mainstay department store sales channel—primarily in North
America and Europe—and by stores being forced to suspend
store operations due to lockdowns or equivalent restrictions
that countries worldwide imposed in response to the spreadof COVID-19.
This operating environment makes it necessary for the overseas business to shift further toward the e-commerce business.
Accordingly, we will increase the speed of our efforts tostrengthen the e-commerce business—one of the core tasks set
out in the current medium-term management plan.
One particularly noteworthy achievement in fiscal 2020 was
stable growth in the net sales and operating income of

IN T EG R AT ED R EPORT 2020

businesses in China, attributable mainly to the e-commercebusiness. Going forward, we will target millennials andGeneration Z customers in China by proactively introducing
and increasing rollouts of product lineups available in Japan,such as amphi-brand products. In other parts of Asia, meanwhile, progress was unsatisfactory, even allowing for the issueof our late participation in the e-commerce business.
Ultimately, the spread of COVID-19 significantly affected businesses in other parts of Asia, and I believe our performance inthis region calls for serious reflection.
As for businesses in the United States, in July 2019 we
acquired Intimates Online, Inc., with a view to further growth.
This acquisition is enabling us to capture a share of the millennial and Generation Z market, which we were unable toaccess. Our first priority is to rapidly put the start-up company
on a growth trajectory so that it breaks even on an operatingbasis in fiscal 2022. Specifically, we are increasing the company’s management efficiency by integrating and consolidating logistics infrastructure and back-office operations. Looking
slightly further ahead, plans call for the introduction to thecompany of such intangibles as the manufacturing and product-planning know-how that Wacoal America, Inc., has cultivated. At the same time, we will laterally introduce Intimates
Online’s digital marketing know-how across our organization
with the aim of capturing demand from customers in younger
generations, a market segment that has been challenging forus. In these ways, we will realize mutual synergy benefits,
thereby lifting the basic level of businesses in the UnitedStates as a whole.
Regarding businesses in Europe, the United Kingdom
accounts for the lion’s share of sales. Amid a slowdown ofexisting sales channels in the country, we completed arenewal of our in-house e-commerce website and began operation of the renewed website in September 2019. With the
exception of the U.K. market, we have yet to adequately penetrate the markets of European countries. In Europe alone, wewill expand and enhance brand portfolios and marketing
based on each region’s characteristics rather than on sales
channels. In this way, we will steadily expand our business in
the region. In particular, we view Germany as a priority region
due to the magnitude of the country’s market. Therefore, wewill build business foundations in the country by investing
human, physical, and financial resources based on a timeframe stretching between five and 10 years into the future.
Long-Term Global Strategy—2030 Vision anda “Global Wacoal”
The Global Division of Wacoal Corp. has set ¥150.0 billion as atarget for overseas net sales in 10 years’ time. To this end, we
will realize discontinuous growth through a combination ofeffective growth investment in countries and regions withsmall-scale businesses and M&As with companies whose
compatibility with our existing businesses has been rigorously
analyzed. When envisioning the long-term growth of theoverseas business, it is important to formulate growth strategies for each region, each brand, and each sales channel. For
example, in the United States—the world’s largest and mostadvanced market—the achievement of growth will be determined by whether or not Wacoal America and Intimates
Online can rapidly realize synergy benefits and combine their
online and off-line operations to reach a broad customer
group. If the companies can do this, I believe that the businesscan grow and increase net sales from the current level ofaround ¥20.0 billion to between ¥30.0 billion and ¥40.0 billion
in fiscal 2028.
In countries and regions other than China and Europe, forwhich our approach is as stated earlier, we will continue toseek business growth, particularly in countries and regions
such as India, which offer significant potential but where ourbusinesses are small, as well as in promising countries where
we have yet to establish a presence.
My Mission as the Corporate Officer in
Charge of Group International Business
Since its foundation, the Wacoal Group has pursued the visionof a “Global Wacoal.” Today, we are engaged in businesses
worldwide, selling products in more than 50 countries andregions and operating local subsidiaries in 22 countries andregions. Due to the current COVID-19 pandemic, however,
wisdom and practices that were valid until recently are nolonger viable. Consequently, reform has become a matter of
now or never. Nonetheless, looking ahead to a post-COVID-19
society, expansion of the overseas business will be indispensable to the growth of the Wacoal Group.
Until now, Group companies have conducted businessdevelopment in a vertical manner based on discrete brands
and countries. To accelerate growth and achieve results going
forward, however, concerted business development on aGroupwide basis is essential. We will be able to realize significant growth if three categories of companies can act as one
and increase coordination with one another. These three categories are overseas subsidiaries under the management of
the Global Division of Wacoal Corp., Peach John Co., Ltd. andother Group companies in Japan, and the overseas subsidiaries under the management of these domestic Group companies. Under the corporate officer system, in fiscal 2020 I was
appointed as the corporate officer in charge of Group international business. The mission I have been given is to forge
ahead with unified, Groupwide business development. Revisedand clarified last year, our vision of a “Global Wacoal” is a setof five tasks that indicate how we should expand and develop
overseas businesses (please see page 14). By establishingand faithfully following a road map for the accomplishment ofthese five tasks, we will take on the challenge of achieving
discontinuous growth.
Through concerted initiatives, the Group will become a“Global Wacoal” that is highly trusted by existing customers aswell as by a constantly growing number of new customers.

I N TEG RATE D RE P O RT 2020

35

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(2) The Wacoal Business (Overseas)

Businesses in the United States (Wacoal America, Inc.)

Businesses in the United States (Intimates Online, Inc.)
We will leverage a strong customer base andBy aggressively advancing a “Digital First” strategy,balance marketing investment between customer

we will accelerate growth of the e-commerce business,acquisition and retention to heighten profitability andthereby contributing to the growth of the entire Group.

bolster our brand power even further.

Mitch Kauffman

Michelle Cordeiro Grant

CEO
Wacoal America, Inc.

Fiscal 2020 PerformanceCEO
Intimates Online, Inc.

Net Sales, Operating Income, and Operating Margin of Wacoal International Corp.*(US$ thousand)
200,000

Net sales

US$168,685 thousand (–1.4 % YoY)

20

162,904

163,457

168,184

166,679

Operating margin

11.0

10

50,0005

17,974

18,41818,9000
2016

Net sales

US$11,967 thousand

Operating loss

US$(11,494) thousand

Operating margin

–

11.3

100,000

20,731

8.8 % (–2.3 pt YoY)

Net sales15

11.0

US$14,830 thousand (–21.9 % YoY)

176,508

150,000

12.7

Operating income

Fiscal 2020 Performance

(%)

2017

Operating income

2018

2019

2.1
3,694
2020

0
(FY)

Operating margin* Wacoal International Corp. is a holding company whose scope of consolidation
includes Wacoal America, Inc., and Intimates Online, Inc.

1. What is the role of Wacoal America (WAI) in the Wacoal Group?
Established 35 years ago, Wacoal America has grown to be the leading
intimate apparel brand in better stores across North America. WAI’s success has been achieved through a dedication to quality, fit, service, andmutual trust. Moreover, WAI has greatly expanded and strengthened the
Wacoal brand’s reputation worldwide.
WAI also contributes to other Group companies by excelling in key
production processes and in online sales and marketing. Given online retailchannels’ growth, this expertise has become even more important for the
future. With sights set on increasing net sales in the North American market
to US$30.0 billion by fiscal 2028, WAI is advancing various initiatives basedon priority strategies: grow e-commerce further, enhance product development capabilities, reform cost structures, and expand businesses in surrounding countries.
2. What were the company’s business results and issues in fiscal 2020?
In fiscal 2020, U.S. consumer spending was strong overall but continued
shifting away from such categories as apparel and toward experiential
areas. Growth in online shopping also continued to accelerate.
Consequently, the traffic and sales of our core department and specialty
store distribution channels declined. The pandemic in March resulted insudden store closures and order cancellations.
Despite the macro retail challenges, the Wacoal and b.tempt’d brands
achieved solid retail sales gains primarily due to the successful introductionof new products. Retailers focused on inventory control and increasing
turnover, leading to disappointing shipments overall. The strong growth of
Wacoal Direct and the wholesale online business was not enough to offset
declines in brick-and-mortar stores.
Expense savings did not offset the lost gross margin dollars from deficient sales, resulting in WAI only achieving 88% of budgeted operating
profit. However, net income was 10% above budget.
3. In the current fiscal year, what are the challenges in relation to the
COVID-19 pandemic?
The COVID-19 pandemic in the Americas caused the closure of all WAI
brick-and-mortar distribution points by late March 2020. Stores gradually36

began reopening in mid-May. Some consumers shifted to online shopping
but not enough to offset the decline in store sales. In the first quarter offiscal 2021, our total retail sales trend was down 52% year on year.
Overall retail sales trends have recovered but remain down 37% year on
year. First-quarter shipments decreased 50% year on year, reflecting retail
trends and the financial challenges of some key customers. While storesreopened early in the second quarter, customer traffic was down significantly. The current expectation is for an uncertain, fluctuating retail environment in the current fiscal year. In the remaining three quarters, year-on-year
decreases of 6% in revenue and 20% in brick-and-mortar revenue and a 20%
increase in online revenue are expected.
Other significant challenges include the risk of closure of the Wacoal
Dominican Republic factory due to the COVID-19 pandemic as well as
excessive markdown costs resulting from order cancellations.
WAI’s multi-faceted strategy in 2020 entails cutting expenses significantly and accelerating the growth of e-commerce businesses.
Since April, it has been apparent that the COVID-19 pandemic is going tohave a long-term impact on consumer spending. Over 15% of the department stores where WAI is distributed have closed or will close by 2022, andthere is significant risk of additional store closings. Total e-commerce
spending has increased, with the apparel e-commerce share doubling.
Many new e-commerce consumers are expected to continue shopping
online after the pandemic.
To address this new environment, WAI has created a “Digital First”
strategy, which will continue aggressive growth of the Wacoal Direct andwholesale e-commerce businesses and focus on brand awareness, online
experience, digital and virtual fittings, warehouse and distribution, andredeployment of our fit consultant team.
This strategy will enhance the Wacoal Direct experience, thereby attracting and retaining new customers in our highest-margin distribution channel.
These initiatives will also benefit our wholesale online and store businesses
by enhancing brand awareness and improving operational execution.
As a result, in terms of revenue growth we expect over 20% CAGR for
Wacoal Direct and 8% CAGR for wholesale online over the next five or more
years. This should offset an 8% CAGR decline expected in store businesses
and allow WAI to continue to grow in 2021 and beyond.

IN T EG R AT ED R EPORT 2020

1.What is the role of LIVELY in the U.S. business, and how will the brandget on a growth trajectory in the medium to long term?
In 2016, Michelle Cordeiro Grant launched LIVELY to create a new genre andpoint of view in the U.S. lingerie category. Our goal has always been to build
a long-lasting, leading brand with strong equity through community, productexcellence, experiences, and core values. Moreover, LIVELY is a brand andcommunity that inspires women to live passionately, purposefully, andconfidently.
Since our establishment, we have focused on digital excellence andacquisition marketing to build a strong, loyal community and customer
base. While its core products are innerwear, LIVELY has expanded into
additional categories. In addition, we have launched the “No Makeup
Needed” podcast and fostered a thriving ambassador network across the
U.S. Also, we have begun an omni-channel journey by launching a presence
in retail and establishing a key wholesale partner, Nordstrom. Consequently,
LIVELY is now poised to grow even more and make bigger and bolder
strides toward the mission of inclusivity, community, physical retail, andexperiences.
Having established a strong omni-channel strategy with a substantial
customer and community base, we are ready for the next chapter of our
growth. Our medium-term focus is on an optimal balance between acquisition to retention marketing, which will increase profitability and brand equity.
Also, we are preparing for exponential e-commerce growth based on continued efficiencies, operational excellence through use of the Wacoal warehouse, superior customer service, and inventory management that meets
customers’ needs.
While the physical environment is uncertain, in the long term the omnichannel approach is key. However, our near-term focus is on being a primarily digital entity supported by operational excellence. We will build abest-in-class customer experience by advancing a range of initiatives to tie
together our digital and physical resources.
We will continue building the LIVELY brand through a long-term, threepillar strategy comprising efficient growth in brand awareness, customers,
and community; omni-channel connectivity; and product category
expansion.

2. What were the company’s business results and issues in fiscal 2020?
In fiscal 2020, overall growth was not as strong as expected. Nonetheless,net sales grew 44.3% year on year, to US$19.4 million, and we acquired
295,000 more customers. This progress will allow us to continue building astrong customer base through a balanced approach toward customer
acquisition and retention in fiscal 2021. Further, our ambassador community has expanded to more than 130,000 members.
We knew diversification of our marketing mix would be critical to success in fiscal 2020. From the second quarter onward, however, a greaterthan-expected decline in Facebook efficiencies created a difficult digitalmarketing climate. To offset these inefficiencies, we leaned into building
new channels; for example, our affiliate program grew from less than 2% to
14% of revenue, while email and text grew 13 percentage points year on
year, to account for 20% of revenue. In addition, we increased our physicalretail footprint to four stores, all of which are growing strongly. Meanwhile,wholesale flattened as we shifted our penetration at Nordstrom frombrick-and-mortar stores to e-commerce to better align with growth opportunities. In March 2020, although we were able to pivot our digital experience
quickly, we were unable to completely offset the rapid market declines
accompanying the spread of COVID-19.
3. In the current fiscal year, what are the challenges in relation to the
COVID-19 pandemic?
In the current fiscal year, we have responded to the pandemic’s impact on
the market through a major shift in strategic focus from retail and wholesale toward e-commerce. As a result, LIVELY has seen a rapid increase inrevenue. In the new climate, digital marketing efficiencies have quickly
improved; we have increased TV advertising; organic channels havebecome extremely effective; and we have leveraged the affiliate partners
channel. Further, we have launched new digital experiences for customers.
Additionally, we tested virtual styling and social content experiences for ourambassador community based on the theme of staying home.
Although the first half of fiscal 2021 has seen exponential growth, we are
cautiously optimistic about full fiscal year performance given the approaching end of a government stimulus package and unemployment funding—which have supported customer sentiment—and uncertainty over theupcoming election.

I N TEG RATE D RE P O RT 2020

37

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(2) The Wacoal Business (Overseas)

Businesses in Europe

Businesses in China

Wacoal Europe will expand its share of important markets

We will steadily advance business strategies

by catering precisely to changes in purchasing behavior andand enhance profitability to fulfill our roleby enhancing services at brick-and-mortar stores.

as a growth driver.
Geoff Embley

Koji Tsujimoto

CEO
Wacoal Europe Ltd.

Fiscal 2020 Performance

President and Representative Director
Wacoal China Co., Ltd.

Net Sales, Operating Income, and Operating Margin

Fiscal 2020 Performance(£ thousand)
120,000

Net sales

Operating income£93,954 thousand (–3.0 % YoY)

£7,290 thousand (–24.6 % YoY)

90,000

7.8 % (–2.2 pt YoY)

87,68760,00091,93995,342

96,8268.7

7.8

93,9542016

Net sales

38

1.9
1,766

8,339

2017

2018

Operating income

600,000

9,658

7,290
0

2019

2020

12

575,010580,016

694,776

702,223

7.9

8.3

636,504

99Operating income

RMB58,468 thousand (+7.1 % YoY)

400,000

6

4.4

Operating margin

8.3 % (+0.4 pt YoY)

4.9
3

0

Operating margin

3. In the current fiscal year, what are the challenges in relation to the
COVID-19 pandemic?
COVID-19 has changed our priorities, but we have continued to follow thefounder’s principles of mutual trust and taken decisive action. We haveadapted to ways of working that still ensure employee safety, thereby
keeping the trust of our employees while servicing our customers. Service
levels have been maintained, and we have delivered a development programfor each season. During the lockdown period, we took 100% ownership of
the Sri Lanka manufacturing operation, thereby securing manufacturing forthe future and strategic capacity for other Wacoal companies.

5.0

200,000(FY)

I am delighted to report that we were successful in navigating our way toanother year of solid growth until the COVID-19 pandemic hit world markets. We expanded our department store base, with new business added at
El Corte Inglés, the largest European department store group in Europe. We
expanded into Dillard’s in the southern region of the United States andacquired new listings with David Jones in Australia. We were still growing in
the independent sector as the brands gained recognition, and we were well
positioned in the e-commerce market. We launched our own e-commerce
branded websites in the fiscal year, which has proved to be fortuitous as
they have exceeded expectations in 2020 due to the impact of lockdowns.
Over the past three years, we have worked hard on forecasting, merchandising, and inventory management, and as a result, customer service levels
are at record-high levels. We have invested in the physical and technologicalinfrastructure, the development of the management group, and thestrengthening of the organization’s culture. We worked in collaboration with
the Human Science Research Center in Japan on projects that we believe
will give us competitive advantage in the future and develop our programfor social sustainability. We have also worked with our sister companies toleverage synergies within our businesses.

IN T EG R AT ED R EPORT 2020

RMB702,223 thousand (+1.1 % YoY)

Net sales

10.0

7.8

(%)

800,000

36,828

2. What were the company’s business results and issues in fiscal 2020?
It is important to understand results for fiscal 2020 in the context of themarket. In most markets, the challenges have been similar worldwide.
Corporate sustainability is emerging as a key issue, but the challenge of achanging retail market has been more problematic. Brick-and-mortar
retailers are under increasing pressure due to the growth of e-commerce,
which has led to reduced footfall along with cost pressures due to highrental values on property. Inevitably there have been some casualties, someshort term, while others have been terminal.

12

6

0

1. What is the role of Wacoal Europe in the Wacoal Group, and what is thecompany’s medium- to long-term vision?
In 1950, Wacoal’s founder Koichi Tsukamoto, set out a 50-year plan toexpand business overseas and become a true global leader in the industry.
Subsequently, Wacoal expanded into Asia, North America, and Europe.
The European business was enhanced through an acquisition in 2012that provided a substantive base on the continent, but it was not until its
recognition as 2018 Designer of the Year at the Salon de Lingerie in Paris
that Wacoal was confirmed as a truly global brand.
The Wacoal brand in the Wacoal Europe business is only part of thestory, however. Wacoal Europe’s business is unique as it has a portfolio of
six brands, covering lingerie and swimwear, that are rolled out not just in theEuropean markets but in over 30 countries across the world.
As retail has reopened, we have restarted some of the projects that will
help us in the future, and our development program has been adapted tosuit the changing conditions. We are adapting our strategies to the changing marketplace, recognizing that digital has accelerated and that consumers are more cautious. However, we recognize that brick-and-mortar storesare still very important. We design and manufacture an engineered garment,
and the best service is still provided by fit consultants. The more weenhance that process for the consumer, the more successful we will be. We
also recognize that we have more to do on corporate sustainability and inmany other areas. Just as the founder set out 10-year plans, we are pursuing a 10-year plan to continue growing market share through organic
growth, new ventures, and acquisition.

(RMB thousand)

15

30,000Operating margin

Net Sales, Operating Income, and Operating Margin(%)

25,341

28,84331,295

2016

2017

2018

Net sales

Operating income

54,59458,468

2019

2020

0
(FY)

Operating margin

Roles and Fiscal 2020 Achievementsof Businesses in China

Measures Going Forward in Anticipation of
Post-COVID-19 Conditions

Aiming to play its part in a “Global Wacoal” alongside the Group’sbusinesses in North America and Europe, Wacoal China Co., Ltd.,is pursuing its priority strategies by increasing the company’s
share of department store sales and strengthening the e-commerce business. In fiscal 2020, the year ended March 31, 2020,
thanks to the successful strengthening of collaboration with
e-commerce mall operators, the revenues of the e-commercebusiness significantly surpassed targets and the previous fiscal
year’s revenues to account for 20% of net sales. Meanwhile, we
decisively withdrew from underperforming brick-and-mortar
stores. Further, Japan’s amphi brand product lineup, which werolled out to acquire young customers, met with a favorable reception from customers and made a strong start. Also, with a view tosustained growth, we reorganized and strengthened our businessfoundations by consolidating logistics bases.

Going forward, Wacoal China will increase its absolute customer
numbers by building a relationship with each customer that isdeeper, broader, and longer. In addition to the aforementioned
amphi brand offerings, from the autumn and winter of 2020 thee-­commerce business will begin marketing products that target
the middle-class customer group. Further, in collaboration with
Peach John Co., Ltd., we will begin in-house live commerce.*
Meanwhile, we will further consolidate brick-and-mortar storesand strengthen the profit and loss management of stores. Also,
Wacoal China will maximize store value by expanding and enhancing model stores, renewing the membership program, and improving store services. Other initiatives will include increasing theefficiency of product rollouts and conducting rigorous inventory
control to boost earning power. In addition, plans call for strengthening personnel development through the operation of a newhuman resources system.
Although the COVID-19 pandemic has greatly affected us, wewill overcome the present difficulties by returning to basic management strategies, strengthening internal collaboration within theoperation division, and proactively leveraging China’s advanced
digital infrastructure.
* A combination of livestreaming and e-commerce, which has become popular in Asia,
particularly in China

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ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(3) Other Businesses

LecienPeach John
Fiscal 2020 Performance

Net Sales, Operating Income (Loss), and Operating Margin(¥ billion)

With the revitalization of Peach John as our mission,

Net sales

we will capitalize on the advantages of being a company focused on¥5.8 billion (–8.3 % YoY)

10

Operating loss

capable of sustaining profits and creating value.

8.9

Manabu Tochio

Operating margin

6
5

8.4

7.2

¥(0.5) billion

4

6.3

6

5.8

3
2

4
2

–0.04

–2

–

1.0
0.1

0.5

0

President and Representative Director
Peach John Co., Ltd.

7

6.1

12

8

e-commerce and step up marketing to evolve into a company

(%)

14

2016

Net sales

1
0

–0.4
2017

2018

Operating income (loss)

2019

–0.5

–1

2020

(FY)

Operating margin

Fiscal 2020 Achievements and Measures Going Forward
Fiscal 2020 Performance

Net Sales, Operating Income (Loss), and Operating Margin(¥ billion)

(%)

12

Net sales

11.2¥10.5 billion (–0.1 % YoY)

10.8

3.4
6

Operating loss

11.1

10.5

10.5

4.1
3

2.3

¥(0.4) billion

0.3

0

6

0.4

0.4

0

–0.4
Operating margin

–

–5.9

–6
2016

Net sales

2017

Operating income (loss)

2018

2019

In accordance with the medium-term management plan, Lecien
Corporation has adopted the selection and concentration of business fields as a priority strategy and is building business foundations that will enable the company to remain in the black
permanently. In fiscal 2020, the year ended March 31, 2020, thecompany’s net sales were 8% lower than those of the previous
fiscal year because a year-on-year increase in the sales of private
brand products for general merchandise stores and specialty
stores was unable to completely offset a decline in the revenuesof the material business. Due to the recognition of one-time
expenses for a special voluntary retirement scheme that

–3
2020

accompanied withdrawal from the apparel business, Lecien recognized an operating loss.
Challenging business conditions are expected to continue asorders decline due to the surplus inventories of the domesticclients that we supply as an original equipment manufacturer. We
will proactively develop new clients and strengthen efforts tomarket solutions for suburban specialty stores, which have seen
comparatively firm trends even amid the COVID-19 crisis. In conjunction with these efforts, Lecien will continue improving management efficiency by revising expenditure plans.

Nanasai(FY)

Operating margin

Fiscal 2020 Performance

Net Sales, Operating Income, and Operating Margin(¥ billion)

Fiscal 2020 Achievements

Measures Going Forward in Anticipation of
Post-COVID-19 Conditions

At Peach John Co., Ltd., in fiscal 2020, the year ended March 31,
2020, we implemented fundamental structural reform of businesses with a view to improving profitability in line with the priority
strategies of the current medium-term management plan. Our firstreform measure was to withdraw from underperforming businesses. As a result of the decision to close eight underperforming
stores and reduce the number of directly managed stores to 36,
business efficiency increased. The second reform measureentailed discontinuing the production of catalogs, which were not
performing well. Immediately after the discontinuation of catalogs, sales dropped. Nonetheless, we have been able to offset thisdrop by successfully disseminating topical promotion initiatives
via social media. In our third reform measure, we established a
new lineup of low-priced products to attract customers aged 25 orunder, one of our priority strategies. In aforementioned ways, by
focusing strongly on growing in-house e-commerce in domestic
operations while increasing product appeal and enhancing customer services in Japan, Peach John has prepared the way for amove into the black.

40

Net sales

10¥8.7 billion (–7.4 % YoY)

(%)

8.9
3.4

IN T EG R AT ED R EPORT 2020

Operating income¥0.2 billion (–22.7 % YoY)

4

3.0

2.7

3

2.5

1.4

4

5

8.7

8.3

8.1

8
6

We believe that our strengths will remain advantages in a postCOVID-19 world. Accordingly, in fiscal 2021, the year ending March
31, 2021, we will accelerate measures implemented up until fiscal
2020. While increasing the differentiation of each sales channel,
we will establish a product lineup that reflects customer needs,
conduct and implement product development, and increase management efficiency. Meanwhile, to increase in-house e-commerce
sales—which is a priority measure—the development of points ofcontact with customers will be important. By applying to digitalformats expertise garnered through the production of catalogs,
we will create content competitors cannot match and thereby
acquire new customers among the younger generation.
Peach John’s role is to contribute to earnings through the utilization of powerful brand equity for continued trend creation andthe development of new points of contact with young customers.
We will revitalize Peach John by marketing products and services
that reflect changes both in society and in demand.

9.4

1

2

Operating margin

0.3
2016

0

2.5 % (–0.5 pt YoY)2

Net sales

0.1

0.2

0.3

2017

2018

2019

Operating income

0.2
2020

0
(FY)

Operating margin

Fiscal 2020 Achievements and Measures Going Forward
In line with the medium-term management plan, Nanasai Co., Ltd.,is taking steps to build new platforms through the acquisition of
new customers and the development of new products. At thesame time, the company is conducting business managementwith a strong focus on profits. In fiscal 2020, the year ended
March 31, 2020, reflecting the absence of the previous fiscal
year’s large-scale remodeling of department stores, net sales
declined 7% year on year. Due to the lower net sales, operating
income decreased 23% year on year.
The COVID-19 pandemic is significantly affecting the business

management of Nanasai because its clients are postponing store
remodeling and canceling various events. Premised on the unlikelihood of an early recovery in demand, we are undertaking a boldrevision of expenditure plans that entails commencing sales ofairborne droplet barriers, eliminating and consolidating underperforming sales bases, suspending the recruitment of new employees, and reorganizing properties rented from third parties. Further,
we plan to examine next-stage measures for profitability improvement in light of careful analysis of future demand.

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41

ST R AT E G Y

ST R AT E G Y

Anticipating a Post-COVID-19 Society(4) Production System Realignment

Establishment of Global Production and Procurement and Promotion of ESG Initiatives

Production System Realignment
We will help the Group sustain growth by building
systems that enable global management ofboth production capacity and materials procurement,
maintaining and enhancing Wacoal’s quality,

Kazuhiro Shibahara

Corporate Officer in charge of Group
increasing productivity, and reducing costs.
Technology and Production
Wacoal Holdings Corp.
Director, Corporate Officer
General Manager of Technology/Production Division
Wacoal Corp.

Roles of the Technology/Production Division
Over many years, Wacoal has built a production management
system that integrates technologies and skills and realizes highquality manufacturing. While in the present day many apparelcompanies have fabless business models and cannot manufacture their own products, we have always made a point of using
in-house factories for production. In-house manufacturing enables
us to pursue the wearing comfort and quality that Wacoal customers seek. Moreover, our current production system is best suited
to realizing an uncompromising approach to manufacturing aswell as to maintaining our competitive advantage as a manufacturer of high-quality innerwear.

The Technology/Production Division is responsible for establishing sewing technologies and providing technological guidance.
Also, from materials procurement through to delivery date management, we maintain Wacoal’s quality levels, increase productivity, and reduce costs. Further, as with domestic operations, theoperations of our overseas subsidiaries entail integrated manufacturing that covers product planning and development through tosales. For this reason, one of the division’s main roles is the facilitation of a global production management system through coordination among countries and the provision of technological support.

Under the current medium-term management plan, the division’s
most important mission is to strengthen future cost competitiveness by constructing a system that enables the global control andmanagement of the Wacoal Group’s entire production capacityand materials procurement.
At present, our factory in the Dominican Republic, which manufactures products for the North American and European markets,and our factory in Sri Lanka, which manufactures products for
European markets, only receive technical guidance from Japan,
with respective overseas subsidiaries managing the production
capacity and materials procurement of these factories. From theviewpoints of heightening overall management efficiency andenabling the growth strategies of the overseas business going
forward, however, being able to manage and adjust production
capacity among factories will be important. Also, the Group needs
to create a system for the efficient in-house procurement ofhigh-value-added materials.
With aforementioned tasks in mind, we invited materials managers from respective countries to participate in the inaugural

Fiscal 2018 Brassiere Production Volume and Expected Changes in Brassiere Production Capacity

The worldwide spread of COVID-19 since the beginning of 2020 ishaving a serious impact on our production sites. In response to
the crisis, Wacoal’s first priority was to reduce production volume
by between 20% and 30% so that decreasing sales did not lead tosurplus inventories. Further, we decided to boldly shift to the
ASEAN region the manufacture of products for Japan’s market. In
fiscal 2021, the year ending March 31, 2021, the percentage ofsuch products manufactured overseas is expected to increase toapproximately 70%, surpassing the 67% target set for fiscal 2022,
the medium-term management plan’s final fiscal year.
Furthermore, even while significantly lowering production volume,
we have been able to curb manufacturing costs. The ability toadjust production flexibly among bases and maintain stable supplies even in an emergency has given me a firsthand appreciationof the significant merits of in-house factories.

42

Meanwhile, domestic factories—which are facing challenges
due to changes in business conditions and production structures—need to increase operational efficiency and further
strengthen profitability. Through the further improvement of ourdifferentiated capabilities with respect to advanced technology,
small-lot manufacturing, and short-lead-time manufacturing andthrough the strengthening of cost competitiveness and sales
capabilities, we will also seek orders for the manufacture of othercompanies’ sewn products. Further, between July and September
2020, at the request of the Japanese government, our domestic
factories manufactured approximately half a million medical
gowns as a contribution to COVID-19 infection countermeasures.
Through the accumulation of such initiatives, we will further
heighten the competitiveness of domestic factories.

IN T EG R AT ED R EPORT 2020

 Production increase planned
Production decrease planned

Global Control of Production Capacity
East Asia

12.5 million units
Dominican Republic

4.5 million units

Products purchased
outside Group

Acceleration of the Shift of Production to the ASEAN Region in Response to the COVID-19 Pandemic

Materials Managers Global Meeting in September 2019. Goingforward, these managers will share information with each othercontinuously and, ultimately, establish common procurement ofmaterials and unified quality standards. Other initiatives will
include creating the new position of global production manager
and taking a variety of measures to foster production engineers.
Due to the COVID-19 pandemic, the establishment of a global
production and procurement system is expected to be slightly
delayed. Nonetheless, the Technology/Production Division willcontinue steadily building the system with the aim of contributing
to the Group’s sustained growth.
Another important mission of a “Global Wacoal” is to help
realize a sustainable society by addressing social issues throughmainstay businesses. Accordingly, we will continue collaboratingclosely with suppliers to ensure adherence to and respect forsocial norms related to human rights, labor practices, ethicalmatters, and other issues. Further, we will continue proactively
promoting environmental preservation by advancing activities
that lower environmental burden.

12.5 million units

Sri Lanka

1.5 million units

Brassiere production volume

Fiscal 201848.5 million units

Southeast Asia

17.5 million units

Sewing Factories and Their Shipment Destination Countries and Regions (as of March 31, 2020)
Shipment Destination Countries and Regions
Japan(Wacoal Corp.)

Japan (Lecien, Ai)

United States

EuropeChina

ASEAN region, etc.

Hokuriku Wacoal Sewing
Niigata Wacoal Sewing
Kyushu Wacoal Manufacturing
ToricaLecien Nagasaki
East Asia
Guangdong Wacoal
Dalian Wacoal
Wacoal China (Beijing)
Dalian Lecien Fashion
Vietnam Wacoal
Indonesia Wacoal
Thai Wacoal
Southeast
Asia
Lecien (Vietnam)
Lecien (Cambodia)
Myanmar Wacoal
Wacoal Timex (Sri Lanka)
South Asia
Wacoal Dominicana
Latin America(Dominican Republic)

I N TEG RATE D RE P O RT 2020

43

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46 Human Resources Management
48 Sustainability
50 Management Team
52 Corporate Governance
58 Dialogue

44

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

45

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Human Resources Management

Consistent with a management philosophy that emphasizes mutual trust, Wacoal manages employees’ health and safety, trains
personnel, and is receptive to diversity in human resources and values in each workplace, thereby deepening mutual trust with
employees and developing workplace systems conducive to the creation of environments where the talents of individual
employees can be fully realized.
Our Basic Approach to Human Resources
The Wacoal Group has built value chains that comprise proprietary
networks, which span all stages from product planning and development through to material procurement, production, and sales. In
these value chains, human resources are the Group’s most important management resource. For this reason, we believe that creating an appealing corporate culture that is employee friendly andoffers job satisfaction will lead to sustained growth.

A Human Resources Strategy Based on Diversity and Inclusion
Wacoal employs and recognizes the individual differences of a wide range of
people, not just in terms of race, gender, age, or whether they have disabilities but
also in terms of limitations on availability due to child-rearing or nursing care
commitments or lifestyle factors. With this in mind, we have positioned diversity
and inclusion at the center of our human resources strategy with the aim ofcreating new value by leveraging the individuality of employees and enabling themto fully realize their talents. In accordance with this strategy, we are promoting
human resources development, work-style reform, health and productivity
management, and other initiatives.

Focus Areas of Our Initiatives
Work-Style and Leave-Style Reform
Aiming to enhance productivity and job satisfaction, Wacoal Corp.
launched the Work-Style and Leave-Style Reform Project in April
2017. Under this project, we are establishing employee-friendly
working conditions by introducing a telecommuting system, aleave system for self-improvement, and a system that helps families take leave at the same time.
Further, we are advancing personnel management with the aimof optimizing human resources quantitatively and qualitatively andincreasing the productivity of each employee. Also, given the needto ensure the safety of employees and the social responsibility toprevent infection inside and outside the Company during the
COVID-19 pandemic, from March 2020 the Company introduced
staggered commuting, encouraged online meetings, restrictedbusiness trips, extended eligibility for telecommuting to include all
office workers, and promoted working from home. In addition, weestablished an environment that enables personnel to operatecomputer-aided design software from home and perform planningand development duties as they would normally.
With telecommuting as a premise, we will advance work-stylereform and revamp our personnel evaluation system.

Purpose of Telecommuting and Eligible Employees
Since pandemic

Purpose: Promote work–life balance

Purpose: Ensure safety, prevent infection inside andoutside the Company, enhance productivity, promote
work–life balance
Eligible employees: All office workers (frequency permonth adjusted as required in light of pandemic status)

Number of eligible employees: Approximately 200(number of applicants as of January 31, 2020)

Number of eligible employees: Approximately 2,010(as of August 31, 2020)

The Advancement of Work–Life Balance
Wacoal Corp. is developing workplace environments that enable
employees to lead fulfilling lives and to make the best use of theirskills. For example, as part of our initiatives to help employees
meet work and child-rearing commitments, we are establishingprograms and norms with a view to creating environments thatare convenient and fulfilling to work in not only for employees withchild-rearing commitments but also for coworkers who support
them.
Further, as a result of preparing an action plan based onJapan’s Act on Advancement of Measures to Support Raising
Next-Generation Children and taking measures to implement theplan, in 2018 we received Kurumin certification for the third time and Platinum
Kurumin certification.
In addition, measures in response to
the COVID-19 pandemic—such as anincrease in the number of employees
eligible for telecommuting, the introduction of staggered commuting, and an
easing of the conditions of the flextime
system—will also help to enhance productivity and work–life balance.

Human Resources Development
We believe that our development as a company is dependent
upon efforts to enhance the qualifications of each employee.
Based on this belief and with the aim of fostering personnel who
can put our management philosophy into practice, we provide andconduct training programs that support the development of
employees’ careers and professional skills. We also assist in
career and personal development through programs supporting
employees’ self-study.
In addition, we conduct human resources development basedon the skills required in particular fields. For example, we provide
training on maintaining and enhancing the quality of Wacoal
products as well as programs aimed at promoting customer
satisfaction by heightening employees’ consultative capabilities.
Introduction of the Wacoal Terakoya Personnel Development System
With the aims of fostering autonomous, innovative personnel who can put its
management philosophy into practice and creating a culture conducive toemployees’ growth as individuals, Wacoal Corp. introduced the Wacoal Terakoya
personnel development system in April 2019. The new system helps employees
take the initiative in building their careers and continue learning by offering a wider
selection of training options beyond rank-based training as well as more opportunities to volunteer as a project participant. In addition to modifying our programs
to increase the focus on productivity and practical training, we are conducting
joint training with other companies to expose employees to diverse viewpoints. By
fostering personnel who are able to create new value through the implementationof our management philosophy, we will sustain growth in a changing businessenvironment.

importance. We will continue supporting the career developmentof women by expanding and improving a variety of systems andtraining programs.
Percentage of female
employees

Percentage of female
managers

89.5% (+0.3pt YoY)

23.7% (+1.1pt YoY)

(As of the end of March 2020)

Other key initiatives include passing on our highly competitive
manufacturing techniques and enhancing quality and productivity
on a global basis by providing support and direction throughtechnical experts dispatched from Japan to overseas factories.
Highlights of Our Human Resources Development Programs
Aim

Rank-Based
Training

Helps employees understand the roles and the mindset
expected of them in new ranks or positions and gives
employees an opportunity to consider their career plansin the context of the Company’s strategies

654

1– 6
days*

Business
SkillsEnables employees to learn the skills needed bybusinesspeople through exchanges with personnel
inside and outside the Company and to acquire
universal business skills usable inside and outside
the Company

86

7.5
hours

WacoalAcademyShares in-house knowledge, passes on knowledge,
and develops organizations through training andseminars conducted by in-house and external
instructors

259

7 hours

Overseas job training

6

2 years

Global Talent
Development

Develops globally competent personnel who haveinternational communication skills (the ability to
execute duties, language
skills, and the ability to workin and understand othercultures)

Overseas language
training

2

5monthsGlobal mindset
training

10

3.5
hours

Utilizes e-learning programsas the primary means of
implementing training andmeasures and providing
content that supports theautonomous development
and enhancement of
employee capabilities

Self-study support
program

50–

Distance learning

422–

Self-Study

Platinum Kurumin
Certification received in 2018
Wacoal Corp.

Health and Productivity Management
Viewing the health of employees as an important asset for sustained growth, Wacoal Corp. is advancing strategies for health andproductivity management through close collaboration with healthinsurance associations and labor unions.
Covering the period through to 2020, the Wacoal GENKI Project
2020 ( TABLE A ) establishes medium-term targets and actionplans for countermeasures to lifestyle diseases, cancer, andmental health issues. Moreover, these initiatives have received
external recognition.
Aiming to alleviate shoulder stiffness and back pain and toencourage employees to incorporate regular exercise into their
daily routines, in January 2020 we renewed an in-house exercise
program that employees participate in before commencing duties.
With increasing numbers of people refraining from going outdoors
or working from home, we periodically distribute information
aimed at helping employees maintain and improve their health.
Further, we strengthened smoking countermeasures by prohibiting smoking during working hours in April 2020 and by establishing measures that offer smokers free participation in aquit-smoking support program for two years.

TABLE A

Wacoal GENKI Project 2020

Lifestyle disease countermeasures
Reduce the percentage of employeeswith lifestyle ­disease-related conditions

Cancer countermeasures
Increase the percentage of
employees screened forfive major cancers

IN T EG R AT ED R EPORT 2020

(Before project’s
countermeasures)

25% or

2020/3(Results)

29.2%

27.2%

Lung

96.1%

96.3%

Stomach

79.3%

84.0%

90.5%

95.4%

Breast

81.0%

84.0%

Uterus

65.0%

71.6%

100%

67.0%

79.7%

15% or

20.4%

14.7%

7,000 or

9,555

14,556Large
intestine

Increase the percentage of screened
high-risk employees (those requiring
secondary tests)
Reduce the percentage of employees who
smoke
Mental health issue countermeasures
Reduce the number of employees absent
long term due to mental health issues ×
The number of days absent

I N TEG RATE D RE P O RT 2020

2015/3

Numerical
targetSummary

Health & Productivity Stock
Wacoal Holdings Corp.

46

Period/No.
Annualof hrs. of
number oftraining per
participants
personProgram* Differs according to employee rank

Before pandemic
Eligible employees: Certain office workers (required
application in advance and frequency per month restricted)

The Empowerment of Women
Although women account for a high percentage of Wacoal Corp.
employees, they are underrepresented in Wacoal Corp.’s management team. Therefore, we view empowering women and therebyreflecting a greater diversity of viewpoints in decision-making as
an important management goal. To this end, we are cultivating
workplace environments that are conducive to women utilizing
their strengths and attributes to play professional roles of greater

lower

100%

lower

lower

Excellent Enterprise of Health & Productivity
Management 2020 (White 500)
Wacoal Holdings Corp.

47

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Sustainability

In pursuing our mission, which calls on us to contribute to society by helping women to express their beauty, and in helping
address social issues, we continuously conduct social contribution activities through our mainstay business and remain mindfulof the effect of our business activities on the environment and society.
Sustainability information and statistics are available on the Company’s website.
https://www.wacoalholdings.jp/en/sustainability/

Our Basic Approach to Sustainability
We believe that meeting the needs and expectations of society
and earning its trust are essential for the realization of soundcorporate activities and sustained growth. Wacoal procures manydifferent types of resources from society, including land, energy,
personnel, and large amounts of raw materials. However, we
would be denied access to such resources if we did not have arelationship of trust with society. Accordingly, as we conduct ourbusiness activities, we will keep firmly in mind the need to consider and benefit society, without which our markets would notexist.

Our Policy on CSR Activities
Wacoal’s fundamental social responsibility is to manufacture products that
customers love, develop products that meet current needs, and conduct businessfairly to pave the way to a better future. In other words, we believe that our basic
corporate social responsibility (CSR) is to build relationships of trust with customers and society through the development of businesses in an equitable mannerand an uncompromising approach to manufacturing that provides customers
with the products they seek.
We advance CSR initiatives based on seven basic principles and seven core
subjects, all of which are in accordance with the ISO 26000 standards publishedin November 2010 (Japan Standards Association, 2010). Our seven basic principles are accountability, transparency, ethical behavior, respect for stakeholders’interests, respect for the rule of law, respect for international codes of conduct,
and respect for human rights. The seven core subjects are organizational governance, human rights, labor practices, the environment, fair operating practices,
consumer issues, and community involvement and development.

Focus Areas of Our Initiatives
Environmental Activities
Wacoal shall promote environment-friendly business activities
reflecting the view that protecting the environment is a corporate
responsibility. Wacoal shall provide products that place minimalburden on the environment and prevent pollution by pursuingenvironment-friendly initiatives in a variety of processes related toits products, from design and materials development through tomanufacturing, distribution, and sales. Aiming to realize operations that are in greater harmony with the global environment andlocal communities, we will step up supply-chain environmental
initiatives focused on such areas as promoting the elimination ofplastic from packaging, reducing the disposal of unsold products,
and introducing smart factories.

CSR Procurement Based on Mutual Trust and Cooperation
Wacoal’s supply chains for textiles and apparel begin with productplanning and design in the countries and regions where the products will be sold. Almost all of our products are shipped to theirrespective markets after processing through international networks in which the production or procurement of raw materials
and the mass production of finished products are carried out infactories in China or emerging countries in the ASEAN region.
Established in October 2017, the Wacoal Group CSR
Procurement Guidelines declare that “in order to fulfill our social
responsibilities, we must build close partnerships with all suppliers involved in our product manufacturing activities, and together
with them we must comply with and respect society’s requirements with regard to not only quality, pricing, and delivery but also
human rights, labor practices, the environment, and ethics.” Since
February 2018, we have been conducting a management cyclethat continuously amends and improves the guidelines in light ofcareful monitoring of compliance with the guidelines. Further, withthe permission of its contract manufacturers, Wacoal has been
disclosing their basic information on its website since May 2018.

Contract Manufacturers Covered by Disclosure(As of the end of August 2020)

Name

Updated number offactories covered bydisclosure

Manufacturing output offactories covered byNumber of
disclosure as a percentupdates
age of products procured in value terms

Wacoal Corp.

129 factories

95% of innerwear,
pajamas, roomwear,
babywear, maternitywear, legwear, andsportswear
procuredPeach John
Co., Ltd.

26 factories

88% of innerwear,
roomwear, andfashionwear
procured3

LecienCorporation

11 factories

99% of fashionwear
procured3

Ai Co., Ltd.

16 factories

56% of swimwear
and innerwear
procured2

3

Measures for Contract Manufacturers in Response to the COVID-19 Pandemic
The Wacoal Group is adjusting production to avoid surplus inventories, which could arise from the lackluster sales. The low level ofsales reflects measures to prevent the spread of COVID-19, such as the suspension of store operations and restrictions on goingoutdoors. In adjusting production, we are engaged in sincere discussions with contract manufacturers regarding countermeasures.
Our aim is to ensure that, as our suppliers, contract manufacturers are not put at a disadvantage. For example, we are paying appropriately for materials that contract manufacturers have procured but which have become surplus to requirements as a result of
production suspension. Moreover, we are seeking a way to reuse such materials.

Fiscal 2020 Initiatives and Fiscal 2021 Plans
Environmental Initiatives for Supply Chains
With the potential to significantly affect the earth and corporate
activities, climate change is both a risk and an opportunity tocreate new businesses for the Wacoal Group. In accordance withthe belief that helping address environmental issues is fundamental to sound corporate development and to the realization of asustainable society, in February 2020 Wacoal Corp. launched theSupply Chain Environmental Project, which will lower the overall
environmental burden of the Company’s supply chains.
Until now, our environmental initiatives have focused on reducing the environmental burden of operating bases in Japan. Our
supply-chain initiatives have been limited to measures for individual issues, such as modal shift promotion and brassiere recycling activities. The recently launched Supply Chain Environmental

Continued on-site audits of contract manufacturers (conducted on-site audits at approximately 20% of target factories)
Project comprises three task forces, each of which is focused on
the supply chain relevant to a specific goal, namely, the reductionof promotional materials, the reduction of waste, and the development of environment-friendly products and materials. The task
forces are analyzing current situations, setting targets for
improvement, and establishing action plans.
Further, with a view to helping realize a low-carbon society by
reducing CO2 emissions, members of the aforementioned projectare discussing plans to set targets and disclose progress in relation to two overriding goals: the reduction of CO2 emissions fromthe internal activities of operating bases and the reduction of CO2
emissions from product life cycles.

Fiscal 2020
Initiatives

 xtended the coverage of CSR-focused procurement activities (added as survey targets the contract manufacturers ofE
Wacoal Corp.’s Retail Business Department and operational areas beyond the innerwear-related operations of Wacoal
Corp.’s Wholesale Business Division)
Revised the management methods for self-evaluations and surveys of contract manufacturers
Continue the aforementioned on-site audits

Fiscal 2021
Plans

 xtend the coverage of CSR-based procurement activities (add as survey targets online sales business departments
E
and suppliers of products to Unenana Cool Corp. and consolidated subsidiaries in the United States, Europe, andChina)
Begin utilizing the revised self-evaluations and surveys of contract manufacturers
 egin requiring product suppliers to submit checklists and written pledges as operators of long-standing contract
Bbusinesses

Overview of the Supply Chain Environmental Project(1) Promotional materials reduction
task force(2) Waste reduction task force(3) Development task force

Mission:Mission:Mission:Reduce the number of discarded products, implement recycling activities,
and reduce leftover materials andcutting wastage at factories

Establish Wacoal environmental standards and develop and roll out environment-friendly products and incidental
materials

Reduce the pamphlets, posters, direct
mail, and shopping bags used in store
operations

Conducting an on-site audit at Myanmar Wacoal

48

IN T EG R AT ED R EPORT 2020

A safety measure for working with band knife cutting machines at thefactory of a contract manufacturer in China

I N TEG RATE D RE P O RT 2020

49

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ESG

Management TeamAs of June 26, 2020

Directors

Audit & Supervisory Board Members
Representative Director and Chairman

Representative Director, President and Corporate Officer

Standing Audit & Supervisory Board Member

Audit & Supervisory Board Member

Apr. 1972 Joined the Company
Nov. 1977 Director of the Company
Nov. 1981 Managing Director of the Company
Sep. 1984 Executive Vice President of the Company
Sep. 1984 Representative Director of the Company
Jun. 1987 President and Director of the Company
Oct. 2005 	Representative Director, President and Corporate Officer
of Wacoal Corp.
Apr. 2011 Representative Director and Chairman of Wacoal Corp.
Jun. 2018 	Representative Director and Chairman of the Company(present)Mar. 1975 Joined the Company
Apr. 1997 Director and General Manager of Wacoal China Co., Ltd.
Apr. 2005 	Corporate Officer/General Manager of Wing Brand
Business Department of the Company
Jun. 2006	Director and Managing Corporate Officer, General
Manager of Wing Brand Business Department, of
Wacoal Corp.
Apr. 2010 	Director and Senior Managing Corporate Officer, andGeneral Manager of Wacoal Brand Business
Department, of Wacoal Corp.
Apr. 2011 	Representative Director, President and Corporate Officer
of Wacoal Corp.
Jun. 2011 Director of the Company
Jun. 2013 Senior Managing Director of the Company
Jun. 2016 Vice President and Director of the Company
Apr. 2018 	Representative Director and Chairman of Wacoal Corp.
(present)
Jun. 2018 	Representative Director and President of the Company
Apr. 2020	Representative Director, President and Corporate Officer(present)

Apr. 1981 Joined the Company
Apr. 2008 	Materials Control Manager of Technology/Production
Division of Wacoal Corp.
Apr. 2009 	Production Control Manager of Technology/Production
Division of Wacoal Corp.
Apr. 2010 	Corporate Officer and General Manager of Technology/
Production Division of Wacoal Corp.
Apr. 2011 	Director and Corporate Officer and General Manager ofTechnology/Production Division of Wacoal Corp.
Apr. 2015 	Director and Corporate Officer and Supervisor ofTechnology/Production of Wacoal Corp.
Jun. 2015 	Audit & Supervisory Board Member of Wacoal Corp.
(present)
Jun. 2015 	Audit & Supervisory Board Member of the Company(present)Mar. 1985 Joined the Company
Apr. 2008	Director, Manager of Accounting and General Affairs
Department of Studio Five Corp.
Apr. 2009	Director, Manager of Business Management
Department of Studio Five Corp.
Apr. 2013	General Manager of IR & Corporate PR Office of theCompany
Apr. 2018 Accounting Manager of the Company
Jun. 2020	Audit & Supervisory Board Member of the Company(present)

Director and Vice President Corporate Officer

Director, Vice President Corporate Officer

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Apr. 1981 Joined the Company
Apr. 2011 	Corporate Officer and Manager of Personnel Division of
Wacoal Corp.
Apr. 2013 	Director and Corporate Officer, and General Manager of
Personnel and Administration Division of Wacoal Corp.
Apr. 2014 	Director and Managing Corporate Officer, and General
Manager of Personnel and Administration Division of
Wacoal Corp.
Apr. 2015 	Director and Senior Managing Corporate Officer incharge of Administration, and General Manager of
Personnel and Administration Division of Wacoal Corp.
Jun. 2015 	Director in charge of Personnel and Administration of
the Company
Apr. 2017 	Director, Vice President Corporate Officer in charge of
Administration, and General Manager of Personnel and
Administration Division of Wacoal Corp.
Jun. 2017 	Managing Director and Supervisor of Personnel and
Administration and Future Business of the Company
Apr. 2019 	Appointed Director, Vice President and Corporate
Officer in charge of Administration of Wacoal Corp.
Jun. 2019 	Director and Vice President and Supervisor of Group
Business Management of the Company
Apr. 2020 	Director and Vice President Corporate Officer, andSupervisor of Group Business Management (present)

Apr. 1983 Joined the Company
Apr. 2006	General Manager of Sales Planning Division, Wacoal
Brand Operations
Apr. 2007 President of Studio Five Corp.
Apr. 2011	General Manager of Innerwear Merchandising Division,Wacoal Brand Operations
Apr. 2014	Director, Corporate Officer, Head of Wacoal Brand
Operations
Apr. 2015	Director, Managing Corporate Officer, Head of Wacoal
Brand Operations
Apr. 2016	Director, Senior Managing Corporate Officer, Head of
Wacoal Brand Operations
Apr. 2018	Representative Director, President and Corporate Officer
of Wacoal Corp. (present)
Apr. 2020	Director, Vice President Corporate Officer of theCompany
Jun. 2020	Director, Vice President Corporate Officer of theCompany (present)

Nov. 1977 	Joined Pricewaterhouse
Aug. 1982 Registered as Certified Public Accountant
Jul. 1992 Joined Aoyama Audit Corporation
Aug. 2007 Joined Deloitte Touche Tohmatsu
Jun. 2010 	Vice Chairman of The Japanese Institute of Certified
Public Accountants Kinki Chapter
Sep. 2011	Left Deloitte Touche Tohmatsu
Oct. 2011 	Established Shirai Public Accounting Firm, Managing
Partner (present)
Jun. 2012 	Audit & Supervisory Board Member, ALTECO INC.
(present)
Jun. 2015 	Audit & Supervisory Board Member of the Company(present)Mar. 2016 Audit & Supervisory Board Member, Noritz Corporation
Apr. 2016 	Executive Director of Public University Corporation,
Osaka City University
Apr. 2019 	Inspector of University Public Corporation Osaka(present)

Oct. 2000 Admitted to the Bar
Oct. 2000 Joined the Law Office of Tadashi Yamada
Oct. 2004 Joined the Kikkawa Law Office
Apr. 2008 Partner at the Kikkawa Law OfficeJun. 2017 	Audit & Supervisory Board Member of the Company(present)
Feb. 2019 Managing Partner of Hamamoto Law Office (present)

Director and Managing Corporate Officer

Director

Audit & Supervisory Board Member

Mar. 1984 Joined the Company
Oct. 2007 	Manager of Business Management and Administrationof Wacoal Brand Operation Division of Wacoal Corp.
Apr. 2011 	Director and Deputy General Manager of Wacoal China
Co., Ltd.
Apr. 2014 	General Manager of Corporate Planning of theCompany
Apr. 2017 Corporate Officer of Wacoal Corp.
Jun. 2018 	Director and General Manager of Corporate Planning of
the Company
Jun. 2019 	Managing Director and General Manager of Corporate
Planning of the Company
Apr. 2020	Director and Managing Corporate Officer in charge ofGroup Finance (present)

Aug. 1996 	Launched and organized monthly haiku magazine
Gekkan HepburnJan. 2001 	Member of “National Language Subdivision” of Council
for Cultural Affairs, Ministry of Education, Culture,
Sports, Science and Technology
Dec. 2004 	Member of “Council for the Promotion of Cultural
Diplomacy,” Cabinet Secretariat
Apr. 2010	Japan Cultural Envoy for Agency for Cultural Affairs
May 2013 	Member of “Forum to Realize Culture and Arts-Oriented
Nation” held by Minister of Education, Culture, Sports,
Science and Technology
Apr. 2014 	Member of “Cultural Policy Subdivision” of Council for
Cultural Affairs, Ministry of Education, Culture, Sports,
Science and Technology
Apr. 2014 Advisor of the Company
Jun. 2015 Director of the Company (present)

Apr. 1977 	Joined The Bank of Tokyo, Ltd. (currently “MUFG Bank,
Ltd.”)
Jun. 2004 	Corporate Officer, General Manager of Corporate
Banking Group No. 1, Corporate Banking Division No. 4,
The Bank of Tokyo Mitsubishi, Ltd. (currently “MUFG
Bank, Ltd.”)
May 2005 Corporate Officer, Manager of New York Branch
Apr. 2008 	Managing Corporate Officer, General Manager ofCorporate Banking Group, Nagoya Branch, The Bank ofTokyo-Mitsubishi UFJ, Ltd. (currently “MUFG Bank, Ltd.”)
Jun. 2010 	Representative Director and Vice President, SOTSU
CORPORATION
Jun. 2011 	Representative Director and President, NAIGAI
Construction Co., Ltd.
Jun. 2012 	Representative Director and President, SOTSU
CORPORATION; Representative Director and President,
Sotsu Amenity Service Corporation
Jun. 2018 	Director and Chairman, SOTSU CORPORATION
Audit & Supervisory Board Member of the Company(present)
Jun. 2020 Executive Adviser, SOTSU CORPORATION (present)

Director

Director

Nov. 1979 	Joined TOSE CO., LTD.
General Manager of Development Department
Oct. 1985 Director of TOSE CO., LTD.
Feb. 1987 Representative Director and President of TOSE CO., LTD.
Sep. 2004 	Representative Director and President, and CEO of
TOSE CO., LTD.
Dec. 2015	Appointed Representative Director and Chairman, andCEO of TOSE CO., LTD. (present)
Jun. 2017 Director of the Company (present)

Apr. 1979 Joined Shiseido Co., Ltd.
Apr. 2002 	General Manager of Product Commercialization,
Planning Department, Shiseido Co., Ltd.
Apr. 2008 	Corporate Officer, General Manager of Technical
Department, Shiseido Co., Ltd.
Jun. 2014 	Director, Corporate Executive Officer in charge of
Research & Development, Production and TechnicalAffairs, Shiseido Co., Ltd.
Jan. 2016 	Representative Director, Executive Vice President, Chief
Technology & Innovation Officer, Shiseido Co., Ltd.
Mar. 2018 Senior Advisor, Shiseido Co., Ltd.
Jun. 2018 Director of the Company (present)

Yoshikata Tsukamoto

Hironobu Yasuhara

Masashi Yamaguchi

Akira Miyagi

Madoka Mayuzumi

Shigeru Saito

50

Tomoyasu Ito

Kiyotaka Hiroshima

Shinichi Kitagawa

Hiroshi Shirai

Mitsuhiro Hamamoto

Minoru Shimada

Tsunehiko Iwai

IN T EG R AT ED R EPORT 2020

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Corporate Governance

Basic Policy and Purpose
The basic policy and purpose of the Wacoal Group’s corporate
governance is to continuously enhance enterprise value by
increasing transparency and ensuring the fairness and independence of corporate management in order to build “mutual trust” inrelationships with every stakeholder, including shareholders, customers, employees, business partners, and local communities.
Corporate Governance Guidelines
https://www.wacoalholdings.jp/group/files/governance_guideline_en.pdf

Corporate Governance Structure
Summary of the Corporate Governance Systemand the Reasons for Its Adoption
The Company has adopted a governance system based on a
Board of Directors, comprising directors who are conversant withrespective businesses and outside directors with diverse professional backgrounds, and an Audit & Supervisory Board, including
outside Audit & Supervisory Board members. This governancesystem enables the holding company to effectively supervise andaudit the execution of operations at Group companies and torealize and maintain high-quality business management.
Comprising eight directors, three of whom are outside directors
and one of whom is a woman, the Board of Directors deliberates
and makes decisions on such issues as important management
policies and strategies and items stipulated by statutory laws andregulations or the Company’s articles of incorporation. To clarify
management responsibility, directors are appointed for one year.
Thus, we have built a business management system that enables
rapid responses to changes in business conditions.

Comprising five Audit & Supervisory Board members, three ofwhom are outside members, the Audit & Supervisory Board supervises and audits business management. Also, the Group has
established the Office of Corporate Auditors, which audits andmonitors the appropriateness and efficiency of the operational
processes of Group companies.
Further, the Group has established the Group Management
Meeting, which considers Group management strategy and otherimportant management issues and conducts prior deliberation ofmatters for consideration by the Board of Directors.

Overview and Composition of the Board of Directors, Advisory Committees, and Other Meetings
Name
1

B
 oard of Directors

Based on its regulations, the Board of Directors convenes regular meetings every month and convenes extraordinary
meetings as required. It makes decisions on management policy and strategy and other important business-related
matters as well as on matters stipulated by statutory laws and regulations or the Company’s articles of incorporation.

13

2

Executive Nomination
Advisory Committee

An advisory body to the Board of Directors, the committee is chaired by an independent outside director and comprises
three outside directors and three internal directors. In principle, the committee convenes annually on the day of the January
meeting of the Board of Directors, considers the nomination or promotion of directors, and submits proposals to the Boardof Directors for approval. The attendance and approval of all committee members are required to pass resolutions.

1

3

Executive
Compensation
Advisory Committee

An advisory body to the Board of Directors, the committee is chaired by an independent outside director and comprises
three outside directors, two internal directors, and one other member. In principle, the committee convenes on the days of
the April, July, and February meetings of the Board of Directors, considers the compensation of directors, and submits
proposals to the Board of Directors for approval. The attendance and approval of all committee members are required topass resolutions.

44Independent Outside
Officers Meeting

Primarily comprising independent officers, this meeting evaluates the Board of Directors by exchanging opinions.
Further, the details of these evaluations are reported to the Board of Directors and then disclosed through a corporate
governance report.

15Group Management
Meeting

Comprising directors and key members of the management team, the meeting considers items related to the Group’s
management strategy and other important management issues and conducts prior examinations of agenda items to be
discussed by the Board of Directors.

22
8

Overview of the Corporate Governance Structure (as of June 26, 2020)
FormatAudit & Supervisory Board system

Number of directors

8

Of whom, outside directors

3

Term of directors

1 yearNumber of Audit & Supervisory
Board members

56

 anagement Issues
M
Review Meeting

This meeting is convened as required to analyze medium- to long-term Companywide strategies and important management issues and to prepare drafts of management strategies and medium- to long-term plans.

 f whom, outside Audit &O
Supervisory Board members

3

7

Convening three times a year, these committees check business results and the progress of measures. Also, if targets are
not achieved, the committees consider improvement measures and revise targets as required.

Number of independent officers

6 uarterly BusinessQ
Results Review
Committee

Participation of outside directors indetermination of remunerationYes orporate Ethics andCRisk Management
Committee

With the president and representative director acting as supervisor, the committee comprises the director of the
Administrative Department, internal directors, the directors of operating companies, corporate officers, and other members.
The committee strengthens and ensures the rigorous enforcement of systems for compliance with corporate ethics,
identifies risks related to the overall business management of the Group, and strengthens systems for managing such risks.

8

Organizations to assist indecision-making

Executive Nomination Advisory
Committee, Executive
Compensation Advisory Committee

Key committees

Independent Outside Officers
Meeting, Group Management
Meeting, Corporate Ethics and Risk
Management Committee

Results-linked remuneration

Expertise and experience beneficial to the Company
Name

General Meeting of Shareholders

Committee

Audit & Supervisory Board
Cooperation
5 Audit & Supervisory Board
members(of whom 3 are outside Audit &Supervisory Board members)

Audit

Chairman: Outside director
6 directors (of whom 3 are outside directors)
3 Executive Compensation Advisory

Committee

Reporting offindings

Chairman: Outside director
6 directors (of whom 3 are outside directors)
4 Independent Outside Officers Meeting

1 Board of Directors*

8 directors(of whom 3 are outside directors)

Secretariat Office for Audit &Supervisory Board

Assessment

Representative Director, President and Corporate Officer

Key Committees

8 Corporate Ethics and Risk Management Committee

5 Group Management Meeting*

Audit
OfficeCorporate Ethics Hotline

6 Management Issues

7 Quarterly Business

Review Meeting

Results Review Committee*

Give instructions toReport toCompliance Committee
Give instructions to

CSR Procurement Committee
Report to* Both internal and outside Audit & Supervisory Board members attend meetings for the purpose of auditing the performance of duties by directors.

IN T EG R AT ED R EPORT 2020

Internal
audit

1

Yoshikata Tsukamoto2

Hironobu Yasuhara

3

Masashi Yamaguchi

4

Tomoyasu Ito

5

Akira Miyagi

6

Madoka Mayuzumi

7

Shigeru Saito

8

Tsunehiko Iwai

Independence(outside directors
only)

Corporate
management,
operational
management

Finance,accounting

Law, complianceInternational
insight

Personnel
development

Art, culture, andsocial insight

Note: The above overview does not represent the entirety of directors’ expertise and experience.

Audit & Supervisory Board Members

Name

Cooperation
Accounting
audit

Operating department / Group company

52

Accounting Auditors

Audit

Election / Removal(Business execution)

Election /RemovalElection / Removal

Reporting offindings

4

Directors

Yes

Election / Removal

3

Diversity of the Board of Directors and the Audit & Supervisory Board

Corporate Governance Structure

2 Executive Nomination Advisory

Number of meetings
convened in FY2020

Description

1

Kiyotaka Hiroshima

2

Shinichi Kitagawa

3

Hiroshi Shirai

4

Mitsuhiro Hamamoto

5

Minoru Shimada

Independence(outside Audit &Supervisory Board
members only)

Expertise and experience beneficial to the Company
Corporate
management,
operational
management

Finance,accounting

Law, complianceInternational
insight

Personnel
development

Art, culture, andsocial insight

Note: The above overview does not represent the entirety of Audit & Supervisory Board members’ expertise and experience.

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Measures to Strengthen the Effectiveness of Corporate GovernanceAnalysis and Assessment through the Independent Outside Officers Meeting
The Independent Outside Officers Meeting assesses the effectiveness of the Board of Directors, identifies issues, and promotes­continuous improvement.
Assessments of the Effectiveness of the Board of Directors and Improvement Measures

Improvement
measuresIssues identified

FY2018FY2019FY20201. Need for increased sharing of information with 1. Need for revision of both the regulations of the 1. Need to conduct on-site inspections of factooutside directors and Audit & Supervisory
Board of Directors and the establishment ofries, stores, and other facilities to further
Board members about important matters thatagenda items in order to extend the scope ofunderstanding of the Group’s businesses
are not subject to deliberations by the Board of
responsibilities entrusted to corporate officers 2. Need to facilitate constructive discussions of
Directors, such as matters submitted to theand to increase the opportunities for reporting
growth strategies by providing opportunities
Group Management Meetingon agenda items that require continuousthat enable understanding of brand merchanconfirmation of progressdising strategies
2. Need to consider making meeting documents
paperless
1. Modified administrative systems to ensure
1. Revised regulations on the submission ofthat information about important matters thatagenda items to the Board of Directors andare not subject to deliberations by the Board ofrevised the establishment of agenda items
Directors is distributed together with materials 2. Made documents used by the Groupin advance of Board meetings
Management Meeting and the Board of
Directors paperlessOutside Directors and Outside Audit & Supervisory
Board Members
The Company has three outside directors and three outside Audit& Supervisory Board members. The Company appoints outside
directors who have made wide-ranging contributions to the fields
of art and culture in Japan and overseas or who have extensive
experience and knowledge of corporate management. By providing objective, neutral advice based on their extensive businessexperience and specialized knowledge in a range of fields, outside
directors enhance the appropriateness of directors’ decisionmaking. Further, the Group appoints as outside Audit &1. Considered organizing on-site inspections ofstores that have introduced 3D body scanners
and other facilities
2. Considered the establishment of an inspection
program for newly appointed outside directors
with the aim of cultivating understanding of
the Group’s businesses

Supervisory Board members certified public accountants who
have a high level of expertise with regard to finance and accounting, attorneys who are independent from the Company, and individuals who have many years of experience of working at financial
institutions and extensive knowledge of corporate management.
While retaining a high degree of independence, outside Audit &Supervisory Board members draw on their expertise to undertake
strict auditing of the legality of directors’ decision-making andoperational execution.
Criteria to Ensure the Independence of Outside Officers
https://www.wacoalholdings.jp/group/files/governance_outsidedirectors_en.pdf

Reasons for Election of Outside Directors and Outside Audit & Supervisory Board Members
Expected field of expertise andknowledge

Attendance at Board of Directors’
meetings

As a haiku poet, Madoka Mayuzumi has made wide-ranging
contributions to the fields of art and culture in Japan andoverseas. Her expertise and experience is expected to contribMadoka Mayuzumi
ute to our efforts to realize business management that emphasizes diversity, making her an appropriate outside director for
the Group.

Art, culture, and social insight

13/13

Shigeru Saito

It is anticipated that Shigeru Saito will enhance management
supervisory functions by providing input from various perspectives based on his extensive knowledge and experience as arepresentative director of another company.

Corporate management,
operational management, andinternational insight

13/13

Tsunehiko Iwai

In addition to his extensive knowledge and experience as abusiness manager, Tsunehiko Iwai can also be expected tocontribute to management using his specialist knowledge
relating to research, production, and various fields oftechnology.

Corporate management,
operational management, law
and compliance, andinternational insight

13/13

Outside directors

Outside Audit &Supervisory Board
members

Hiroshi Shirai
Mitsuhiro
Hamamoto

Minoru Shimada

54

Reason for election

Attendance at Board of Directors’ meetings and Audit & Supervisory Board meetings
Reason for election

Board of Directors’ meetings

Audit & Supervisory Board meetingsSpecialized knowledge of accounting and finance as a certified
public accountant make Hiroshi Shirai an appropriate outside
Audit & Supervisory Board member for the Group.

13/13

14/15

Mitsuhiro Hamamoto’s experience and specialized knowledge
as an attorney make him an appropriate outside Audit &Supervisory Board member.

13/13

Minoru Shimada can be expected to contribute to our audit andsupervisory structure by using his extensive experience in thefinancial sector and his knowledge as a business manager, as
well as his overseas experience.

13/13

IN T EG R AT ED R EPORT 2020

Strengthening of the Functions of the Audit & Supervisory Board
and Its Members
The Audit & Supervisory Board comprises two internal full-time
Audit & Supervisory Board members and three outside Audit &Supervisory Board members. Convening monthly to coincide withthe meetings of the Board of Directors, the Audit & Supervisory
Board also holds extraordinary meetings as required. Pursuant toauditing standards that are stipulated by the Audit & Supervisory
Board, Audit & Supervisory Board members audit the status of
duty execution and property, receive reports and explanations
from the independent auditor, and verify the appropriateness offinancial statements and the relevance of the auditing ofaccounts. The Audit & Supervisory Board members also monitor
and verify the establishment of internal control systems and theiroperational status. In addition, the Company provides an independent, dedicated secretariat to assist the Audit & Supervisory Boardand assigns one employee to operate the secretariat.
At meetings of the Audit & Supervisory Board, outside Audit &Supervisory Board members communicate and coordinate extensively with full-time Audit & Supervisory Board members.
For example, the latter provide the former with reports on thestatus of audits of operations and the details of discussions atimportant meetings. Outside Audit & Supervisory Board members
also receive various types of reports from the independent auditor
and departments engaged in internal control and audit internal
control systems, including the appropriateness of financial reporting. With a view to heightening the effectiveness of audits, outside
Audit & Supervisory Board members engage in a range of otheractivities. For example, they attend important meetings other thanthose of the Board of Directors in light of discussions of the Audit& Supervisory Board and visit subsidiaries to conduct audits andinvestigative interviews.

Compensation of Officers
Under the Company’s system for the compensation of officers,
compensation comprises basic compensation, which is fixed;
bonuses linked to the Company’s performance in each fiscal year;
and share-based stock options, which provide medium- to longterm incentives. Given that they are not involved in the executionof duties, independent outside directors and Audit & Supervisory
Board members only receive fixed basic remuneration.
For fiscal 2020, a breakdown of the fixed basic compensation,
performance-based bonuses, and share-based stock options aspercentages of the compensation of officers is shown below.
Further, this breakdown assumes calculation methods for performance-based bonuses that are in accordance with expectations.

• Performance-Based Bonuses
To increase the degree of linkage between bonuses and consolidated business performance, the aggregate amount of performance-based bonuses is determined for each fiscal year basedon the percentage achievement of a reference value of consolidated operating income and, to a lesser extent, based on certain
other business results. With reference to past business results
and other factors, the reference value of consolidated operating
income has been set at ¥13.5 billion.

Basic compensation

Performance-based bonuses• Share-Based Stock Options
The amount of share-based stock options is determined by aresolution of the Board of Directors in consideration of themonthly amount of the basic compensation and the fair value ofstocks, which are determined based on reports issued by the
Executive Compensation Advisory Committee.
Further, a resolution of the Ordinary General Meeting of
Shareholders convened on June 27, 2008, set an upper limit of¥70 million for aggregate annual share-based stock options.

Share-based stock options

71%

18%

11%

• Basic Compensation
The amount of basic compensation is set according to the positions of officers. With respect to officers in the same position,
however, the basic compensation of a particular officer can behigher than that of other officers as a result of an increase, within acertain range, in basic compensation that reflects the officer’s
degree of contribution to business results in the previous fiscal year.
With reference to the results of a compensation survey conducted by an external organization, every year the Company verifies the range of appropriate levels of compensation forcompanies in the same industry as well as for companies of asimilar size and then sets a level of compensation commensuratewith the Company’s business results and size.
Further, a resolution of the Ordinary General Meeting of
Shareholders convened on June 29, 2005, set upper limits of ¥350
million for the aggregate annual basic compensation of all directors (excluding employee salaries of directors who concurrently
serve as employees) and ¥75 million for the aggregate annual
basic compensation of all Audit & Supervisory Board members.

Policy on Reviewing the System for the Compensation of
Officers with a View to Strengthening Its Effectiveness
The Executive Compensation Advisory Committee is engaged in
an ongoing review of the entire system for the compensation of
officers. Going forward, the committee will consider the following
matters:
 onsideration and establishment of a basic policy on the comC
pensation of officers
The mix of basic compensation, performance-based bonuses,
and medium- to long-term incentives (review of monetaryamounts and percentages)
The calculation method for performance-based bonuses(strengthening linkage with the numerical targets of themedium-term management plan)
Medium- to long-term incentives (consideration of methods that
could replace stock options)Compensation of Officers in FY2020
Classification

15/15

15/15

Directors (excluding outside directors)
Audit & Supervisory Board members(excluding outside members)
Outside directors and outside Audit &Supervisory Board members

Total amount of remuneration, etc., by type (¥ million)

Total amount of remuneration, etc. (¥ million)

Basic compensation

Performance-based
bonuses

Share-based stock
options

Number of eligible
recipients

282

227

12

43

5

39

39

―

―

2

49

49

―

―

6

Note: A s of March 31, 2020, there were four directors, two Audit & Supervisory Board members, and six outside officers. The number of directors differs from the number of directors in theabove table because the number in the table includes one director who retired upon the conclusion of the 71st Ordinary General Meeting of Shareholders, convened on June 27, 2019.
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Policy on Strategic Shareholdings and Standards for Exercising
Voting Rights
The purpose of the Company’s strategic shareholdings is toenhance enterprise value over the medium to long term by maintaining and strengthening transactional relationships; establishing,
maintaining, and strengthening cooperative and transactional
relationships with respect to business development; and maintaining stable financial transactions. The Company determines
whether strategic shareholdings are appropriate from a mediumto long-term perspective and whether the attendant benefits andrisks of strategic shareholdings commensurate with equity costare verified, and the findings are periodically reported to the Boardof Directors. Based on the verification findings, the Board of
Directors analyzes whether strategic shareholdings contribute to
the enhancement of the Company’s enterprise value over the
medium to long term and decides whether to continue or disposeof strategic shareholdings. Taking into consideration the circumstances of its partner companies, the Company steadily disposesof or reduces strategic shareholdings whose significance haslessened.
Regarding the exercise of the voting rights of strategic shareholdings, the Company affords due respect to the management
strategies of investee companies and decides whether or not tovote in favor of proposals based on comprehensive considerationof whether they contribute to the enhancement of the enterprisevalue of both said companies and the Company.
Reference: Shareholdings of Wacoal Corp.
FY2018FY2019FY2020

Number of stocks

97

95

84

Monetary amount (¥ billion)

674

608

422

22.6%

21.6%

15.2%

As a percentage of consolidated total assets

Note: The shareholdings of Wacoal Corp. for which the largest monetary amount isrecognized on the balance sheets in relation to investment in equity securities(the monetary amount of equity securities recognized) have been stated.

Internal Control
The Office of Corporate Auditors reports directly to the president
and representative director and conducts internal audits pursuant
to internal audit regulations. The office audits compliance withlaws and regulations and appropriateness of the execution ofduties at the Company and subsidiaries in Japan and overseas,
evaluates the effectiveness of internal control, and periodicallyreports the results of these activities to the president and representative director.

Further, the Office of Corporate Auditors comprises 11 personnel
and holds monthly report verification meetings with Audit &Supervisory Board members. These meetings primarily verify reportson the main points of meetings that Audit & Supervisory Board members attend and report on the activities of the Office of Corporate
Auditors. The Company has established a system for sharing documents and other information required for audits. To facilitate efficient,effective audits both parties coordinate through such measures as
mutual exchanges and the verification of audit working papers.

Compliance and Risk Management Structure
The Company’s Corporate Ethics and Risk Management
Committee has the representative director, president and corporate officer acting as supervisor and the director and supervisor ofGroup business management as its chairperson. The committee
is tasked with developing the compliance structure, examining
compliance issues that could significantly affect the Wacoal
Group, and ensuring all employees understand and internalize
corporate ethics. Further, the committee identifies risks in relation
to overall business management and develops and strengthens
the risk management structure.

employees perform their duties in compliance with laws, regulations, and the articles of incorporation and sound social norms.
Further, the Wacoal Code of Ethics and the Corporate Ethics:
Wacoal’s Code of Conduct stipulate resolute refusal of demands
from antisocial forces. In addition, the Company has established
an internal whistle-blowing system and other systems that enabledirectors and employees to report on any misconduct or inappropriate behavior.

Compliance Structure
Based on Group compliance and risk policies formulated by the
Corporate Ethics and Risk Management Committee, the Company
has established the Wacoal Code of Ethics and the Corporate
Ethics: Wacoal’s Code of Conduct to ensure that directors andRisk Management Structure

56

Risk Management Structure
Subject to the approval of the Board of Directors, the Corporate
Ethics and Risk Management Committee stipulates basic regulations for risk management. Pursuant to these regulations, thecommittee clarifies the responsibilities for each category of risk,
advances the construction of a risk management system thatcomprehensively encompasses the Wacoal Group’s overall risks,regularly shares information, and identifies and resolves issues.

Risk Management during the COVID-19 Pandemic
The worldwide COVID-19 pandemic is significantly affecting the Company’s sales and production. Based on our determination to
give first priority to the safety of customers, business partners, and employees and to the prevention of the further spread of
COVID-19, in fiscal 2020 we established the COVID-19 Task Force, which is a subcommittee of the Corporate Ethics and Risk
Management Committee and chaired by a director and vice president. The task force takes countermeasures in light of developments in relation to the COVID-19 pandemic.
Specifically, from April 1, 2020 until the middle of June, mainstay subsidiary Wacoal Corp. introduced an additional one-day
holiday per week for all employees and encouraged office workers to work from home. Further, we put all store sales personnel
on furlough as the state of emergency declaration issued nationwide on April 16 resulted in the suspension of operations at
department stores and many other stores.
For details on the Company’s measures in response to the COVID-19 pandemic, please see pages 4 and 5.

Basic Policy on Information Disclosure
We see timely disclosure of accurate information as the foundation of “mutual trust” in relationships with all stakeholders. We arealso keenly aware that disclosure is essential for accurate assessments of our enterprise value. We actively disclose information
while complying with all related regulatory requirements.
We have identified three basic requirements for information
disclosure. First, important information must be disclosed accurately and in a timely manner, regardless of whether it is positiveor negative. Second, information must be expressed in languagethat is easy for all stakeholders to understand and disclosed using
various methods to ensure ease of access and fairness. Third,organizational, personal, physical, and technical steps must be
taken to prevent information leakage before timely, appropriate
disclosure.

Basic Policy on Constructive Dialogue with Shareholders
https://www.wacoalholdings.jp/en/sustainability/talk_with_stockholder/

Investor Relations Activities
The following investor relations activities were conducted in FY2020.
ActivityJapan

Representative Director, President andCorporate Officer

Compliance Committee

CSR Procurement
Committee

Discusses and makes decisions
on the compliance management
structure and other significant
matters

Drafts and checks the progressof overall plans related toactivities for the promotion of
CSR procurement

Corporate Ethics and Risk
Management Committee

Strengthens and rigorously implements the compliance structure
for corporate ethics and identifies risks related to overall business
management and develops and strengthens the management
structure accordingly

Quality Assurance Inquiry
Committee

Accident and Disaster
Measures Committee

Promotes quality assurance
activities based on quality
assurance regulations

IN T EG R AT ED R EPORT 2020

Takes measures to prevent andrespond to accidents, disasters,
and other emergencies

Overseas

Environmental Committee
Advances in-house activities in
response to society’s environmental preservation
expectations

Basic Policy on Constructive Dialogue with Shareholders
and Other Stakeholders
We have adopted and published a basic policy on constructive
dialogue with shareholders and other stakeholders. Dialogue withshareholders and other stakeholders is under the overall control ofthe director in charge of finance and is the responsibility of thedivision in charge of investor relations as well as the Group officers and employees that said division designates. Various factors
are considered in relation to requests for meetings with directors,
including the proposed subject matter of the meeting and theaffiliations of the person seeking the meeting. In addition to fair,timely, and accurate disclosure about our business management
and financial situation to shareholders and other investors inJapan and overseas, we help them gain a better understanding ofour viewpoint and approach by actively distributing information
about the market environment and our unique strengths.

Frequency

Details

Results briefings

Twice

Full-year and interim results briefings (held in Tokyo)

Individual meetings with institutional
investors and analysts

98 times (companies intotal)

Interviews with the investor relations manager (including interviews withthe president and representative director and directors)

Business briefings (small meetings)

Once (eight companies)

Briefing conducted by the officer in charge

Conferences

One day (seven companies)

Interviews with the president and representative director

Study tours of a sewing factory

Twice

Interviews with the investor relations manager and a tour conducted by
the factory manager (held in Nagasaki and Fukui)

Seminars for individual investors

Three days

Seminars conducted by the investor relations manager(held in Kumamoto, Osaka, and Sendai)

Individual meetings with analysts

Once

Meetings conducted by the president and the investor relations managerof an overseas subsidiary (Location: United States)

Individual meetings with institutional
investors

Two days (six companies)

Meetings conducted by the investor relations manager and the president
and representative director (Location: United States)

Feedback

Provided each time thatmeetings for investors areheld after full-year andinterim results briefings

Report on the activities of the investor relations manager (Targets: thepresident and representative director, directors, managers of operatingcompanies, outside Audit & Supervisory Board members, etc.)

Briefings on the integrated reportThree times

Briefings conducted by the investor relations manager(Target: employees)

In-house

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Dialogue

Aiming to benefit society and enhance enterprise value through thecreation of a new innerwear culture

Tsunehiko Iwai

Naomi Yamazaki
Administration Manager
Institutional Investors Collective
Engagement Forum

Outside Director
Chairman of Executive Nomination
Advisory Committee
Chairman of Executive
Compensation Advisory Committee

The worldwide COVID-19 pandemic is significantly affecting the Wacoal Group’s business management. How
should this turbulent era be viewed? What are the prospects for innerwear culture? What should an outside
director’s role be in corporate decision-making?

Realizing Effective Governance in Emergencies
Yamazaki: In recent years, as the reform of Japanese companies’ governance has progressed, the balance between theadvisory and supervisory roles of outside directors has
become a focus of attention. Such attention has become evenmore pronounced with the series of issues arising from the
COVID-19 pandemic. First, this is because the true value ofoutside directors is more evident when companies are dealing
with emergencies than in ordinary times. Second, Japanesecompanies have come to an important fork in the road, a point

58

stressed by our forum’s April 10 Emergency Engagement
Agenda. With many companies making great efforts to getreforms underway only to then abandon them in pursuit ofnear-term business results, I believe that now more than evercompanies need the objective, broad perspectives that outside directors are uniquely qualified to provide. Today I would
like to hear the views of Mr. Iwai, who has been an outside
director of Wacoal Holdings since 2018, in regard to a variety
of topics.
Let’s begin with the COVID-19 issue. When exactly did theBoard of Directors grasp how the situation was unfolding, andwhat type of discussions did the Board hold?

IN T EG R AT ED R EPORT 2020

Iwai: In addition to Wacoal Holdings’ Board of Directors,
venues for discussing the Group’s management policies
include meetings of the Board of Directors of Wacoal Corp.
and the Group Management Meeting. Further, the minutes ofmeetings that outside directors do not attend are emailed tothem. According to the minutes, in the second half of February
the Group Management Meeting received a situation reportfrom the Corporate Ethics and Risk Management Committee
and discussed such countermeasures as transitioning totelecommuting. Discussions including outside directors beganat the March meeting of the Company’s Board of Directors.
This meeting heard reports on the effect of COVID-19’s spreadon business results, the presence or absence of infected persons and those in close contact with infected persons, and theGroup’s countermeasures. I was particularly impressed bymeasures to have Kyushu Wacoal Manufacturing Corp. produce masks for distribution to all Group employees worldwide.
Outside directors praised such measures and pointed out theneed to prevent infection in day-to-day activities by ensuringawareness is raised among employees. Executives replied tothe effect that they were issuing information through theintranet and health insurance associations and actively urging
caution through the posting of signs in stores and othermeasures.
Also, in the second half of April the Group Management
Meeting held an in-depth discussion on management issues
going forward. It seems that the specific medium- to longterm matters discussed included reducing business expenses
and investments in the current fiscal year; issues related tochanges in and responses to customer purchasing patterns
post-COVID-19; things that the Company should discontinue,
temporarily suspend, revise immediately, or continue
unchanged; and the strategic focus of businesses, structuralreforms, and organizations in the aftermath of COVID-19.
However, regrettably the online Board of Directors’ meeting on
the following day did not receive a report on these discussions. Of course, details of the discussions were included in
the meeting’s minutes, which were provided later.
Yamazaki: Was this point about a report not being received
made to the executives?
Iwai: The point I just mentioned and other relevant points wereclearly communicated to the executives. The atmosphere atmeetings of the Board of Directors lends itself to stating opinions, and outside directors, as needed, share their opinions
frankly with the senior management team during prior briefings on agenda items and chats after meetings. When it
comes to online meetings, however, inevitably there are fewerof these kinds of incidental opportunities for communication.
Yamazaki: What is your overall evaluation of the measures
Wacoal has taken in response to the COVID-19 crisis?
Iwai: The senior management team’s response to the crisis
showed a determination to protect employees and prevent
them from becoming infected, and employees also seemed toshare an appropriate sense of crisis. On the other hand, notholding discussions on medium- to long-term management
issues until the second half of April was perhaps a little late.
Yamazaki: While a sense of crisis with respect to the situation
at hand is important, precisely such situations also call fortaking a broader view of things.

Creating a New Innerwear Culture
Yamazaki: Looking back over history, on numerous occasions
humanity has been exposed to the plague and other infectious
diseases. At present, COVID-19 is having a similar effect asthese diseases. Do you think that society will have to live “with
COVID-19” for some time to come?
Iwai: Yes, I believe so. Our adversary is a virus, and viruses canrepeatedly undergo sudden mutations. Even if a vaccine isdeveloped, there is no guarantee that it will be a panacea for
all issues resulting from COVID-19. We may not even get to a“post-COVID-19” situation. That is to say, we may be forced tocoexist with the virus over a long period.
The impact of such a scenario would go far beyond that of
the global recession triggered by the bankruptcy of Lehman
Brothers and would turn conventional business wisdom on its
head. Indeed, looking at the activities of companies, telecommuting and online meetings have already become commonplace. Moreover, some companies have begun reducing theiroffice floor space.
Yamazaki: Business-to-consumer companies have suddenly
been affected by changes in work styles and lifestyles, haven’t
they?
Iwai: For example, in the cosmetics industry, which I previously worked in, these changes are affecting business models
based on such sales techniques as consultative sales
because they conspicuously meet the three conditions thatfacilitate the transmission of infectious diseases, namely
closed spaces, crowds, and close contact. Meanwhile, digitaltransformation is accelerating, with the burgeoning demandfor e-commerce being the most obvious sign of this trend.
Yamazaki: What effect do you think that this new situation will
have on Wacoal’s strengths?
Iwai: I think the disappearance of demand for women’s innerwear is absolutely out of the question. For instance, Night Up
Bra, designed to support the position of the bust so that evenwhen wearers are lying on their side they can sleep comfortably, has proven extremely popular. This example and otherssuggest that the desire of women to maintain their physiques
is perhaps universal.
Yamazaki: I agree that the market for innerwear is unlikely tovanish. However, changes in innerwear culture are possible. In
the past 100 years, Japan’s apparel culture has been completely transformed. Previously, Japan did not have the

I N TEG RATE D RE P O RT 2020

59

ESG

ESG

custom of wearing Western innerwear. After World War II,
however, Wacoal was founded, and the country’s innerwear
culture changed significantly. Taking this history into consideration, a new innerwear culture might come into being.
Iwai: I think you are right. As the leader of Japan’s innerwear
culture, Wacoal must be in the vanguard of new changes, and
it is a company with the ability to do just that.
Since I was engaged in the cosmetics industry, I have beeninterested in the huge volume of measurement data that the
Human Science Research Center has accumulated. I believe
data on approximately 45,000 women as well as data on thechanges in the physiques of the same women over time are
unique assets. This knowledge underpins such achievements
as Wacoal’s original 3D smart & try 3D body scannertechnology.
Yamazaki: Taking just one measurement seems as if it would
require extensive knowledge of physique measurement. The
combination of 3D body scanners with AI-enabled customer
services is an approach that merits attention as it meets thecurrent era’s need for contactless services.
Iwai: In tandem with the introduction of these technologies todirectly managed stores, Wacoal is exploring the possibility ofselling the technologies externally. Regarding the latter activities, at meetings of the Board of Directors I have stressed theimportance of rigorously analyzing the business formats ofpartners and proceeding strategically. As the first phase ofsuch initiatives, Wacoal recently formed an alliance with the
major department store Isetan Mitsukoshi Holdings Ltd. For avariety of reasons, I believe Isetan Mitsukoshi to be an ideal
partner.

Accelerating and Decelerating as Needed
Yamazaki: Looking back over the two years since you became
an outside director, how do you feel that Wacoal’s governancehas changed?
Iwai: Reform of Wacoal’s governance is underway at thismoment. The Audit & Supervisory Board’s annual report commended the Board of Directors for having much livelier discussions. The fact that we are now given documents and minutes
from the main in-house meetings has been a major step forward. Further, I chair the Executive Compensation Advisory
Committee and the Executive Nomination Advisory
Committee. With respect to the latter, I feel that more proactive provision of information is required. In deepening discussion on the short-listing and nomination of candidates for
positions in the senior management team, we need to beapprised of the candidates’ abilities, professional skills, andbusiness experience.
On the other hand, the Independent Outside Officers
Meeting, which was established in 2015, is functioning well.
My impression is that the Company responds promptly to thefindings of this committee. Also, I frequently communicate
with investor relations managers, who receive valuable pointers from investors. This allows me to submit various recommendations to executives with the aim of ensuring that they
are aware of issues investors raise.
Yamazaki: That is very encouraging to hear. Admittedly, outside directors are not in a position to issue orders; however,they can submit recommendations on major strategies andideas. I believe that it is important to facilitate this kind ofcommunication at meetings of the Board of Directors andother meetings.

As outside directors can submit recommendations on major strategies and ideas, I believethat it is important to facilitate this kind ofcommunication at meetings of the Board of
Directors and other meetings.

Iwai: I believe that the role of an outside director is to be ready
and willing to “step on the gas” or “the brake” as appropriate ineach situation. I will work unstintingly to assist the reforms
that Wacoal is advancing in response to the current unprecedented situation. Further, if I ever feel that we are running outof control, I will step on the brake without hesitation.
Yamazaki: When deciding to step on the gas, what kind ofthings do you focus on?
Iwai: First, I make a point of stating opinions with reference todata and based on my own research. Also, rather than accepting executives’ proposals unquestioningly, I enumerate myreasons for concern with the aim of having them eliminatedone by one. This has been my philosophy since I was engaged
in corporate management. To arrive at the correct decision,
we need to listen not just to one side’s opinion but also to the
opposing argument.
Before meetings of the Board of Directors, I carefully readand absorb the relevant documents. If there is anything that I
do not understand, I ask questions. If something does notseem right, I state my doubts frankly. For example, when theacquisition of the LIVELY brand in the United States was underconsideration, we received a prior briefing on the details of the
proposal directly from members of the U.S. company’s senior
management team. At this time, I posed a variety of questions
and expressed several concerns. Ultimately, as I had received
convincing replies and explanations, I stepped on the gas at
the subsequent Board of Directors’ meeting and agreed withthe proposal.

Building a More Robust Corporate Structure

I believe that the role of an outside director is to be ready and willing to “step on
the gas” or “the brake” as appropriate ineach situation.

60

IN T EG R AT ED R EPORT 2020

Yamazaki: Have you shared the various issues that you
discussed today with President Yasuhara?
Iwai: President Yasuhara and I are of similar ages and have agreat deal of mutual understanding. Of course, I tell him whatneeds to be said directly, and I feel that all of his words andactions demonstrate that he seriously considers the issues
raised. This is his third year as president, and my guess is that
he has a strong desire to deliver solid results during the termof the current medium-term management plan.
Yamazaki: Lastly, what type of measures are needed if Wacoal
is to grow into a company with a stronger corporate structure?
Iwai: The top priority is to survive the shakeout that is underway at present. The current medium-term management plan’s
first basic policy calls on the Group to achieve strong growth
in Japan and overseas. Although the premise of this policy
has been undermined, Wacoal’s response must be to accelerate efforts focused on the plan’s second basic policy, which isto review and reform the structures of the Group’s businesses
without making any special exceptions. At the same time, theGroup must heighten enterprise value by enhancing both economic and social value in accordance with the third basic
policy.
Enhancing “social value” means the pursuit of integrated
value creation that takes into account environmental, social,and governance (ESG) factors. This is exactly the type of value
creation that the vision of a “Global Wacoal” refers to bydescribing a future in which we always provide pioneering
products to the world and continue to lead the field of innerwear culture. Wacoal should maintain this commitment tosocial value and use it to identify which aspects of businesses
require reform.
Wacoal’s operations span all value creation processes,
including consumer surveys and product planning through todevelopment, manufacturing, marketing, and sales. This vertically integrated value chain opens the way for the creation ofcustomer-oriented businesses based on completely new
concepts. The first step toward reform is to ensure that all
Group employees are fully aware of such unique strengths
and the medium- to long-term business targets for fiscal
2028. I will continue encouraging executives to discuss
themes of a more forward-looking nature so that Wacoal
remains essential to society.

I N TEG RATE D RE P O RT 2020

61

FACTS
64 Consolidated Financial Highlights
66 Financial Highlights by Segment
67 Share of Sales by Channel (Principal Subsidiaries)
68 11-Year Financial Summary
70 Management’s Discussion and Analysis
76 Consolidated Balance Sheets78	Consolidated Statements of Income
Consolidated Statements of Comprehensive Income

79 Consolidated Statements of Equity
80 Consolidated Statements of Cash Flows
81 Notes to Consolidated Financial Statements
114 Principal Subsidiaries
116 Corporate Information
117 Investor Information

62

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I N TEG RATE D RE P O RT 2020

63

FACTS

FACTS

Consolidated Financial Highlights
For the fiscal years as of/ended March 31

Net Sales

Operating Income / Operating Margin*(¥ billion)(¥ billion)

(%)

210

15

10

Shareholders’ Equity per Share* /Net Income per Share Attributable to Wacoal Holdings Corp.*

Share of Sales by Business Segment

(Yen)

202.9

12

200

195.9

195.7

12.3

11.5

194.2

9

186.8

6.0

5.9

6.6

5.3

6

4.9
180

3

0

2.5

3.6

0
2017

2018

8

2,800.00

6

2,100.00

4

1,400.00

2

700.00

0

0

2019

2020

2016

Operating income

2017

2018

2019

2020

Net Income Attributable to Wacoal Holdings Corp. / Return on Equity (ROE)(¥ billion)

Operating margin

12.5

Total Assets / Return on Assets (ROA)(%)(¥ billion)

7.5

8

300

9.7

6

290

4

3.5
1.6

2

0.3
0.2

0
2016

2017

2018

2019

281.8

280

277.7

Net income attributable to Wacoal Holdings Corp.

0

270

1.6
0.8

0

2020

2016

ROE

Total assets

2017

143.46
2018

54.26

5.16
2019

2020

Wacoal Business (Domestic)
Wacoal Business (Overseas)
Peach John Business
Other Businesses

Shareholders’ equity per share
Net income per share attributable to Wacoal Holdings Corp.
* The Company conducted a share consolidation of its common stock pursuant towhich two shares were consolidated into one share effective as of October 1, 2017. Per
share information was calculated as if the consolidation of shares (reverse stock split)
had been carried out at the beginning of the fiscal year ended March 31, 2018.

Share of Sales by Geographic Segment(Yen)(%)
80

2,000

6

60

4

40

16.6%

72
1,395.3

60

1,500

4.8

5.0

2.5

90.13

79.23

72

5.6

2020

27.1%

58.7%

295.0

5.0
4.2

8

298.5
292.9

5.5

4.9

5.6%

Dividends per Share* / Dividend Payout Ratio
(%)

11.2
10.0

8.6%

3,321.57 3,291.06

1,592.90 1,658.53

2016* New accounting guidance, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost (ASU No. 2017-07), was adopted at the beginning of theconsolidated fiscal year ended March 31, 2019. Accordingly, key financial data for the previous
fiscal years are the amounts after the retroactive application of such accounting guidance.

12.5

3,454.40

10.3

190

2016

3,500.00

2017

2018

2019

33
2

11.0%

1,000

36

20

2020

500

72.4%
0

0

2020

ROA

41.7

39.9

2016

2017

Dividends per share

50.2

110.6

2018

2019

0

2020

Dividend payout ratio

Japan

Asia and Oceania

Americas and Europe* The Company conducted a share consolidation of its common stock pursuant towhich two shares were consolidated into one share effective as of October 1, 2017. Per
share information was calculated as if the consolidation of shares (reverse stock split)
had been carried out at the beginning of the fiscal year ended March 31, 2018.

Cash Flows

Total Shareholders’ Equity / Shareholders’ Equity Ratio(¥ billion)(¥ billion)

(%)(¥ billion)

240

90

10.0

20

12.6

16.4
13.3

10

15.5

15.9

13.6

8.1

11.1

1.2
0

13.3

230

2.6

220

76.6

78.0

210

–2.5

–3.0
–10

–7.4

85

227.6

77.2

76.8

CF from operating activities

2018

2019

2020

74.0

CF from investing activities

Free CF

70

0
2016

Total shareholders’ equity

2017

2018

2019

Shareholders’ equity ratio

5.0

5.5

5.8 5.6

0.6%
4.0%

6.0

2020

75

0
2017

7.0
5.9

4.8

2020

6.2%

0.8%
6.8%

7.4

7.5

5.0

205.4

–11.4

2016

4.0%

80

216.5

200

–20

Share of Sales by Product Category

9.0

232.7
224.4

Capital Expenditures / Depreciation and Amortization

77.6%

2.5

0
2016

Capital expenditures

2017

2018

2019

Depreciation and amortization

2020

Foundation garments and lingerieNightwear
Children’s underwear
Outerwear and sportswear*1
Hosiery
Textile products
Other*2*1 Including men’s underwear and swimwear*2 Mannequin rental, interior design and construction of stores, restaurants, culture,services, etc.

64

IN T EG R AT ED R EPORT 2020

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65

FACTS

FACTS

Financial Highlights by Segment

Share of Sales by Channel (Principal Subsidiaries)

For the fiscal years as of/ended March 31

Net Sales

Operating Income (Loss)*

Wacoal

Wacoal China(¥ billion)(¥ billion)

(%)

(%)

200

202.9

195.9

195.7

194.2

15.0

186.8

12.3

10.3

11.5

100

100

75

75

4.9

6.6

150

7.5

100

0

50

50

50

–7.5

25

25

0

–15.0
2016

2017

2016

Wacoal Business(Domestic)

120.6

2018

2017

118.4

2019

2018

116.1

51.8

48.4

51.9

Peach John Business

11.2

11.1

10.8

19.3

18.0

2016

2019

Wacoal Business(Overseas)

Other Businesses

0

2020

2020

2016

2018

2019

2017

2020

2018

0
2016

2019

2020

2017

2018

2019

2020

2016

2016

2017

2018

2019

2020

5.8

Department Stores

2019

2020

27.8

27.4

27.2

26.8

G
 eneral MerchandiseStores

32.9

31.6

31.3

31.4

25.0

76.1

75.9

72.2

70.0

69.5

31.7

A
 gent(Specialty Stores)

9.4

7.4

6.9

6.4

4.3

8.3

8.1

7.6

7.5

7.3

Third-Party EC Site

9.1

9.3

10.8

14.5

19.5

5.1

3.1

3.2

3.1

2.4

0.3

4.3

6.9

6.0

4.3

50.6

4.4

3.1

3.9

4.6

1.5

10.5

10.5

Peach John Business

0.3

0.4

0.4

–5.8

–0.4

Specialty Stores–0.3

Directly Managed
Stores

13.9

14.6

15.1

14.9

15.3

Peach John (DirectlyManaged Stores)E C and Catalog
Mail-order

9.1

9.4

12.2

12.2

13.1

Peach John (EC Site)

Others

8.0

8.9

6.6

7.2

7.6

17.2

16.0

Other Businesses

0.4

0.6

6.3

0.4

–0.2

* New accounting guidance, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost (ASU No. 2017-07), was adopted at the beginning of theconsolidated fiscal year ended March 31, 2019. Accordingly, key financial data for the previous
fiscal years are the amounts after the retroactive application of such accounting guidance.

Share of Sales by Geographic Segment

Share of Sales by Principal Subsidiaries*

Wacoal International (U.S.)

Wacoal Europe(¥ billion)(¥ billion)

(%)

(%)

250

200

200

202.9

195.9

195.7

194.2

186.8

189.2

179.8

179.2

177.0

2020

2018

53.1

6.8

2019

2017

Wacoal Business(Overseas)

6.2

2018

2016

109.7

7.2

2017

Department Stores

Wacoal Business(Domestic)

113.4

16.9

2017

100

100

75

75

50

50

25

25

171.1

150

150
100

69.4

100
50

50

–1.5

0

0
2016

2017

2018

2019

2020

0
2016

2017

2018

2019

2020

0
2016

2016

2017

2018

2019

2020

Japan

150.7

147.1

143.2

140.2

135.3

Wacoal

2016

2017

2018

2019

2020

Asia and Oceania

17.9

19.2

21.1

22.5

20.6

Ai

107.9

106.5

104.6

102.4

5.7

5.5

5.1

4.2

Americas and Europe

34.3

29.6

31.5

31.5

30.9

Peach John

11.2

11.1

10.8

10.5

Lecien

8.9

8.4

7.2

6.3

Nanasai

8.9

8.1

8.3

W
 acoal International(U.S.)

19.6

17.7

Wacoal Europe

15.9

Wacoal China

11.1

2017

2018

2019

2020

2016

2016

2017

2018

2019

2020

99.2

Department Stores

74.2

70.6

69.7

66.0

3.6

D
 irectly Managed
Stores and Outlet

0.6

0.7

0.5

0.7

10.5

Department Store EC

8.4

8.9

9.2

9.5

5.8

Third-Party EC Site

5.8

7.4

7.8

9.4

8.7

Own EC Site

6.0

7.6

8.7

18.6

18.5

19.2

Export(excluding Canada)

5.0

4.8

4.1

13.0

14.0

14.1

13.0

9.5

10.6

11.6

11.1

2017

2018

2019

2020

2016

2017

2018

2019

2020

61.6

Department Stores

28.0

26.6

25.1

23.0

21.3

0.6

Specialty Stores

51.0

51.4

51.7

52.7

52.2

11.4

Directly Managed
Stores

7.8

7.6

8.0

6.2

6.0

9.1

9.6

EC Site

13.2

14.4

15.2

18.1

20.5

9.8

12.7

4.9

4.1

* Calculated based on net sales to external customers

66

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

67

FACTS

FACTS

11-Year Financial Summary
Wacoal Holdings Corp. and Subsidiaries
For the fiscal years as of/ended March 31(Millions of Yen)

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

186,760
84,95945.5%
94,69650.7%
473
12,661
6,632
3.6%

194,201
89,80446.2%
93,68448.2%
5,834
10,526
4,879
2.5%

195,725
92,03247.0%
91,99347.0%
206
16,986
11,494
5.9%

195,881
93,073
47.5%
92,52647.2%
015,314
10,282
5.3%

202,917
96,09447.4%
94,54946.6%
017,08912,274
6.0%

191,765
90,80447.4%
88,56346.2%
6,021
11,451
6,377
3.3%

193,781
91,00847.0%
88,95645.9%
018,853
13,817
7.1%

180,230
84,54846.9%
83,84446.5%
2,852
13,8748,986
5.0%

171,897
81,891
47.6%
79,14446.0%
015,522
10,862
6.3%

165,548
81,65949.3%
77,198
46.6%
1,772
9,604
4,919
3.0%

163,548
80,10149.0%
77,342
47.3%
1,094
9,776
5,011
3.1%

4,359

2,203

14,286

16,56914,957

11,342

15,033

10,940

10,207

3,927

3,155

3,472
1.6%
1.6%

341
0.2%
0.8%

9,745
4.2%
4.8%

12,5255.5%
5.6%

11,159
4.9%
5.0%

8,444
3.9%
4.0%

10,106
5.2%
5.7%

7,880
4.4%
4.6%

6,913
4.1%
4.7%

2,785
1.6%
1.8%

2,475
1.5%
1.4%

Financial Condition
Total assets
Total shareholders’ equity
Net property, plant and equipment
Inventories

277,688
205,371
52,08343,427281,767
216,494
53,27042,508298,534
232,71254,33342,676294,958
227,568
55,28843,822292,854
224,374
53,93844,445300,272
228,857
49,18842,893271,988
205,106
48,97840,211

254,536
186,646
49,66537,807221,098
171,496
49,07832,847215,276
167,480
49,73430,956

222,889
171,860
51,804
32,103

Cash FlowsNet cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Free cash flow
Cash and cash equivalents

13,325
2,569(17,471)
15,89427,905

13,620(2,474)(10,872)
11,14630,133

15,493(7,362)(12,303)8,13129,487

16,351(3,032)(13,055)
13,31933,995

12,635(11,407)(4,547)1,228
34,05914,337164(8,391)
14,501
38,4108,949
1,658(5,554)
10,60730,65812,309(23,520)
5,379(11,211)24,514

10,060(3,467)(2,824)
6,593
29,985

10,441(703)(4,965)
9,738
26,316

9,463(3,573)(5,363)5,890
22,328

6,981
6,029

5,783
5,647

5,884
5,492

7,445
5,032

8,978
4,815

4,478
5,074

3,464
5,036

3,330
4,888

3,554
4,660

3,323
4,685

5,736
4,765

3,291.06
54.26
60
3,808
2.6%
110.6%
43.25
0.71

3,321.57
5.16
72
4,732
2.6%
1,395.3%
533.330.83

3,454.40
143.46
72
4,871
2.3%
50.2%
21.47
0.89

1,658.53
90.13
36
4,940
2.6%
39.9%
15.24
0.83

1,592.90
79.23
33
4,648
2.5%
41.7%
16.95
0.84

1,624.93
59.95
30
4,225
2.2%
50.0%
22.55
0.83

1,456.32
71.75
33
4,648
3.1%
46.0%
14.68
0.72

1,325.19
55.95
28
3,944
2.8%
50.0%
18.11
0.76

1,217.57
49.08
28
3,944
2.9%
57.0%
19.99
0.81

1,189.08
19.73
20
2,817
1.9%
101.4%
53.12
0.88

1,215.17
17.51
20
2,824
1.7%
114.2%
66.70
0.96

109,70950,552
10,48016,019113,400
53,10010,491
17,210116,085
51,888
10,795
16,957

118,389
48,423
11,107
17,962

120,570
51,869
11,19019,288112,203
48,107
11,626
19,829118,085
43,636
12,482
19,578

5,782
1,493
(351)
(292)

6,325
4,581
(5,859)
(168)

6,845
3,852
441
356

6,176
3,055
374
677

7,219
4,433
258
364

7,739
4,776
(6,296)
158

9,241
4,037
83
456

20,984

20,662

20,904

21,13920,65518,986

18,912

18,65016,52416,013

15,686

Performance
Net sales
Cost of sales% of net sales
Selling, general and administrative expenses% of net sales
Impairment charges on goodwill and other intangible assets
EBITDA
Operating income% of net sales
Income before income taxes and equity in net income ofaffiliated companies
Net income attributable to Wacoal Holdings Corp.
Return on equity (ROE)
Return on assets (ROA)

Investment
Capital expenditures
Depreciation and amortization
Per Share of Common Stock
Shareholders’ equity per share (Yen)
Net income per share attributable to Wacoal Holdings Corp. (Yen)Dividends per share (Yen)
Total dividend amount
Dividend yield
Dividend payout ratio
Price earnings ratio (Times)
Price book-value ratio (Times)
Operating Segment Information
Net sales:
Wacoal Business (Domestic)
Wacoal Business (Overseas)
Peach John Business
Other
Operating income (loss):
Wacoal Business (Domestic)
Wacoal Business (Overseas)
Peach John Business
Other
Employees
Employees within Group (Persons)Notes: 1. Consolidated financial statements for the fiscal year ended March 31, 2013, and prior fiscal years have been retroactively revised in accordance with the changes of the settlement dates for certain consolidated subsidiaries that took place in the fiscal year ended March 31, 2014, in order to present in the consolidated financial statements periodic profit
or loss that is more appropriate.
2. The Company conducted a share consolidation of its common stock pursuant to which two shares were consolidated into one share effective as of October 1, 2017. Per share
information was calculated as if the consolidation of shares (reverse stock split) had been carried out at the beginning of the fiscal year ended March 31, 2018.
3. New accounting guidance, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU No. 2017-07), was adopted at the beginningof the consolidated fiscal year ended March 31, 2019. Accordingly, key financial data for the previous fiscal years are the amounts after the retroactive application of suchaccounting guidance.

68

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

69

FACTSFACTSManagement’s Discussion and Analysis
Wacoal Holdings Corp. and Subsidiaries

Financial information contained in this section is based on the consolidated financial statements included in this integrated report, prepared inaccordance with generally accepted accounting principles in the UnitedStates (U.S. GAAP).
The Wacoal Group consists of one holding company (the Company),
58 consolidated subsidiaries, and seven equity-method affiliates. The
Wacoal Group manufactures, wholesales, and—for certain products—
retails women’s foundation garments and lingerie, nightwear, children’s
underwear, outerwear and sportswear, hosiery, and other textile products.
Other operations include restaurant businesses, cultural and servicerelated operations, and the construction of interiors for commercial
premises.
OVERVIEW
We are a leading designer, manufacturer, and marketer in Japan of
women’s intimate apparel, with the largest share of the Japanese market
for foundation garments and lingerie. Foundation garments (primarily
brassieres and girdles) and lingerie (primarily slips, bra-slips, andwomen’s briefs) accounted for 77.6% of our consolidated net sales forfiscal 2020. We also design, manufacture, and sell nightwear, children’s
underwear, outerwear, sportswear, hosiery and other apparel and textile
goods, and provide several other services.

OVERVIEW OF STATUS OF BUSINESS PERFORMANCE, ETC.
Status of Financial Position and Operation Results Statusof Financial Position
Total assets at the end of fiscal 2020 was ¥277,688 million, a decreaseof ¥4,079 million as compared to the end of the previous fiscal year,
mainly due to a decrease in investments resulting from decrease inmarket value.
Total liabilities at the end of fiscal 2020 was ¥68,240 million, an
increase of ¥7,617 million as compared to the end of the previous fiscal
year, due to the recognition of operating lease liabilities following thechanges in the accounting policy, as well as increases in contingent
consideration liability.
Total Wacoal Holdings Corp. shareholders' equity at the end of fiscal
2020 was ¥205,371 million, a decrease of ¥11,123 million as comparedto the end of the previous fiscal year, due to decreases in retained
earnings and foreign currency translation adjustments.
As a result of the above, shareholders' equity ratio at the end of fiscal
year 2020 was 74.0%, an decrease of 2.8% as compared to the end of theprevious fiscal year.

the implementation of self-isolation measures since March after the
spread of the outbreak. Our overseas business was negatively impacted
by the weak sales at department stores in the United Kingdom andUnited States, poor sales from our raw materials factory in Thailand andthe impact of the appreciation of the Japanese yen (¥1,780 million), as
well as the suspension of economic activities due to lockdown measures
implemented at major cities since March, despite the positive impact of
the consolidation of Intimates Online results. Accordingly, revenue fromour domestic and overseas businesses both decreased.
Consolidated operating income was ¥6,632 million, an increase of
35.9% as compared to such consolidated operating income for theprevious fiscal year. Both our domestic and overseas businesses
recorded a decrease in profit, due to decreased revenue from thewholesale business of Wacoal Corp. and an increase in IT-related
expenses with respect to our domestic business, and due to the impact
of inclusion of operating loss from Intimates Online, non-recurrence
expenses incurred for the acquisition of Intimates Online, as well as therecognition of impairment charges on property, plant and equipment(¥769 million) related to the raw material factory in Thailand with respect
to our overseas business. Although we also recorded ¥473 million as
impairment charges on goodwill and other intangible assets for thecurrent fiscal year, we recorded an increase in operating income because

the amount of such impairment charges was less than that for theprevious fiscal year (¥5,834 million).
Consolidated income before income taxes and equity in net income ofaffiliated companies was ¥4,359 million, an increase of 97.9% ascompared to such consolidated income for the previous fiscal year.
Although we recorded valuation loss on marketable securities andinvestments (net) for both the previous fiscal year and the current fiscal
year, we recorded an increase in the consolidated income since theamount of such valuation loss was less than that for the previous fiscal
year. (We have been using U.S. accounting standards, under which equity
securities held by the Company and consolidated subsidiaries aremeasured at fair value, and any change from the beginning of the period
is recognized as other income (expenses).)
As a result of the above, net income attributable to Wacoal Holdings
Corp., the ratio of operating income to net sales and the ratio of net
income attributable to Wacoal Holdings Corp. to shareholders’ equity forthe current fiscal year were, ¥3,472 million, 3.6% and 1.6%, respectively.
The exchange rates used for the current fiscal year were: ¥108.74 to the
U.S. dollar; ¥138.24 to the Sterling pound; and ¥15.78 to the Chinese yuan.
The following is a summary of operations by operating segment.

(Millions of Yen)

2019

Results of Operation(Millions of Yen)

Net sales
Cost of sales
Sales profit
Selling, general and administrative expenses
Impairment charges on property, plant and equipment
A: Impairment charges on goodwill and otherintangible assets
Operating income
Other income/expenses
B: Valuation loss on marketable securities andinvestments - net
Income before income taxes and equity
in net income of affiliated companies
Net income attributable to Wacoal Holdings Corp.

Wacoal Business (Domestic)

2019

2020

194,201
89,804
104,397
93,517
167

186,760
84,959101,801
93,927769(7,441)(4,845)(2,596)+410+602(3.8%)(5.4%)(2.5%)+0.4%+360.5%

5,834

473

(5,361)(91.9%)

4,879
2,894

6,632
1,487

+1,753(1,407)+35.9%(48.6%)(5,570)(3,760)+1,810—

Amount

%

2,203

4,359

+2,156+97.9%

341

3,472+3,131+918.2%

Summary of Business Results
Our group entered the first year (from April 1, 2019 to March 31, 2020) of
our mid-term business plan and continues to implement various initiatives based on our basic policy to understand the actual situation,
estimate future demand and implement drastic reform, while emphasizing growth. Wacoal Corp., which aims to return its business to growthand improve profitability, made efforts to improve CX (customer experience) by innovation through the introduction of 3D body scanning and an
AI (artificial intelligence)-based customer service system in stores (sixshops), and creating an environment for effective use of our customer
database to coordinate and merge the physical stores and e-commercechannels. In the overseas markets, we have made efforts to create
growth opportunities and strengthen our competitiveness in e-commerce, which is one of our business challenges, and as part of suchinitiative, we acquired all of the issued and outstanding shares ofIntimates Online, Inc. (“Intimates Online”), a women’s LIVELY brandinnerwear design and sales company in the U.S., at the end of July 2019,70

YoY Change

making Intimates Online our wholly-owned subsidiary (the operating
results of our acquired subsidiary, Intimates Online, have been included inour consolidated results from the second quarter of the current consolidated fiscal year and are disclosed along with Wacoal International Corp.
(U.S.) under the “Wacoal Business (Overseas)” segment). Although we
implemented these initiatives, the business environment surrounding ourgroup has become extremely difficult due to the effects of a slowdown inglobal economic activities resulting from the COVID-19 outbreak (the“outbreak”) during the fourth quarter of the current fiscal year, in addition
to the impact of the slowdown in consumer spending after consumption
tax increase in October 2019.
As a result of the above, our consolidated sales for the current fiscal
year were ¥186,760 million, a decrease of 3.8% as compared to suchconsolidated sales for the previous fiscal year. In addition to the prolonged effect of the slowdown in demand after the consumption tax
increase, our domestic business activities were impacted by a decreasein the number of customers visiting our domestic retail stores following

IN T EG R AT ED R EPORT 2020

AmountTotal Net Sales
Wacoal Business (Overseas)
Peach John Business
Other
Operating Income (Loss)
Wacoal Business (Domestic)
Wacoal Business (Overseas)
Peach John Business
Other

194,201
113,400
53,10010,491
17,210
4,879
6,325
4,581
(5,859)(168)2020% to Sales

100.0%
58.4%
27.3%
5.4%
8.9%
2.5%
5.6%
8.6%
—
—

Wacoal Business (Domestic)
Sales attributable to our “Wacoal Business (Domestic)” segment decreased by 3.3% as compared to such sales for the previous fiscal year.
While we recorded an increase of 3.0% in revenue for the first half of thecurrent fiscal year (from April to September) due to the positive impact of
the last-minute rise in demand before the consumption tax increase, werecorded a decrease of 10.0% in revenue for the second half of thecurrent fiscal year (from October to March) due to self-isolation measures implemented against the spread of the outbreak. Operating income
decreased by 8.6% due to the impact of decreased revenue from ourwholesale business of Wacoal Corp. and the operating loss that werecorded with respect to Ai Co., Ltd., which distributes resort wear andundergarments.
Wacoal Corp.:
Sales from Wacoal Corp. decreased by 3.1% as compared to such sales
for the previous fiscal year. Sales from our products under the Wing
brand which are mainly sold at general merchandise stores exceeded thesales for the previous fiscal year due to strong sales of our regular
products, as well as the successful sales promotion of our wireless“Synchro Bra” products. Sales from our products under the Wacoal brandfell below the sales for the previous fiscal year due to a decrease in theAmount186,760
109,70950,552
10,48016,019
6,632
5,782
1,493
(351)
(292)

YoY Change% to Sales

100.0%
58.7%
27.1%
5.6%
8.6%
3.6%
5.3%
3.0%
—
—

Amount(7,441)(3,691)(2,548)(11)(1,191)+1,753(543)(3,088)+5,508(124)%(3.8%)(3.3%)(4.8%)(0.1%)(6.9%)+35.9%(8.6%)(67.4%)——

number of customers visiting our retail stores following the spread of theoutbreak and the weak sales from our key sales channels such as
department stores resulting from the slowdown in demand after the
consumption tax increase, despite growth in sales of certain products
such as “Night Up Bra”. In addition, sales from products other thaninnerwear, such as nightwear and sportswear also fell significantly below
such sales for the previous fiscal year as a result of weak sales from our
key sales channels. Although sales from our retail business were alsopoor during March due to the spread of the outbreak, sales exceeded thesales for the previous fiscal year as a result of initiatives that we implemented to minimize the decline in demand after the consumption tax
increase as well as our successful marketing to the shop members, thenumber of which reached 1.2 million. In addition, sales from our ecommerce website maintained high growth resulting from strengthened
communication with our customers attributable to marketing
automation.
Operating income decreased by 38.4% as compared to operating
income for the previous fiscal year. While gross profit rate from ourwholesale and retail businesses continued to improve, operating income
was significantly impacted by a drastic sales decline in March in thewholesale business, in addition to an increase in IT related expenses
incurred for the implementation of our omni-channel strategies.

I N TEG RATE D RE P O RT 2020

71

FACTS

FACTS

Wacoal Business (Overseas)
Sales attributable to our “Wacoal Business (Overseas)” segment on a
Japanese yen basis decreased by 4.8% as compared to such sales forthe previous fiscal year due to the impact of the appreciation of theJapanese yen (¥1,781 million), as well as weak sales from our raw
materials factory in Thailand attributable to a decrease in the number oforders received and a drastic sales decline in Europe and North America
due to the spread of the outbreak since mid-March. Operating income
decreased by 67.4% as compared to operating income for the previous
fiscal year due to the impact of decreased profit of Wacoal International
Corp. (U.S.) resulting from the acquisition of Intimates Online, as well as
the recognition of impairment charges of ¥769 million on property, plantand equipment with respect to our raw materials factory in Thailand.
Wacoal International Corp. (U.S.):
Sales from Wacoal International Corp. (U.S.) on a local currency basis
increased by 5.9% as compared to such sales for the previous fiscal year,
while sales on a Japanese yen basis increased by 3.8%. This increase
was due to the inclusion of sales of $11.9 million (approximately ¥1,300
million) from Intimates Online, which has been consolidated into ourbusiness results since August. Revenue from Wacoal America Inc., which
distributes “Wacoal” and “b.tempt’d” brand products, decreased due tothe weak over-the-counter sales at department stores (physical stores),while sales from our e-commerce website and third-party e-commerce
websites were strong.
Operating income on a local currency basis decreased by 80.5%(80.9% on a Japanese yen basis) as compared to such operating income
for the previous fiscal year. This significant decrease was due to lower
gross profit rate resulting from the higher percentage of sales subject todiscounts, the impact of decreased profit from Wacoal America Inc.
resulting from higher labor costs and office lease expenses, the impact
of inclusion of operating loss of 11.5 million dollars (approximately¥1,250 million) from Intimates Online, as well as non-recurring expenses
incurred for the acquisition.
Wacoal Europe Ltd.:Sales from Wacoal Europe Ltd. on a local currency basis decreased by
3.0% (7.9% on a Japanese yen basis) as compared to such sales for theprevious fiscal year. While sales were weak in the United Kingdom due topoor sales at department stores, sales exceeded such sales for theprevious fiscal year resulting from the expansion of sales in the North
America, France and other European countries up until the third quarterof the current fiscal year. Revenue, however, decreased as a result of
weak sales recorded during March which was impacted by the spread of
the outbreak.
Operating income on a local currency basis decreased by 24.6%(28.4% on a Japanese yen basis) as compared to such operating income
for the previous fiscal year due to a more aggressive advertising campaign to expand our brand awareness, recognition of expenses incurred
for the redesign of our own e-commerce website, and increases in laborcosts incurred in connection with the launch of business with departments stores in Spain.
Wacoal China Co., Ltd.:Sales from Wacoal China Co., Ltd. on a local currency basis increased by
1.1% as compared to such sales for the previous fiscal year, while sales
on a Japanese yen basis decreased by 4.6% due to the impact of theappreciation of the Japanese yen. We maintained high growth from our
e-commerce sales by strengthening our alliance with online mall providers through initiatives including the active sales promotion of “Wacoal”
brand products during the high demand season, and launch of Japanese“Amphi” brand products targeting a new customer segment. As the fiscal
year-end for Wacoal China Co., Ltd. is December, the spread of theoutbreak did not affect its results for the current fiscal year.

72

Operating income on a local currency basis increased by 7.1% (1.1% on a
Japanese yen basis) as compared to such operating income for the previous
fiscal year. Despite increases in advertising expenses and recognition of
non-recurring expenses incurred in connection with the relocation of awarehouse, we recorded an increase in profit due to improvement in the
gross profit rate resulting from a lower percentage of products with low
profit margins, and reduction of labor costs and office lease expenses
resulting from the closing of certain underperforming stores.
Peach John BusinessOverall sales attributable to our “Peach John Business” segment remained at about the same level as such sales for the previous fiscal year.
While revenue from the mail-order business decreased as we ceased
distribution of catalogues in an effort to improve business efficiency, werecorded an increase in revenue from our domestic retail stores, whichclosed certain underperforming stores in Japan, due to steady sales ofour regular products, as well as strong sales subject to discounts.
We recorded an operating loss of ¥351 million (an operating loss of¥5,859 million recorded for the previous fiscal year). While we recorded
income for our business in Japan due to various efforts including
reduction of selling, general and administrative expenses, as well as
improvement in gross profit rate, we recorded an operating loss due torecognition of impairment charges of ¥191 million on intangible assets(trademark), in addition to the operating loss recorded from our Chinese
business.
Other
Overall sales attributable to our “Other” business segment decreased by
6.9% as compared to such sales for the previous fiscal year, while werecorded an operating loss of ¥292 million (an operating loss of ¥168
million recorded for the previous fiscal year).
Lecien Corporation:
While sales of our private products handled at general merchandise
stores and specialty stores exceeded such sales for the previous fiscal
year, sales from Lecien Corporation decreased by 8.3% as compared tosuch sales for the previous fiscal year due to the impact of decreased
revenue in our material business. We recorded an operating loss due torecognition of one-time expenses incurred for the withdrawal fromcertain businesses including the apparel business.
Nanasai Co., Ltd.:Sales from Nanasai Co., Ltd. decreased by 7.4% as compared to suchsales for the previous fiscal year due to the absence of the one-timeincrease in revenue (large-scale construction for renovation such as
department stores) in the previous fiscal year. Operating income decreased by 22.7% as compared to operating income for the previous
fiscal year due to decreased revenue.
UNDERSTANDING, ANALYSIS AND CONSIDERATION WITHRESPECT TO STATUS OF BUSINESS PERFORMANCE, ETC., FOR
FISCAL 2020
The management’s understanding, analysis and consideration withrespect to our group’s business performance etc. are as follows. Any
forward-looking statements contained below are based on our judgment
as of the end of the current fiscal year.
Our group entered the first year (from April 1, 2019 to March 31, 2020)of our mid-term business plan and continues to implement various
initiatives based on our basic policy to understand the actual situation,
estimate future demand and implement drastic reform, while emphasizing growth. Wacoal Corp., which aims to return its business to growthand improve profitability, made efforts to improve CX (customer experience) by innovation through the introduction of 3D body scanning and an
AI (artificial intelligence)-based customer service system in stores (sixIN T EG R AT ED R EPORT 2020

shops), and creating an environment for effective use of our customer
database to coordinate and merge the physical stores and e-commercechannels. In the overseas markets, we have made efforts to create
growth opportunities and strengthen our competitiveness in e-commerce, which is one of our business challenges, and as part of suchinitiative, we acquired all of the issued and outstanding shares ofIntimates Online, Inc. (“Intimates Online”), a women’s LIVELY brandinnerwear design and sales company in the U.S., at the end of July 2019,making Intimates Online our wholly-owned subsidiary. Although we
implemented these initiatives, the business environment surrounding ourgroup has become extremely difficult due to the effects of a slowdown inglobal economic activities resulting from the COVID-19 outbreak (the“outbreak”) during the fourth quarter of the current fiscal year, in addition
to the impact of the slowdown in consumer spending after consumption
tax increase in October 2019.
Our view of the management achievements and issues for the current
consolidated fiscal year, the first year of our mid-term business plan, is
as follows.
Our achievement in “Wacoal Business (Domestic)” was that werealized stable growth in our retail and e-commerce businesses after weconstructed a mechanism to efficiently use our members’ data. On theother hand, the average annual growth rate of our wholesale business,
our core business, was -4% for the recent two years, and growth in otherbusinesses was not enough to offset such decrease. In our wholesale
business, we introduced a new customer service system using 3D bodyscanning and organized customer data, but challenges remained inoperation. In addition, because our fixed cost ratio remains high whilesales are decreasing, our urgent priority is to control costs and expenses.
In “Wacoal Business (Overseas)”, we expanded our brand portfolio togain new millennial customers after we acquired Intimates Online, which
operates the LIVELY brand. We also succeeded in achieving strong
growth of our e-commerce business, which has been our core challenge,
in various countries. We are facing challenges in dealing with thecontinued slowdown in sales from the physical stores, mainly in Europe
and North America. It is essential that we accelerate the speed of growthof our e-commerce business to offset the negative performance of thephysical stores. It is also necessary to stabilize production capacity andimprove our product development capability at our raw materials factoryin Thailand where the number of orders received continues to decrease.
In our “Peach John Business” and “Other” segments, our achievements
include our decisions to close certain underperforming stores and cease
distribution of catalogues at Peach John, and to withdraw from certain
underperforming businesses at Lecien, in an effort to improve businessefficiency. The issue resides in the fact that operating loss was recorded
for both segments. We continue to implement measures to improve
profitability.
Our view of the impact of the COVID-19 outbreak and future policies is
as follows.
We believe that the COVID-19 outbreak will adversely and significantly
impact our group’s management. As business us pensions, lockdown
measures and requests for self-isolation in response to the COVID-19
outbreak have gradually been eased, economic activities have resumed
and shown some positive signs in many countries and regions. We
believe, however, that it will take a certain amount of time for the world toreturn to normal and for consumers to be able to enjoy shopping. Also,
there is concern that consumer spending will remain weak due to thedeterioration of employment and income environment, and if we sufferfrom another outbreak, consumer activity may further slow down.
In addition, the most significant impact of the outbreak has been tocause drastic changes in the sales channels, consumer value andpurchasing behavior. While there is no significant change to our direction
to promote evolution of digital technology and to focus on consumerbased business models, we will calmly assess the changes in the
consumer values and distribution.

Below are our policies for regrowth within three timeframes.
Basic Policies
Basic policies in all aspects are to prioritize the health and safety of ourcustomers, employees and partner companies. Although we have been
providing customer service including close-to-customer support such as
fitting, it is important to maintain such service while considering thehealth and safety of our employees and customers in the interest ofbalance.
Short-Term Policies
Firstly, we aim to boldly reassess our current initiatives and spendingplans in all business fields. We will reassess our existing businessactivities from scratch, decrease costs such as advertising expenses,
take further steps toward reforming working styles, make efforts to lower
business travel expenses, and review the timing of new investments.
Secondly, to strengthen liquidity on hand in preparation for the
prolonged impact of the COVID-19 outbreak, we have already expanded
our borrowing facilities with financial institutions, and are moving toensure liquidity on hand for our group companies. We expect that we will
temporarily have excess inventory following the weak sales resulting
from the outbreak. We plan to lower our inventory level to the March 31,
2020 level by adjusting production of autumn/winter products and thefollowing spring/summer season products at all subsidiaries.
Mid- and Long-Term Policies
Due to decreasing sales during the past few years, expenses of our group
have been rising to a very high level, exceeding 50% for the current
consolidated fiscal year. It is our urgent priority to review our cost
structure, and to inspect to ensure that our cost structure is tailored toour business. At the same time, we will identify future demand in all
businesses, and clarify which business to end, which business to startanew and which business to maintain after making some adjustments.
Secondly, we will accelerate our initiatives on digital transformation
domestically and globally under our initiatives toward growth, deepen
connection with our customers, and make efforts to promote efficiency
in business operation. Domestically, we will continue to strengthen our
omni-channel strategies, which we promote to establish deeper, broader,and longer relationships. We will carefully assess changes in the purchasing behavior and make adjustments as needed, in the recognition
that digital transformation is essential to growth. We will aim to achieve
regrowth by providing services and values that are responsive to changes
in the customers including by promoting coordination and merger
between the physical stores and e-commerce channels, establishingefficient operation structure for our customer database, and making
adjustments to 3D body scanning and AI (artificial intelligence) tailored to
the new lifestyle. In addition, we will work to strengthen our e-commercebusiness and conduct a thorough inspection of our business by emphasizing customer experience overseas as we have done in Japan.
Further, we will review and rebuild customer touchpoints. Domestically,
we will consider responses appropriate for the transformation of thebusiness model of department stores whose sales continue to remain
weak. While transition of the wholesale business to self-managed
business (i.e. fixed-term leasehold business) is one of the options wehave, our focus will be on building a store management system thatemphasizes profitability, including efficient allocation of human resources and a method profit/loss management at stores.
The last part of the mid- and long-term policies is to develop products
and services that our customers want to buy for their new lifestyle and tostrengthen our capability to address new customer service and sale styles.
Sales channels may change significantly as the values of the customers
may change. In addition, decreasing income may change the customers to
be more predisposed toward lower price. We will review our brand portfolio
developed in various countries, and recombine our brands based on those

I N TEG RATE D RE P O RT 2020

73

FACTS

FACTS

new values. In addition, we will consider and conduct test marketing for a
new service style to replace close-contact customer service. We will
carefully observe how the women’s values regarding beauty around theworld will change after experiencing the pandemic, and make a practicaljudgement on the direction we should take.
Our view, analysis and consideration with respect to improvement of
capital efficiency through implementation of our financial strategies andinitiatives on shareholder returns are as follows: Under the new mediumterm management plan, which started from the current fiscal year, ourtarget is to reduce shareholders’ equity to between ¥200,000 million to¥
210,000 million and to increase the consolidated ROE (i.e., return on
Wacoal Holdings Corp. shareholders’ equity for the current fiscal year) to
6% or higher by March 31, 2022, following the last year of the plan.
During the current fiscal year, however, we were impacted by the inclusion of operating loss from Intimates Online, a U.S. company which we
acquired to create growth opportunities in the e-commerce market andto strengthen our competitiveness, and the recognition of valuation lossof ¥3,800 million on marketable securities and investments, as well as
negative factors including the prolonged decline in consumer spending
attributable to a consumption tax increase and weak sales impacted by
the spread of the COVID-19 outbreak. Accordingly, as in the previous
fiscal year, net income attributable to Wacoal Holdings Corp. and theconsolidated ROE for the current fiscal year were low, at ¥3,470 millionand 1.6%, respectively. The net income attributable to Wacoal Holdings
Corp. not taking into account the impact of the impairment charges on
goodwill and other intangible assets and valuation loss decreased byapproximately ¥3,100 million. It is a fact that profitability, as a business
entity, is declining rapidly and we view the recovery of the profitability to
be a critical issue.
Our basic policy on profit distributions to shareholders is to provide
stable distributions based on our consolidated results, while seeking toincrease our enterprise value through active investment for improving
profitability, and to increase net income per share attributable to Wacoal
Holdings Corp. With respect to retained earnings, in addition to actively
investing in expanding customer contacts in domestic business andexpanding overseas business, from the viewpoint of enhancing ourenterprise value, we will make strategic investments to maintain ourcompetitiveness and strengthen our growth potential. With these efforts,
we aim to return to our shareholders through improved earnings. In
addition, we will acquire treasury shares flexibly while taking into accountthe free cash flow level and market environment, and improve capitalefficiency and returns to our shareholders.
For the fiscal year ended March 31, 2020, we actively made investment
for our future growth, including in IT infrastructure for omni-channel
services in Japan and acquisition of Intimates Online to strengthen
e-commerce in the U.S. We will return profits to our shareholders in theamount of ¥12,600 million in total, ¥4,900 million, in the form of dividends,and ¥7,700 million, in the form of repurchases. In late March, we announced suspension of stock repurchases that had been scheduled before
April 30, 2020 partly because of the spread of the COVID-19 outbreak,while we maintain the total return ratio of 100% through this year.
Though our basic policies on capital or profit distributions to shareholders have not been amended at this time, we may consider revising
our basic policies if needed after examination of trends in the results ofoperation and capital needs resulting from the spread of the outbreak.

74

CAPITAL RESOURCES AND LIQUIDITY
Our current policy is to fund our cash needs from cash flows fromoperating activities, which allows us to secure most of working capital,
make capital investments, and pay dividends without relying on substantial borrowings or other financing from outside of our group companies.
As of March 31, 2020, we had credit facilities at financial institutions
totaling ¥32,259 million, and the balance of loan which established line ofcredit amounted to ¥3,449 million. Of these loan, ¥985 million is available
to Wacoal Europe Ltd., ¥2,379 million is available to Wacoal Service Co.,
Ltd., and ¥85 million is available to Nanasai.
In general, most of our credit facilities have automatically renewed
terms, and we are not aware of any issues with respect to any of ourlenders that could cause these facilities to become unavailable. Even if
any of our subsidiaries loses access to funds from our credit facilities,
we believe that it is possible for other companies in our group to provide
any necessary funds. Our borrowing requirements are not affected byseasonality.
We are not aware of any restrictions on the transfers of funds from a
subsidiary to a parent company in the form of a cash dividend.
Our group’s business activities have been impacted by the COVID-19
outbreak and our cash flows from operating activities may significantly
decrease on a short-term basis. For this reason, we have set up new
borrowing facilities with financial institutions after April 2020 to ensureliquidity on hand. We will reduce the cash outflow that had been plannedfor operating activities by reassessing it from scratch, and review thetiming of new investments in order to ensure liquidity.

DIVIDEND POLICY
Our basic policy on profit distribution to shareholders is to make stable
distributions based on consideration of our consolidated performance,
while seeking to increase our enterprise value through active investment
aimed at higher profitability and to increase net income per share.
Our basic policy is to distribute earnings twice a year in the form ofinterim and year-end dividends and the Board of Directors is the decisionmaking body for distribution of earnings.
Based on such policy, we plan to distribute a year-end dividend of¥20.00 (including special anniversary dividend of ¥4.00) per share as a
distribution of earnings for the current fiscal year. As a result, the annual
cash dividend per share, including an interim dividend of ¥40.00 per
share, is ¥60.00 for the current fiscal year.
As for retained earnings, with the aim of improving our corporate
value, we have actively invested in expanding new points of contact with
consumers for our domestic business and our overseas businesses. We
also plan to use our retained earnings in our strategic investments formaintaining competitiveness and reinforcing growth. With these efforts,
we seek to benefit our shareholders by improving future profitability. We
also intend to acquire treasury stock in a flexible manner taking into
account the level of free cash flow as well as the market environment,
and will make efforts to improve capital efficiency and return profits toour shareholders.
We also provide that the Company may distribute earnings subject tothe resolution of the Board of Directors pursuant to the provisions ofParagraph 1, Article 459 of the Companies Act.

CASH FLOW STATUS
The balance of cash and cash equivalents at the end of fiscal year 2020was ¥27,905 million, an decrease of ¥2,228 million as compared to theend of the previous fiscal year.

RESEARCH AND DEVELOPMENT
Our research and development activities are mainly conducted by our
Human Science Research Center to achieve harmony between thehuman body and clothing and to support better product making.
Since 1964, we have been conducting research into the female body inorder to accurately understand the Japanese woman’s physique. In
particular, we have developed a silhouette analysis system and introduced a three-dimensional measuring system. We are also working onan even more advanced measurement of sensory comfort. Our researchand development activities focus on addressing the proportional,
physiological, and mental aspects of garment design. One of our mostimportant research results was the enrichment of our research on
sensory comfort through our participation in a project led by the Ministry(Cash flow from operating activities)
Cash flow provided by operating activities was ¥13,325 million, a decreaseof ¥295 million as compared to the previous fiscal year, after adjustments
for changes in assets and liabilities to our net income of ¥2,968 million
plus adjustments for depreciation expenses and deferred taxes.
(Cash flow from investing activities)
Cash flow provided by investing activities was ¥2,569 million, as comparedto cash flow used in investing activities in the amount of ¥2,474 million forthe previous fiscal year, due to proceeds from sales and redemption ofequity securities and decreases in time deposits, despite payments madein connection with acquisition of new subsidiaries (net of cash acquired)and payments made to acquire tangible and intangible assets.

of Trade and Industry (presently the Ministry of Economy, Trade andIndustry) from 1995 to 1998. Based on this research, we have been
focusing on developing new products that are not only comfortable forthe wearer, but also have a positive physiological effect based on thebasic study from three factors, which are pressure, heat, and touch. In
2005, we developed and created a new market for our breakthrough Style
Science series products, which support the creation of a healthy andbeautiful body by changing the idea of everyday walking to walking forexercise. In 2010, we conducted an analysis and announced principles on
the physiological changes associated with the aging period from aperson’s 20s to their 50s. We also strengthened the development of new
products coping with aging and have been working on developing new
functional products based on the lifestyle habits of people as they
undergo small physical changes associated with aging.
Our Human Science Research Center is promoting research anddevelopment, which is based on a survey analysis of the body shapes
and needs of young customers including customers of an age of which
the products for the first time are introduced, and a senior generation.
During the fiscal year ended March 31, 2020, we worked on researchand development focused on measurement technology pursuant to our
omni-channel strategies. We also made efforts to expand our body careproducts by releasing a study on breast movement caused by gravity andskin, to protect breasts from gravity, as part of our study of daily life
situations and breast movement. We also launched a breast care bra thatkeeps breasts at near-zero gravity.
As a result of the above, we recorded ¥508 million for our research anddevelopment during the fiscal year ended March 2020.
Our research and development activities cover a wide range of
research from basic research to product development, mainly of women’s innerwear. Therefore, it is difficult to relate each of such activities toa specific segment, and thus, we do not provide information regarding
such research and developments by segment.
In order to promote “the realization of an industry supporting womenwith unbounded living beauty,” we will make efforts to enrich researchand development activities that contribute to the improvement ofcustomer satisfaction and corporate value based on the key concepts ofbeauty, comfort, and health. We will also work toward strengthening
product appeal and developing new products or services that can gain
support from and satisfy our customers.

(Net cash used in financing activities)
Cash flow used in financing activities was ¥17,471 million, an increase of¥6,599 million as compared to the previous fiscal year, due to a decreasein short-term bank loans, repurchase of treasury stock and cash dividend
payments.
SUMMARY OF CAPITAL INVESTMENT, ETC.
The amount of capital investment for the fiscal year ended March 31,
2020, was ¥6,981 million. A majority of our capital investment was usedin the information system investment of our subsidiaries and maintenance and repair work implemented for the real properties held by theCompany.
The amounts of capital investment made in Wacoal Business(Domestic), Wacoal Business (Overseas), Peach John Business, andOther were ¥4,619 million, ¥2,106 million, ¥129 million, and ¥127 million,
respectively.

IN T EG R AT ED R EPORT 2020

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75

FACTS

FACTS

Consolidated Balance Sheets
Wacoal Holdings Corp. and Subsidiaries
March 31, 2020 and 20192020

March 31, 2020 and 2019

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2019

2020

ASSETS

Millions of Yen

Thousands of
U.S. Dollars(Note 2)

2020

2019

2020

¥

¥

$

LIABILITIES AND EQUITYCURRENT ASSETS:

CURRENT LIABILITIES:Cash and cash equivalents
Time deposits¥ 27,905¥ 30,133$ 259,509

797

4,004

7,412

Marketable securities (Notes 3, 20 and 21)

656

446

6,101

Notes and accounts receivable (Note 6)

20,062

24,989186,571

(489)

(229)

(4,548)43,42742,508403,860

868

1,180

8,072

Allowance for doubtful receivables (Note 4)Inventories (Note 5)
Return assets
Other current assets (Notes 6, 21 and 22)
Total current assets

Short-term bank loans (Note 9)

3,364

8,116

31,284

Notes and accounts payable:
Trade notes payable

1,112

1,155

10,341

Trade accounts payable (Note 6)

9,588

10,63889,166

Other payables

7,107

6,548

66,093

Accrued payroll and bonuses

6,734

7,209

62,624

Income taxes payable (Note 17)

4,878

2,759

45,364

3,482

24,598

4,964

4,985

46,164

Refund liabilities

2,645

98,190108,016

913,141

Short-term operating lease liabilities (Notes 1 and 10)

4,600

Other current liabilities (Notes 9, 12, 18, 20, 21 and 22)

4,079

3,955

37,934

44,10743,862

410,183

Total current liabilities

42,779PROPERTY, PLANT AND EQUIPMENT:LONG-TERM LIABILITIES:Land (Note 9)21,46021,549199,572

Buildings and structures (Notes 9, 11 and 21)

74,03974,033

688,543

Liability for termination and retirement benefits (Note 12)

2,069

1,828

19,241

Machinery and equipment (Note 21)

18,782

18,914

174,668

Deferred income taxes (Note 17)

7,911

12,56773,570Construction in progress

1,090

478

10,137Long-term operating lease liabilities (Notes 1 and 10)

9,101

115,371

114,974

1,072,920

Contingent consideration (Notes 7 and 21)

2,786(63,288)(61,704)(588,562)

Other long-term liabilities (Notes 9, 11, 12, 20 and 21)

2,266

2,366

21,07352,08353,270484,358

24,133

16,761

224,430

13,26013,260123,314

Total
Accumulated depreciation
Net property, plant and equipment

Total long-term liabilities

84,63725,909COMMITMENTS AND CONTINGENCIES (Notes 9, 10 and 13)
OTHER ASSETS:
Operating leases right-of-use assets (Notes 1 and 10)

13,540125,918

EQUITY:

Investments in affiliated companies (Note 6)

21,59521,859200,828

WACOAL HOLDINGS CORP. SHAREHOLDERS’ EQUITY:

Investments (Notes 3, 20 and 21)

43,90463,372408,296

Goodwill (Notes 7, 8 and 21)

22,371

11,954

208,044

Other intangible assets (Notes 7, 8 and 21)

14,547

12,297135,283

Prepaid pension expense (Note 12)

4,974

3,990

46,257

Deferred income taxes (Note 17)

1,118

1,362

10,397

Other

5,366

5,647

49,902

127,415

120,481

1,184,925

Total other assets

Common stock, no par value –authorized, 250,000,000 shares in 2020 and 2019;
issued 68,589,042 shares and 70,689,042 shares in 2020 and 2019, respectively
Additional paid-in capital (Note 14)

29,83629,807

277,467

Retained earnings

185,233

193,139

1,722,618

Accumulated other comprehensive (loss) income (Note 16):
Foreign currency translation adjustments(1,033)

1,551(9,607)Pension liability adjustments (Note 12)(4,594)(5,679)(42,723)(5,627)(4,128)(52,330)

Total accumulated other comprehensive lossTreasury stock, at cost – 6,186,410 shares and5,510,891 shares in 2020 and 2019, respectively
Total Wacoal Holdings Corp. shareholders’ equity (Note 15)
NONCONTROLLING INTERESTS
Total equity
TOTAL¥277,688¥281,767$2,582,424

TOTAL(17,331)(15,584)(161,174)

205,371

216,494

1,909,895

4,077

4,650

37,916

209,448

221,144

1,947,811¥277,688¥281,767$2,582,424

See notes to consolidated financial statements.

76

IN T EG R AT ED R EPORT 2020

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77

FACTS

FACTS

Consolidated Statements of Income

Consolidated Statements of Equity

Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2020, 2019 and 2018

Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2020, 2019 and 2018

NET SALES (Notes 6, 10 and 18)
OPERATING COSTS AND EXPENSES (REVENUE):
Cost of sales (Notes 6, 10 and 12)
Selling, general and administrative expenses (Notes 10, 11, 12 and 14)
Impairment charges on property, plant and equipment (Note 21)
Compensation income
Impairment charges on goodwill (Notes 8 and 21)
Impairment charges on other intangible assets (Notes 8 and 21)
Total operating costs and expenses
OPERATING INCOME
OTHER (EXPENSES) INCOME:
Interest income
Interest expense
Dividend income (Note 6)
(Loss) gain on sale, exchange and valuation of marketable securities
and investments – net (Note 3)
Other – net (Notes 10, 12, 16 and 22)
Total other (expenses) income – net
INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME
OF AFFILIATED COMPANIESINCOME TAXES (Note 17):
Current
Deferred
Total income taxes
INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF AFFILIATED COMPANIESEQUITY IN NET INCOME OF AFFILIATED COMPANIES (Note 6)
NET INCOME
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.

2020¥186,760

2019¥194,2012018¥195,725

2020$1,736,818

84,95993,927769

89,804
93,517
167

92,032
92,701790,096
873,496
7,151

217
256
180,128
6,632

4,325
1,509
189,322
4,879

184,231
11,4942,018
2,381
1,675,142
61,676

177
(19)
1,506

289
(11)
1,429

194
(10)
1,329

1,646
(177)
14,005(3,760)(5,430)206(34,967)(177)(2,273)

1,047(2,676)

1,073
2,792

(1,646)(21,138)

(708)
206

4,359

2,203

14,286

40,538

7,126(5,673)
1,453
2,906
62
2,968
504
¥ 3,472

5,350(2,817)
2,533
(330)
725
395
(54)
¥
341

4,880
662
5,542
8,744
916
9,660
85
9,745

66,270(52,757)
13,51327,025577
27,602
4,687
32,289

¥

Yen

2020

Years Ended March 31, 2020, 2019 and 2018

NET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.
PER SHARE (Note 19):
Basic
DilutedNET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.
PER AMERICAN DEPOSITARY RECEIPT (5 shares of common stock) (Note 19):
Basic
Diluted¥ 54.26¥ 54.05¥271.29¥270.252019¥ 5.16¥ 5.14¥25.78¥25.682018$

U.S. Dollars (Note 2)2020¥143.46¥142.98¥717.30¥714.89

$ 0.5
$ 0.5
$2.52
$2.51

As of October 1, 2017, Wacoal Holdings Corp. effected a one-for-two ordinary share reverse stock split. The number of outstanding shares was calculated assuming that the reverse stock split had occurredat the beginning of the earliest fiscal year presented in the consolidated financial statements.
See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2020, 2019 and 2018

Years Ended March 31, 2020, 2019 and 2018

NET INCOME
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX (Note 16):
Foreign currency translation adjustments:
Amounts arising during the year
Total foreign currency translation adjustments
Unrealized gain (loss) on securities:
Amounts arising during the year
Reclassification adjustments
Total unrealized gain (loss) on securities
Pension liability adjustments:
Amounts arising during the year
Reclassification adjustments
Total pension liability adjustments
OTHER COMPREHENSIVE (LOSS) INCOME
COMPREHENSIVE INCOME (LOSS)COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TONONCONTROLLING INTERESTSCOMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TOWACOAL HOLDINGS CORP.

Millions of Yen

Thousands of
U.S. Dollars(Note 2)2020
¥ 2,968

2019
¥ 395

2018
¥ 9,660

2020$ 27,602(2,532)(2,532)

(750)
(750)

1,113
1,113

(23,547)(23,547)

(7)
(97)
(104)

6,494
(139)
6,355

125
960
1,085
(1,447)
1,521(4,787)200(4,587)(5,441)(5,046)

(487)
(193)
(680)
6,788
16,448

1,162
8,928
10,090(13,457)
14,145

452

(18)

21

4,203

¥ 1,973¥(5,064)¥16,469$ 18,348

See notes to consolidated financial statements.

Millions of Yen

Thousands of
U.S. Dollars(Note 2)Millions of Yen

Years Ended March 31, 2020, 2019 and 2018

BALANCE, APRIL 1, 2017
Net incomeForeign currency translation
adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal
Holdings Corp. shareholders,¥270 per 5 shares of common stockCash dividends paid to noncontrollinginterests
Purchase of treasury stock
Disposal of treasury stockShare-based compensation granted(exercised) (Note 14)Equity transactions with noncontrollinginterests
BALANCE, MARCH 31, 2018
Cumulative effects (net of tax) ofadoption of new account standards
Net incomeF oreign currency translation
adjustments
Unrealized loss on securities
Pension liability adjustments
Cash dividends paid to Wacoal
Holdings Corp. shareholders,¥360 per 5 shares of common stockCash dividends paid to noncontrollinginterests
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockShare-based compensation granted(exercised) (Note 14)Equity transactions with noncontrollinginterests
BALANCE, MARCH 31, 2019Cumulative effects (net of tax) ofadoption of new accounting standards(Note 1)
Net income
Foreign currency translation
adjustments
Pension liability adjustments
Cash dividends paid to Wacoal
Holdings Corp. shareholders, ¥300
per 5 shares of common stockCash dividends paid to noncontrollinginterests
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stockShare-based compensation granted(exercised) (Note 14)Equity transactions with noncontrollinginterests

Shares of
Outstanding
Common Stock(Thousands)

CommonStock

Additional
Paid-in
Capital68,605¥13,260¥29,707

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Stock,
at Cost¥21,873¥ (7,334)¥170,062
9,745

Total Wacoal
Holdings Corp.
Shareholders’EquityNoncontrolling
Interests

Total Equity¥227,568
9,745¥4,914(85)¥232,482
9,660

1,062

1,062

51

1,113

6,349
(687)

6,349
(687)

6
7

6,355
(680)

(7,386)(7,386)(7,386)(194)(1,243)0
567,367

13,26058(3)29,765

172,418

28,597

27,834(27,320)(4,007)0(4,007)
0

13

68

68

(11,328)

232,712

86

86

4,785

237,497

514

341

514

341

54

395

(723)

(723)

(27)

(750)

(104)
(4,578)(104)(4,578)(9)(104)(4,587)(4,811)(4,811)(4,811)(191)(2,200)011

65,17813,260(2,631)(6,919)
0
2,631

42

(12)

32

62

29,807

193,139(15,584)

216,494(4,128)(6,919)
0
62
38

38

4,650

221,144

(515)

(515)
3,472

(504)

2,968

(515)

(2,584)(2,584)52(2,532)

1,085

1,085

1,085

(4,907)(4,907)(237)

2362,403

29¥13,260¥29,836(191)(6,919)0

3,472(4,907)(2,798)0(194)(4,007)
0

(237)

(0)
(5,935)(7,745)0
5,935(7,745)0(7,745)
0

(21)

63

71

71

¥185,233¥ (5,627)¥(17,331)¥205,371

116

116¥4,077¥209,448

BALANCE, MARCH 31, 2020

As of October 1, 2017, Wacoal Holdings Corp. effected a one-for-two ordinary share reverse stock split. The number of outstanding shares was calculated assuming that the reverse stock split had occurredat the beginning of the earliest fiscal year presented in the consolidated financial statements.

Thousands of U.S. Dollars (Note 2)

Years Ended March 31, 2020, 2019 and 2018

BALANCE, MARCH 31, 2019Cumulative effects (net of tax) of adoption of new
accounting standards (Note 1)
Net income
Foreign currency translation adjustments
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, $2.79 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Share-based compensation granted (exercised) (Note 14)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2020

CommonStock

Additional
Paid-in
CapitalRetained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)$123,314$277,197$1,796,141$(38,389)

Treasury
Stock,
at CostTotal Wacoal
Holdings Corp.
Shareholders’EquityNoncontrolling
Interests

Total Equity$(144,927)$2,013,336$43,244$2,056,580(4,687)484

27,602(23,547)
10,090(4,789)(4,789)32,28932,289(24,031)
10,090(24,031)
10,090(45,634)(4,789)(45,634)(45,634)(2,204)

270$123,314$277,467(72,027)
055,194586(0)(55,194)(195)$1,722,618$(52,330)$(161,174)(72,027)0661$1,909,895

1,079$37,916(2,204)(72,027)
0
661
1,079
$1,947,811

See notes to consolidated financial statements.

78

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I N TEG RATE D RE P O RT 2020

79

FACTS

FACTS

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2020, 2019 and 2018

Wacoal Holdings Corp. and Subsidiaries

Millions of Yen
Years Ended March 31, 2020, 2019 and 2018

OPERATING ACTIVITIES:Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation (Note 14)
Allowance for returns and doubtful receivables – net
Deferred income taxes
Loss on sales or disposal of property, plant and equipment – net
Impairment charges on property, plant and equipment (Note 21)
Compensation income
Impairment charges on goodwill (Notes 8 and 21)
Impairment charges on other intangible assets (Notes 8 and 21)
Loss (gain) on sale, exchange and valuation of marketable securities andinvestments – net (Note 3)
Equity in net loss (income) of affiliated companies, less dividends received
Changes in assets and liabilities:
Decrease (increase) in notes and accounts receivable(Increase) decrease in inventories
Decrease (increase) in return assets(Increase) decrease in other current assets(Decrease) increase in notes and accounts payable
Decrease (increase) in refund liabilities
Increase (decrease) in liability for termination and retirement benefits
Increase (decrease) in accrued expenses, income taxes payable
and other current liabilities
Other
Net cash provided by operating activities

2020

2019

2018

¥ 2,968¥395¥ 9,660$ 27,602

6,029
71
299
(5,673)
103
769

5,647
62
(2,263)(2,817)
48
167

5,492
68
18
662
250

56,068670
2,781(52,757)
958
7,151

217
256

4,325
1,509

3,760

5,430

(206)

34,967

480

(211)

(397)

4,464

4,685
(1,350)
312
(29)
(373)
(837)
776

822
(76)
(1,180)(653)(1,640)
3,482
(620)

(232)
1,012

(833)

43,569(12,556)
2,902
(270)
(3,469)(7,784)
7,217

ADDITIONAL CASH FLOW INFORMATION:
Cash paid for:
Interest
Income taxes
NONCASH INVESTING ACTIVITIES:Acquisition of a subsidiary (contingent consideration) (Note 7)
Acquisition of property, plant and equipment by assuming payment obligation

2020

(708)
206

2,018
2,381

270
676

665

1,075

(518)

6,184

197
13,325

118
13,62073
15,493

1,823
123,919

(438)
3,576
15,252(339)
544(4,783)
5,226
2,497
(323)
1,008
(900)

(4,073)33,256
141,839(3,153)5,060

104(3,442)(3,539)(9,181)276(2,603)(3,180)(5,129)
3,368
394
(22)
567
(1,605)708
159(3,429)(2,455)

32
2,569

270
38
(2,474)82(7,362)298
23,891(4,645)

1,061

(755)

(43,197)(53)(7,745)0(4,907)(237)
116(17,471)(651)(2,228)30,133¥ 27,905(50)(6,919)0(4,811)(191)
38(10,872)372
646
29,487¥ 30,133(47)(4,007)0(7,386)(194)
86(12,303)(336)(4,508)33,995¥ 29,487(493)(72,026)0(45,635)(2,204)
1,079(162,476)(6,054)(20,720)
280,229$ 259,509

¥

¥

1
5,068

¥

11
5,853

$

¥

954

¥

583

$

INVESTING ACTIVITIES:
Increase in time deposits
Decrease in time deposits
Proceeds from sales and redemption of equity securities
Payments to acquire equity securities
Proceeds from redemption of debt securities
Payments to acquire debt securities
Compensation income
Proceeds from sales of property, plant and equipment
Payments to acquire property, plant and equipment
Payments to acquire intangible assets (Note 8)
Acquisition of a subsidiary (net of cash acquired) (Note 7)
Proceeds from sales of shares of affiliated companies
Other
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:
Decrease (increase) in short-term bank loans
with original maturities of three months or less – net
Repayments of long-term debt
Purchase of treasury stock
Disposal of treasury stock
Dividends paid on common stock
Dividends paid to noncontrolling interests
Proceeds from share issuance of noncontrolling interests
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

Thousands of
U.S. Dollars(Note 2)

¥

20
4,758
4,172
751

967
(32,010)(32,912)(85,381)186
44,24838,7986,984

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
Basis of Financial Statements—Wacoal Holdings Corp. (the “Company”)
and subsidiaries are predominantly engaged in one industry, the manufacturing and sale of apparel, including foundation garments, lingerie,nightwear, and outerwear in Japan, the United States of America, Europe,and certain other countries in Asia.
The accompanying consolidated financial statements, stated inJapanese yen, have been prepared on the basis of accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
Consolidation—The consolidated financial statements include theaccounts of the Company and its majority-owned subsidiaries (collectively, the “Companies”). All intercompany transactions and balances
have been eliminated.
Some foreign subsidiaries of the Company have a fiscal year ending
December 31. The accounts of those subsidiaries are included in the
Company’s consolidated financial statements based on the subsidiaries’
fiscal year-end. Necessary adjustments have been made for significant
events related to subsidiaries that occurred during the period between
their fiscal year-ends and March 31.
Investments in affiliated companies where the Companies’ ownershipis 20% to 50% are accounted for using the equity method.
Significant influence is generally deemed to exist if the Companies
have an ownership interest in the voting stock of the investee from 20%
to 50%, although other factors are considered in determining whether theequity method of accounting is appropriate.
Use of Estimates—The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could
differ from those estimates.
The Companies reflected the impact of the COVID-19 outbreak in such
estimates. The official views of when the outbreak will be contained havenot been announced by public institutions. The Companies are estimating that COVID-19 will have an impact on their business results until
September 2020, and that their results in October 2020 will recover to thelevel before the outbreak. The Companies developed future businessplans and used them for the estimates of impairment charges onproperty, plant and equipment, goodwill and other intangible assets
based on this assumption. However, COVID-19’s impact on impairment
charges on property, plant and equipment, goodwill and other intangible
assets recorded for the year ended March 31, 2020 were immaterial.
Note that when the outbreak will be settled is not easy to predict andthere is a possibility that these impairment charges would increase if theassumptions were different from actual results.
Cash and Cash Equivalents—Cash and cash equivalents include all
highly liquid investments with original maturities of three months or less.
Foreign Currency Translation—Assets and liabilities of foreign subsidiaries have been translated to Japanese yen at period-end exchange rates
and income and expenses have been translated using average exchange
rates for the period. Translation adjustments resulting from the processof translating consolidated financial statements, net of tax, are includedin accumulated other comprehensive (loss) income, which is a separate
component of equity. Exchange gains and losses resulting from foreign
currency transactions and the conversion of monetary assets andliabilities denominated in foreign currencies are included in other(expenses) income in the consolidated statements of income.
Foreign currency translation gains (losses) for the years ended March
31, 2020, 2019 and 2018 were ¥36 million, ¥76 million and ¥(189) million,
respectively. They have been included in other – net of other (expenses)
income.

Marketable Securities and Investments—The Companies classify theirmarketable securities and investments in debt securities into one of two
categories: available-for-sale or held-to-maturity. Available-for-salesecurities are recorded at fair value with a corresponding recognition of
unrealized holding gain or loss (net of tax) in accumulated other comprehensive (loss) income, which is a separate component of equity, until
realized. Held-to-maturity securities are measured at amortized cost. The
Companies classify debt securities as held-to-maturity only if theCompanies have the positive intent and ability to hold those securities tomaturity. Gains and losses on sales of debt securities are computed
based on cost determined using the average cost method. The Company
periodically determines whether any decline in the value of debt securities is temporary, based on the period and extent of the decline, theissuer’s financial position and prospects, and the intention to hold it for a
sufficient period of expected recovery of fair value. If it is determined thatthe decline is not temporary, the difference between the carrying amountand its fair value is recognized as a valuation loss.
Equity securities are measured at fair value and unrealized holding
gain or loss is recorded in net profit or loss.
Allowance for Doubtful Receivables—An allowance for doubtful notes
and receivables is estimated based on historical collection experienceand additional information including current economic conditions andthe creditworthiness of each applicable customer.
Inventories—Inventories are stated at the lower of cost or net realizablevalue, cost being determined by the first-in, first-out method for raw
materials and the average cost method for work in process and finishedproducts. Cost includes net prices paid for materials purchased, production labor cost, factory overhead and charges for customs duties.
Property, Plant and Equipment—Property, plant and equipment is statedat cost less impairment charges. Property, plant and equipment areamortized over their estimated useful lives mainly using the straight-line
method. The estimated useful lives are as follows:Buildings and structures
2 to 50 years (mainly 38 years)
Machinery and equipment (except for the part of the paintings)
2 to 20 years (mainly 5 years)
Depreciation expenses for the years ended March 31, 2020, 2019 and2018 were ¥3,545 million, ¥3,538 million and ¥3,681 million, respectively.
Impairment of Property, Plant and Equipment—The carrying amount oflong-lived assets held and used by the Companies is evaluated for
impairment whenever there is an event or change in circumstances thatindicates that such assets have been impaired or that the carrying
amounts of such assets might not be recoverable. The carrying amount ofproperty, plant and equipment is not recoverable if it exceeds the sum of
the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. That assessment is based on the carrying amountof the asset at the date it is tested for recoverability, whether in use orunder development. The impairment charge is measured as the amount bywhich the carrying amount of property, plant and equipment exceeds its
fair value.
Goodwill and Other Intangible Assets—Goodwill represents the excessof the purchase price of an acquired entity over the fair value of assets
acquired and liabilities assumed.
Goodwill and other intangible assets with indefinite useful lives aretested for impairment annually, or more frequently if conditions indicate
an earlier review is necessary. The goodwill is allocated to the reporting
unit in which the business that the goodwill resides. To test for goodwill
impairment, the carrying amount of each reporting unit is compared with
its fair value. If the carrying amount of a reporting unit exceeds its fairvalue, an impairment charge is recognized in an amount equal to that
excess. To test for impairment of other intangible assets with indefinite
useful lives, the carrying value of an intangible asset is compared with its

See notes to consolidated financial statements.

80

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

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FACTS

FACTS

fair value. If the carrying amount of an intangible asset with indefinite
useful life exceeds its fair value, an impairment charge is recognized in
an amount equal to that excess.
Other intangible assets with finite useful lives consist primarily ofbrands and software are amortized over their estimated useful lives
using the straight-line method. The estimated useful lives are as follows:
Brands10, 20 and 25 years (mainly 25 years)
Customer relationships 5 years
Software5 years
Asset Retirement Obligations—The Companies have obligations arisingfrom contractual commitments to remove leasehold improvements fromleased facilities and return the property to a specified condition when thelease terminates. The Companies recognize asset retirement obligations
at the inception of a lease. The asset retirement obligations are measured with an expected present value technique based on historicalexperience and recorded in other long-term liabilities in the consolidatedbalance sheets and subsequently adjusted for changes in estimateddisposal costs. The difference between the gross expected future cash
flow and its present value is accreted over the life of the related lease,which is determined using best estimates because the Companies’ lease
contracts generally have automatic renewal provisions. The estimatedasset retirement costs are capitalized as part of the carrying amount of
the associated long-lived asset and depreciated over its useful life. For
some lease contracts that are automatically renewed at the end of thecontract, asset retirement obligations are calculated based on a reasonable estimate of the end of the contract.
Termination and Retirement Plans—Termination and retirement benefits
are accounted for in accordance with the guidance for retirement
benefits. The Companies amortize net actuarial gains and losses andprior service cost over the average employees’ remaining service periodby the declining-balance method and by the straight-line method,respectively.
Leases—As for lessor accounting, the Companies recognized revenue
mainly from contracts consisted of leasing mannequins, display furnitureand real estate owned by the Companies to our customers. These leasearrangements are classified as operating leases and related revenue isrecognized ratably over the lease term. Options to extend or terminate
the leases are included in some of the contracts. The Companies takesuch options into account to determine the lease term when it is probable that these options will be exercised. Moreover, almost all of thecontracts do not contain variable consideration and purchase options fortheir customers. Some of the contracts contain lease and non-lease
components and the consideration in the contracts are allocated based
upon estimated standalone selling prices of the lease and non-lease
components.
As for lessee accounting, the Companies have leases for assets suchas retail stores, warehouses, offices, corporate housing, vehicles,machinery, and equipment, which are classified as an operating lease.
The Companies determine whether a contract is, or contains a lease at
the inception of the contract. Options to extend or terminate the leases
contracts are included in some of the contracts. The Companies takesuch options into account in order to determine the lease term when it isprobable that these options will be exercised. Some of the contracts
contain variable lease payments. Most of the variable lease payments
are for our retail stores, which depend on their sales. Material residual
value guarantees and restriction or covenants imposed by leases do notexist in the contracts.
Some of the contracts contain lease and non-lease components.
Considerations in the contracts for which underlying assets are land andbuildings and structures are allocated based upon the estimatedstandalone selling prices of the lease and non-lease components, which
are accounted for separately. On the other hand, the Companies elects
the practical expedient and did not separate lease components from82

non-lease components for leases for which underlying assets aremachinery and equipment. The Companies uses the incremental
borrowing rate based on the information available at commencement
date to determine the present values of lease payments, unless theimplicit rate is readily determinable. The Companies also elects thepractical expedient which allows entities to expense leases with a termof 12 months or less at the commencement date as incurred. Operatinglease cost is recognized on a straight-line basis over the lease term.
Treasury Stock—The Companies account for treasury stock under thecost method and include treasury stock as a component of equity.
Acquisitions—The Companies account for acquisitions using theacquisition method in accordance with the guidance for businesscombinations. The Companies allocate the purchase price to the assets
acquired and liabilities assumed based on the estimated fair values atthe date of acquisition, including intangible assets that can be identified
and named. The purchase price in excess of the fair value of the net
assets is recorded as goodwill. In the case where the purchase price isbelow the fair value of the net assets, the Companies recognize theexcess of fair value of the net assets over the purchase price in earnings
as a gain on bargain purchase in the consolidated statements of income.
The Companies measure contingent consideration classified as liabilities
at the fair value as of the date of acquisition and remeasure them to fairvalues at each reporting date until the contingencies are resolved.
Fluctuations of the fair values due to the remeasurement are recognized
in income or expenses as incurred.
Revenue Recognition—The Companies recognize revenue when control
of promised products are transferred to customers and performanceobligations are satisfied. The Group’s revenue is recognized for transactions, net of any trade discounts or rebates given. In addition, provision
for expected returns is deducted from revenue based on historical return.
Shipping and Handling Costs—Shipping and handling costs are expensed as incurred.
Advertising Expenses—Advertising costs are expensed as incurred.
Advertising expenses for the years ended March 31, 2020, 2019 and2018 were ¥13,169 million, ¥12,329 million and ¥12,719 million, respectively, and have been included in selling, general and administrative
expenses.
Research and Development Costs—Research and development costs
are expensed as incurred. Research and development costs for the years
ended March 31, 2020, 2019 and 2018 were ¥508 million, ¥739 millionand ¥781 million, respectively, and have been included in selling, generaland administrative expenses.
Consumption Taxes—Consumption taxes are excluded from sales, costs,
and expenses in the consolidated statements of income.
Income Taxes—The provision for income taxes is determined under theasset and liability method in accordance with the guidance for income
taxes. Under this method, deferred tax assets and liabilities are determined for temporary differences between the financial statements andtax bases of assets and liabilities and tax loss carryforwards at presently
enacted tax rates. A valuation allowance is recorded when it is more
likely than not that some portion or all of the deferred tax assets will not
be realized in the future.
The Companies assess their income tax positions and record tax
benefits for all years subject to examination based upon their evaluationof the facts, circumstances, and information available as of the end of
the fiscal year. For those tax positions only where there is greater than a
50% likelihood that the tax position will be sustained, the Companies
record the largest amount of tax benefit that may potentially be realized
upon ultimate settlement with a taxing authority that has full knowledgeof all relevant information. Interest and penalties related to income taxes
are included in the consolidated statements of income.
Share-Based Compensation—Share-based compensation is accounted
for in accordance with Accounting Standard Codification 718,

IN T EG R AT ED R EPORT 2020

“Compensation – Stock Compensation” (“ASC 718”). The Company
measures share-based compensation cost at the grant date, based on
the fair value of the award and recognizes the cost over the requisite
service period, which is the vesting period. The fair value of the award isestimated using the Black-Scholes option-pricing model.
Derivatives—Derivative instruments, including certain derivative instruments embedded in other contracts, are accounted for in accordancewith the guidance for derivatives and hedging. Because such derivative
instruments are not designated as hedges, changes in the fair value ofthe derivatives are recorded in earnings or losses.
Subsequent Events—In accordance with the guidance for subsequent
events, the Company has evaluated subsequent events through June
26, 2020.
Reclassifications—Certain reclassifications have been made to the prioryears’ consolidated financial statements to conform to the current year’s
presentation. And as of October 1, 2017, the Company effected a
one-for-two ordinary share reverse stock split. The number of ordinary
shares, outstanding shares, treasury stock, and net income attributable to
Wacoal Holdings Corp. per share are calculated assuming that the reverse
stock split occurred at the beginning of the earliest fiscal year presented
in the consolidated financial statements.
Recent Accounting Pronouncements:
Recently Adopted Accounting Guidance
Leases—In February 2016, the FASB issued new accounting guidance
related to leases, Accounting Standard Codification 842, “Leases” (“ASC842”). This guidance requires an entity to recognize lease assets and leaseliabilities on the balance sheet for those leases classified as operatingleases under current U.S. GAAP (“ASC 840”) with a few exceptions.
In January 2018, the FASB also issued a new accounting guidance
related to land easements. This guidance clarifies that land easements
are within the scope of ASC 842 and introduces a transition practical
expedient allowing the Company to forgo assessment as to whether
existing or expired land easements that were not previously accounted
for as leases under ASC 840 are or contain leases under ASC 842. The
guidance is effective for fiscal years beginning after December 15, 2018
and interim periods within those fiscal years.
In July 2018, the FASB issued ASU No. 2018-11, “Leases.” This ASU
provides entities with an additional (and optional) transition method toadopt the new leases standard. Under this new transition method,
entities initially apply the new leases standard at the adoption date andrecognize a cumulative-effect adjustment to the opening balance ofretained earnings in the period of adoption.
This guidance is effective for annual reporting periods beginning after
December 15, 2018 and quarter periods within those fiscal year. The
Companies has adopted the guidance from the quarter beginning April 1,
2019. The Companies has adopted the modified retrospective approach,and applied the transition requirements at the effective date with acumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and prior periods were not restated. The
Companies elected to apply the package of practical expedients permitted under the transition guidance which does not require entities toreassess whether any expired or existing contracts are leases, leaseclassification and initial direct costs. The Companies also elected toapply the practical expedient which allows entities to not assess whether
existing or expired land easements that were not previously accounted
for as leases are leases. As a result of this adoption, operating leases
right-of-use assets and operating leases liabilities of ¥14,550 million wererecorded in the consolidated balance sheet as of April 1, 2019. In
addition, the application of deferred tax accounting resulted in therecording of deferred tax liabilities of ¥515 million and a related decreasein the opening balance of retained earnings as a cumulative-effectadjustment for the same amount. The adoption of this guidance is notexpected to have a material impact on our group’s cash flows.

Recent Accounting Guidance Not Yet Adopted
Internal-Use Software– In August 2018, the FASB issued guidance
related to internal-use software. This guidance clarifies the accounting
for costs of implementation activities performed in a cloud computing
arrangement that is a service contract. This guidance is effective forfiscal years beginning after December 15, 2019 and interim periods
within that annual period. The adoption of this guidance is not expected
to have a material impacts on the Company’s balance sheets andstatements of income.
Disclosure on Fair Value Measurement– In August 2018, the FASB
issued guidance related to the fair value measurement disclosure. This
guidance removes, modifies, and adds some of the disclosure requirements on fair value. This guidance is effective for fiscal years beginning
after December 15, 2019 and interim periods within that annual period.
The adoption of this guidance is not expected to have a material impact
on the Company’s balance sheets and statements of income.
Disclosure on Defined Benefit Plans– In August 2018, the FASB issued
guidance related to disclosure on defined benefit plans. This guidance
removes, modifies, and adds the disclosure requirements on defined
benefit pension. This guidance is effective for fiscal years beginning after
December 15, 2020 and interim periods within that annual period. The
adoption of this guidance did not have a material impact on the
Company’s balance sheets and statements of income.
Measurement of Credit Losses on Financial Instruments– In June 2016,
the FASB issued a new accounting guidance related to measurement ofcredit losses on financial instruments. This guidance introduces a new
impairment model based on expected losses rather than incurred losses.
Using this model will result in more timely recognition of losses than undercurrent incurred approach. In November 2019, the FASB issued an additional
guidance related to changing the effective date of the above guidance. As aresult, the guidance is effective for fiscal years beginning after December 15,
2022 and interim periods within those fiscal years. The Company is currently
evaluating the impact of adoptions on the Company’s consolidated
financial position, results of operations or cash flows.

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FACTS

2. TRANSLATION INTO U.S. DOLLAR STATEMENTS 
The consolidated financial statements are stated in Japanese yen, thecurrency of the country in which the Company is incorporated andoperates. The translation of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside ofJapan and has been made at the rate of ¥107.53 to $1, the noon buying
rate for yen in New York City as of March 31, 2020. Such translation should
not be construed as representations that the Japanese yen amounts could
be converted into U.S. dollars at the above or any other rate.

3. MARKETABLE SECURITIES AND INVESTMENTS 
Debt Securities—The fair value of debt securities is based on quoted market prices as of March 31, 2020 and 2019. The cost, gross unrealized gain andloss, and the fair value by major security type were as follows:
Millions of Yen

2020
Held-to-maturity securities:

Cost

Gross
Unrealized Gain

Gross
Unrealized Loss

Fair Value

The Companies periodically determine whether a decline in the fair value of debt securities is deemed to be other than temporary based on criteria that
include the duration of the market decline, the extent to which cost exceeds fair value, the financial position and business outlook of the issuer, and theintent and ability of the Companies to retain the impaired held-to-maturity securities for a sufficient period of time for anticipated recovery in fair value.
No debt securities were identified that meet the Companies’ criteria for recognition of an impairment charge on debt securities in an unrealized loss
position presented above. Therefore, the Companies do not believe the unrealized losses represent an other-than-temporary impairment as of March 31,
2020 and 2019.
Future maturities of debt securities classified as held-to-maturity
securities as of March 31, 2020, were as follows:
Millions of Yen
Cost

Fair Value

Due within one year

¥656

¥657

Due after one year through five years

329

333

¥985

¥990

Total

Current:
Corporate debt securities

¥656

¥2

¥1

¥657

¥329

¥4

Cost

Gross
Unrealized Gain

Gross
Unrealized Loss

Fair Value

¥ 446

¥0

¥1

¥ 445

¥1,124¥1¥4¥1,121

Noncurrent:
Corporate debt securities¥333
Millions of Yen

2019
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

Gross unrealized losses and fair values of debt securities, for those that have been in a continuous unrealized loss position for more than 12 months asof March 31, 2020 and 2019, were as follows:
Millions of Yen

2020
Fair Value

As a result of the conversion of convertible bonds into equity securities,
the Company recorded gains on exchange of marketable securities of¥140 million for the fiscal year ended March 31, 2019. There were no
exchange of marketable securities and investments during the year
ended March 31, 2020.

Equity Securities—Realized and unrealized gains and losses on equity
securities during the year ended March 31, 2020 and 2019, were as
follows:
Millions of Yen

2020

2019

Realized gain (losses) recognized during theperiod on equity securities sold during the period¥ 1,620¥

Unrealized losses recognized during the period on
equity securities still held at March 31(5,380)(5,493)Net (gains) losses recognized during the period on
equity securities¥(3,760)¥(5,570)

4. ALLOWANCES FOR DOUBTFUL RECEIVABLES 
Information related to the Companies’ allowance for doubtful receivables as of March 31, 2020, 2019 and 2018 was as follows:
Millions of Yen

2020

2019

2018

Balance at the beginning of the year

¥229

¥207

Charged to expenses

270

36

28

Balances written off/reversed

(10)

(14)

(40)

Balance at the end of the year

¥489

¥229

¥207

Gross
Unrealized Loss

Fair Value

Gross
Unrealized Loss

Information related to the Companies’ allowance for sales returns was as follows:
Millions of Yen

2018

Marketable securities:
¥109

¥1

¥332

¥1

Investment:
Corporate debt securities

¥446

¥3

Gross unrealized losses and fair values of debt securities, for those that have been in a continuous unrealized loss position for less than 12 months as ofMarch 31, 2020 and 2019, were as follows:
Millions of Yen

2020
Fair Value

2019
Gross
Unrealized Loss

Fair Value

Marketable securities:
¥220

¥0

Investment:
Corporate debt securities

84

¥228

IN T EG R AT ED R EPORT 2020

Balance at the beginning of the year

¥ 2,258

Charged to cost

2,252

Balances utilized(2,258)

Balance at the end of the year

¥ 2,252

5. INVENTORIES 
The components of inventories as of March 31, 2020 and 2019 were as follows:

Gross
Unrealized Loss

Held-to-maturity securities:
Corporate debt securities

¥219

2019

Held-to-maturity securities:
Corporate debt securities

(77)

¥1

Millions of Yen

2020

2019

Finished products¥37,224¥36,358

Work in process

3,938

3,793

Raw materials

2,265

2,357

¥43,427¥42,508Total

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FACTS

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6. INVESTMENTS IN AFFILIATED COMPANIES 

7. ACQUISITIONS 

Certain investments are accounted for using the equity method if theCompanies have the ability to exercise significant influence over aninvestee. Significant influence is generally deemed to exist if theCompanies have an ownership interest in the voting stock of the investee
between 20% and 50%, although other factors are considered in determining whether the equity method of accounting is appropriate. The
Companies record investments in equity method investees meetingthese characteristics as “Investments in affiliated companies.” Under theequity method, the Companies record their proportionate share of anaffiliated company’s income or loss based on the most recently available
financial statements.

Percentage of Ownership (%)

2020

2019

Shinyoung Wacoal Inc.

25

25

Taiwan Wacoal Co., Ltd.

50

50

THAI WACOAL PUBLIC CO., LTD.

34

34

PT. Indonesia Wacoal

4242House of Rose Co., Ltd.

21

21

Aggregate carrying amounts and fair values of investments in affiliatedcompanies which have a quoted market price as of March 31, 2020 and2019 were as follows:
Millions of Yen

Carrying amount
Aggregate value of quoted market price

2020

2019

Net sales¥62,676¥63,066

Gross profit

32,455

32,105

Income before income taxes

1,654

3,458

860

2,714

Net income

The balance of receivables and payables to affiliated companies as ofMarch 31, 2020 and 2019 were as follows:
Millions of Yen

2020

The primary affiliated companies and percentage of ownership as ofMarch 31, 2020 and 2019 were as follows:
Name of Investee

Millions of Yen

2020

2019

¥14,431¥14,523

9,421

11,075

Accounts receivable

¥618

¥927

Accounts payable

509

665

Other receivable

329

286

The amounts for transactions with affiliated companies for the years
ended March 31, 2020, 2019 and 2018 were as follows:
Millions of Yen

2020

2019

¥41,929

Noncurrent assets

42,161

44,635

Total¥86,135¥86,564¥ 8,569

Current liabilities¥ 9,048

Long-term liabilities

7,583

7,145

Equity69,50470,850Total¥86,135¥86,564

86

2019

2018

Sales

¥2,838¥3,257¥2,700

2,826

3,175

2,675

Purchases

5,302

5,612

5,744

Royalties

330

299

300

Dividends received from affiliated companies were ¥542 million, ¥514
million and ¥519 million for the years ended March 31, 2020, 2019 and2018, respectively.

Millions of Yen¥43,974

2020

Cost of sales corresponding
to sales of material
and products

The following tables represent the affiliated companies’ summarizedbalance sheets and statements of income as of and for the years ended
March 31, 2020 and 2019. Such information as of and for the year ended
March 31, 2018 were not disclosed as they were immaterial.

Current assets

2019

IN T EG R AT ED R EPORT 2020

The Company decided to enter into a share purchase agreement
pursuant to which the Companies acquired through our U.S. subsidiary
Wacoal International Corp. (“Wacoal International”) all of the issued andoutstanding shares of Intimates Online, Inc. (“Intimates Online”), a
women’s innerwear design and sales company in the U.S. at the meetingof our board of directors held on July 30, 2019. Wacoal International
entered into the share purchase agreement on the same day (U.S. time)and acquired all of the issued and outstanding shares of Intimates Online
on July 31, 2019 (U.S. time).
Intimates Online designs and sells women’s innerwear products underits “LIVELY” brand in the U.S. through its e-commerce website and directly
managed retail stores. The Companies expect discontinuous growth in
the U.S. by acquiring its customer base mainly for millennials and its
unique marketing method to spread its reputation and online reviews byorganizing its customers as its ambassador.
Consideration for the acquisition was ¥13,520 million and is consistedof ¥9,348 million (USD86 million) of cash and ¥4,172 million (USD38 million)of contingent consideration.
The contingent consideration was agreed with previous shareholders
upon the share purchase agreement and will be paid to them over a
period of four fiscal years. Payment is contingent on Intimate Online’s
performance achieving certain goals such as sales targets. The total
contingent payment amount will be within the range of USD20 million
and USD55 million.
The fair value of the contingent consideration was ¥3,874 million(USD36 million) as of March 31, 2020. The changes in fair value wererecognized in selling, general and administrative expenses. The contingent consideration of ¥1,088 million (USD10 million), for which theconsideration has been fixed, was recognized in accounts payable.
For the year ended March 31, 2020, acquisition-related costs were¥245 million and had been included in selling, general and administrative
expenses.
As a result of the purchase price allocation, the Company recognized¥11,551 million of goodwill and ¥1,923 million of other intangible assets
in Wacoal Business (Overseas). The goodwill arising from the acquisition
consists largely of the expected growth of Intimates Online, synergies
and economies of scale expected from combining the operations with
Wacoal International. Other intangible assets were composed of ¥1,097
million brands, ¥793 million customer relationships, and ¥33 million of
noncompetition agreements, respectively. Goodwill is not deductive fortax purposes. The amount of brands, customer relationships andnoncompetition agreements are amortized based on the estimateduseful lives of 10 and 5 years, respectively.
The Company adjusted the fair values of assets acquired and liabilities
assumed as of the acquisition date based on the information the
Company obtained subsequent to the acquisition date. These adjustment are reflected retrospectively to the fair value of assets acquired andliabilities assumed as of the acquisition date.
The fair values of assets acquired and liabilities assumed as of theacquisition date were as follows:

Millions of Yen

July 31, 2019
BeforeAdjustment

Cash and cash equivalents

¥

167

After
Adjustment¥

167

Notes and accounts receivable

14

14

Inventories

341

383

Other current assets

16

12Property, plant and equipment

1417

Operating leases right-of-use assets

295

290

13,505

11,551

Goodwill
Other intangible assets

1,923

Other assets

18

18

Total assets

14,37014,375

Notes and accounts payables

222

228

Short-term operating lease liabilities

47

47

Other current liabilities

42

Deferred income taxes

43
288

Long-term operating lease liabilities

249

Total liabilities

560

855

¥13,810¥13,520

Total equity

249

Pro Forma Financial Information (Unaudited)
Unaudited supplemental pro forma information for the combined
result of operation of the Company and its subsidiary as though theacquisition had occurred as of April 1, 2018 were as follows:
Millions of Yen

2020

2019

¥187,482¥195,684

Operating income

6,338

4,346

Net income (loss) attributable to Wacoal
Holdings Corp.

3,172

(193)

Net sales

Net sales and operating loss of Intimates Online included in the
Company’s consolidated statements of income for the year ended March
31, 2020 are ¥1,301 million and ¥1,250 million, respectively.

I N TEG RATE D RE P O RT 2020

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FACTS

FACTS

8. GOODWILL AND OTHER INTANGIBLE ASSETS 

Other Intangible Assets—The components of intangible assets excluding goodwill as of March 31, 2020 and 2019 were as follows:

Goodwill—Changes in the carrying amount of goodwill by operating segments for the years ended March 31, 2020, 2019 and 2018 were as follows.
Millions of Yen

Millions of Yen

2020

Years Ended March 31

Gross Carrying
AmountAccumulated
Amortization andImpairment Charges

Gross Carrying
AmountAccumulated
Amortization andImpairment Charges

Brands¥ 6,670¥ 2,076¥ 6,058¥ 1,899

Software

16,0398,163

14,060

7,542

Others

2,534

1,022

1,732

868

¥25,243¥11,261¥21,850¥10,309¥ 5,316¥ 4,827¥ 5,316¥ 4,636

2020
Wacoal Business(Overseas)

Peach John

Total

Balance at the beginning of the year:
Acquisition cost

¥11,954¥11,954

Accumulated impairment charges
Carrying amount
Acquisition during the year

11,954

11,954

11,551

11,551

Impairment charges

(217)

(217)

Foreign currency translation adjustments

(917)

(917)

22,594

22,594

Balance at the end of the year:
Acquisition cost
Accumulated impairment charges
Carrying amount

(223)

(223)

¥22,371¥22,371
Millions of Yen

2019
Wacoal Business(Overseas)

Peach John

Total

¥12,269¥ 11,203¥ 23,472(6,878)(6,878)

4,325

16,594(4,325)(4,325)

Balance at the beginning of the year:
Acquisition cost
Accumulated impairment charges
Carrying amount

12,269Impairment charges
Foreign currency translation adjustments

(315)

(315)

Balance at the end of the year:
Acquisition cost

11,954

Accumulated impairment charges
Carrying amount

11,20323,157¥(11,203)(11,203)¥11,954¥ 11,954

2019

Amortized intangible assets:

Total
Unamortized intangible assets:
Trademarks
Other

76

Total

¥ 5,392

Other intangible assets acquired during the year ended March 31, 2020
totaled ¥5,313 million, which primarily consist of brands and software.
Other intangible assets acquired during the years ended March 31, 2019and 2018 totaled ¥3,266 million and ¥2,569 million, which primarily
consist of software. Estimated useful life brands and software are ten
and five years, respectively.
During the years ended March 31, 2020 and 2019, the Companies
recorded impairment charges on the trademark of Peach John of ¥191
million and ¥1,314 million, which was included in operating costs andexpenses of the Peach John Business. During the year ended March 31,
2020, the Companies also recorded ¥65 million of impairment charges
on software of the A Tech, which was included in operating expenses ofthe Wacoal Business (Overseas). During the year ended March 31, 2019,
the Companies recorded ¥195 million of impairment charges on softwareof Ai, which was included in operating expenses of the Wacoal Business(Domestic). See Note 21 for further information.

76¥ 4,827¥ 5,392¥ 4,636

Aggregate amortization expenses for the years ended March 31, 2020,2019 and 2018 related to other intangible assets were ¥2,484 million,¥2,109 million and ¥1,811 million, respectively. Future estimated amortization expenses as of March 31, 2020 were as follows:
Years Ending March 31

Millions of Yen

Estimated amortization expenses
2021¥ 2,640

2022

2,497

2023

2,267

2024

1,815

2025

1,169

Total

¥10,388

Millions of Yen

2018

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT 

Wacoal Business(Overseas)

Peach John

Total

¥11,746¥11,203¥22,949(6,878)(6,878)

4,325

16,071

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total

11,746

Impairment charges

(206)

(206)

Foreign currency translation adjustments

736

736

Balance at the end of the year:
Goodwill

12,482

Accumulated impairment charges
Total

11,203

23,685(213)(6,878)(7,091)¥12,269¥ 4,325¥16,594

The Company recorded impairment charges on goodwill of ¥217 million for the G Tech in the year ended March 31, 2020, which was included in operating costs and expenses of Wacoal Business (Overseas). The Company recorded impairment charges on goodwill of ¥4,325 million for the Peach John
Business in the year ended March 31, 2019, which was included in operating costs and expenses of the Peach John Business. The Company recorded
impairment charges on goodwill of ¥206 million for the A Tech in the year ended March 31, 2018, which was included in operating costs and expenses of
Wacoal Business (Overseas). See Note 21 for further information about measurement of fair value.

Short-term bank loans as of March 31, 2020 and 2019 consisted of thefollowing:
Millions of Yen

Unsecured bank loans

88

IN T EG R AT ED R EPORT 2020

Years Ending March 31

Millions of Yen

2020

2019

2021

¥3,364¥8,116

2022

35

Total

¥85

The weighted-average annual interest rates on short-term bank loans asof March 31, 2020 and 2019 were 0.3% and 0.2%, respectively.
Unused lines of credit for short-term financing as of March 31, 2020
and 2019 aggregated to ¥28,657 million and ¥22,935 million, respectively.
Long-term debt as of March 31, 2020 and 2019 was summarized below.
The interest rates and maturities were for loans as of March 31, 2020.
Millions of Yen

2020

2019

Collateralized bank loans, with fixed interest
at 0.6%, maturing through 2022

¥ 35

¥ 55

Unsecured bank loans, with fixed interest at
0.4%, maturing through 2022

50

83

85

138

Total

The annual maturities of long-term debt as of March 31, 2020 were as
follows:

Less current portion of long-term portion

(50)

(50)

Long-term debt, less current portion

¥ 35

¥ 88

¥50

A subsidiary has pledged assets as security for loans. As of March 31,
2020 and 2019, assets pledged as collateral for bank loans were as
follows:
Millions of Yen

2020

2019

Land

¥150

Buildings

146

¥150
169

Total

¥296

¥319

As is customary in Japan, both short-term and long-term loans are madeunder general agreements which provide for security and guarantees for
future and present indebtedness to be given upon request of the bank.
The bank has the right to offset cash deposits against obligations thathave come due or, in the event of default, against all obligations due tothe bank.

I N TEG RATE D RE P O RT 2020

89

FACTS

FACTS

10. LEASES 

12. TERMINATION AND RETIREMENT PLANS 

Lessor Accounting
Operating lease income for the year ended March 31, 2020 was as follows.

Supplemental cash flow information related to operating leases for theyear ended March 31, 2020 was as follows:

Lease income was included in net sales and other net income.

Millions of Yen

Millions of Yen

2020

Operating lease income¥2,392

The acquisition costs of equipment leased to customers under operatingleases were ¥2,756 million of land and ¥516 million of building andbuilding improvements. Accumulated depreciation on these equipment
was ¥413 million as of March 31, 2020. These are included in net
property, plant and equipment.
Future minimum lease income classified as operating leases as ofMarch 31, 2020 were as follows. Note that lease payments related tomannequins and display furniture which were mainly part of theCompanies’ lease income were not included in the below table because
the contracts terms were not material.
Years Ending March 31

Millions of Yen

2021

¥ 245

2022

201

2023

173

2024

172

2025

112

Thereafter

1,287

Total

¥2,190Lessee accounting
Operating lease costs for the year ended March 31, 2020 were as
follows. Lease expenses were included in cost of sales and selling,
general and administrative expenses.

2020

Cash paid for amounts included in the measurement oflease liabilities¥4,798Non-cash activities concerning right-of-use assets
obtained in exchanged for new operating lease liabilities

5,483

Weighted-average remaining lease term and discount rate for operatingleases were as follows:
2020

63.0
months

Weighted-average remaining lease term
Weighted-average discount rate

1.7%

Employee Retirement Plans—Certain subsidiaries of the Company
sponsor termination and retirement benefit plans that cover substantiallyall employees. Benefits are based on the employee’s years of service,position and performance. If the termination is involuntary or caused bydeath, the employee is usually entitled to greater payments than in thecase of voluntary termination.
Certain subsidiaries of the Company have contributory defined
retirement benefit plans and several unfunded termination plans administered by certain subsidiaries of the Company. Benefits under thecontributory defined retirement benefit plan are usually paid in a lumpsum at the earlier of termination or retirement, although periodic payments are available under certain conditions. Benefits under the othertermination and retirement benefit plan are paid either as lump-sum
payments or periodic payments under certain conditions. The benefits
are usually paid as a lump-sum payment, if the employee resigns before
the mandatory retirement age.
Contributory Defined Retirement Benefit Plan—The following provides
a reconciliation of benefit obligations, plan assets, and funded status of
the plans:Millions of Yen

2020

Change in benefit obligations:Benefit obligations at the beginning of the year

¥38,681¥34,580¥34,935

Service cost

1,243

1,196

1,086

Interest cost

176

178

205

Participants’ contributions

60

62

63

(217)

4,937

432

Loss based on prior service benefits

253

Years Ending March 31

Benefits paid from plan assets

(961)

(961)

(1,007)

Settlement paid from plan assets(1,275)(976)(1,003)

(289)

(339)

(138)

3

4

7

37,67438,681

34,580¥40,680¥42,736¥43,203

1,375

(846)

878

Employer contributions

579

657

612

Participants’ contributions

60

62

63

(961)

(961)

(1,007)(1,275)(976)(1,003)

6

8

(10)

40,464

40,68042,736¥ 2,790¥ 1,999¥ 8,156

Actuarial (gain) loss

Millions of Yen

2021¥ 4,805

2022

3,075

2023

1,719

2024

1,148

2025

909

Thereafter

2,899

Total minimum lease payments

14,555(854)

Total lease liabilities¥13,701

Settlement paid by the Company and certain subsidiaries
Changes in foreign currency exchange rates
Benefit obligations at the end of the year
Change in plan assets:
Fair value of plan assets at the beginning of the year
Actual return on plan assets

Benefit payments

2020

Operating lease costs¥4,945

Short-term lease costs

635

Variable lease costs

1,295

Total

¥6,8752018

Future minimum lease payments classified as operating leases as ofMarch 31, 2020 were as follows:

Less interest cost

Millions of Yen

2019

Any material leases commenced after April 1, 2020 were not recognized
as of March 31, 2020.

Settlement payments
Changes in foreign currency exchange rates
Fair value of plan assets at the end of the year
Funded status at the end of the year

Amounts recognized in the consolidated balance sheets as of March 31, 2020 and 2019 consisted of:Millions of Yen

2020

Prepaid pension expense

11. ASSET RETIREMENT OBLIGATIONS 
The Companies recorded the fair value of asset retirement obligations in order to recognize legal obligations associated with the removal of leasehold
improvements from leased facilities and return of the property to a specified condition when the lease terminates.
A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation is as follows:
Millions of Yen

2020

Balance at the beginning of the year
Accretion expense

2019

2018

¥813

¥ 825

¥855

3

2

1

Liability for termination and retirement benefits
Total

92

62

Actuarial loss

(106)

(91)

Prior service cost
Total

0

(2)

¥ 813

¥825

(1,828)¥ 2,790¥ 1,999

Millions of Yen

63
0

(163)

(2,069)

2020

(52)
¥827

¥ 3,990(115)

Amounts recognized in accumulated other comprehensive income as of March 31, 2020 and 2019 were as follows:

Liabilities settled
Balance at the end of the year

¥ 4,974

Other current liabilities

Liabilities incurred
Change due to foreign currency translation

2019

2019

¥(5,048)¥(6,820)(253)¥(5,301)¥(6,820)

The accumulated benefit obligations for all defined retirement benefit plans as of March 31, 2020 and 2019 were as follows:
Millions of Yen

2020

Accumulated benefit obligations

90

IN T EG R AT ED R EPORT 2020

¥37,532

I N TEG RATE D RE P O RT 20202019

¥38,53191

FACTSFACTS

The projected benefit obligations and the fair value of the plan assets for certain subsidiaries’ of the Company with projected benefit obligations inexcess of the fair value of plan assets, and the accumulated benefit obligations and the fair value of the plan assets for certain subsidiaries’ pension
plans with accumulated benefit obligations in excess of the fair value of plan assets were as follows:
Millions of Yen

2020

2019

Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations¥3,075¥2,856

738

865

3,075

2,856

738

865

Fair value of plan assets

The asset allocation as of March 31, 2020 and 2019 was as follows:
2020

2019

Equity securities

44.7%

42.3%

Debt securities

31.1%

34.9%

Life insurance company general accounts

9.3%

9.7%

Real estate

3.2%

3.4%

Other short-term investments

11.7%

9.7%

Plans with accumulated benefit obligations in excess of the fair value of plan assets:
Accumulated benefit obligations
Fair value of plan assets

The target allocation percentages are reviewed and approved by thePension Committee. The actual allocations for 2020 and 2019 aredifferent from the target allocation percentages primarily because
Wacoal Corp. maintained additional equity securities within a separate
plan asset, which is assigned to the plan based on an agreement between
Wacoal Corp. and its employees and is not governed by the Pension
Committee. As such, the actual allocation percentage of equity securities
to the total plan assets is higher than the target allocation and, similarly,
the actual allocation for some other types of assets is lower than thetarget allocation.

The following tables present the plan assets of certain subsidiaries of the Company using the fair value hierarchy as of March 31, 2020 and 2019. The
fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. For references to each level, see Note 21.

Net periodic benefit costs for certain subsidiaries’ of the Company plans consisted of the following for the years ended March 31, 2020, 2019 and 2018:
Millions of Yen

2020

2019

2018

Millions of Yen

2020
Assets evaluated by other than net asset value per share¥ 1,243¥ 1,196¥1,086

176

178

205

Japanese companies

Expected return on plan assets(1,006)(1,007)(991)

Foreign companies

Amortization of actuarial loss (gain)

1,186

5

(157)
(121)

¥ 1,599

¥

372

¥

22

Level 2

Level 3Total

Equity securities:

Service cost
Interest cost

Amortization of prior service benefits

Level 1

¥9,707¥ 9,70743

43

Debt securities:
Foreign government bonds

216

Life insurance company general accounts

216¥3,773

3,773

2,209

2,209

Other types of investments:
The unrecognized net actuarial gain or loss and prior service benefits are amortized within 12 years (the average remaining service life of active participants) using the declining-balance method and the straight-line method, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended March 31, 2020, 2019 and 2018
were as follows:
Millions of Yen

2020

2019

2018

Actuarial gain (loss)¥ 586¥(6,790)¥(545)

Amortization of actuarial loss (gain)

1,186

5

(157)

Prior service benefits(253)

Amortization of prior service benefits(121)¥1,519The estimated amounts that will be amortized from accumulated othercomprehensive income into net periodic benefit costs over the next year
were summarized as follows:
Millions of Yen

Actuarial loss

¥875

Prior service cost

21

Certain subsidiaries of the Company use a measurement date of March
31 for their plans. The weighted-average assumptions used as of March
31, 2020 and 2019 in computing the benefit obligations shown above
were as follows:
2020

Discount rate

0.5%

2019

0.5%

The weighted-average assumptions used as of March 31, 2020, 2019and 2018 in computing the net periodic benefit costs shown above wereas follows:
2020

2019

2018

Discount rate

0.5%

0.5%

0.6%

Rate of increase in futurecompensation

5.3%

5.3%

5.3%

Expected long-term rateof return on plan assets

2.5%

2.5%

2.5%

92

¥(6,785)

Equity securities:
Pooled funds (b)5,227Debt securities:
Pooled funds (c)8,145Other types of investments:
Hedge funds (d)3,634Pooled funds (e)
Total

7,510
¥9,966¥5,982

Level 1

Level 2

¥40,464¥(823)

Certain subsidiaries’ of the Company approach to establishing thediscount rate is based upon corporate bond indices. The discount rate
assumption is based upon effective yields as of March 31, 2020 on thecorporate bond indices for which maturity dates approximate the timingof the expected future benefit payments.
The retirement benefit plan of certain subsidiaries of the Company is apoint-based benefits system, and, therefore, the rate of compensation
increase has not been included in computing the benefit obligations.
The expected long-term rate of return on plan assets is derived
proportionally from return assumptions determined for each of the major
asset classes. The return expectations for each of the asset classes are
based largely on assumptions about economic growth and inflation,
which are supported by long-term historical data. The estimated longterm rate of return is based on an asset allocation of equity securities of
26.0%, debt securities of 54.0%, life insurance company general accountsof 18.0%, and other short-term investments of 2.0%.
The plan investment strategy of certain subsidiaries of the Company
is to maintain actual asset weightings within a preset range of target
allocations. The plan investment strategy of certain subsidiaries of theCompany is broadly diversified, consisting primarily of equity and debt
securities. Certain subsidiaries of the Company believe these ranges
represent an appropriate risk profile for the planned benefit payments ofthe plans based on the timing of the estimated benefit payments.

IN T EG R AT ED R EPORT 2020

Other short-term investments
Assets evaluated by net asset value per share (a)Millions of Yen

2019
Assets evaluated by other than net asset value per share

Level 3Total

Equity securities:
Japanese companies
Foreign companies¥8,138¥ 8,138

58

58

Debt securities:
Foreign government bonds

152

Life insurance company general accounts

152¥3,928

3,928

2,943

2,943

Other types of investments:
Other short-term investments
Assets evaluated by net asset value per share (a)Equity securities:
Pooled funds (b)5,955Debt securities:
Pooled funds (c)8,912Other types of investments:
Hedge funds (d)3,832Pooled funds (e)
Total

6,762
¥8,348¥6,871¥40,680(a) Certain assets evaluated by net asset value per share (or its equivalent) are not categorized in the fair value hierarchy. Total amounts in the above table are presented to reconcile the amounts in the fairvalue hierarchy to the amounts stated on the consolidated balance sheets.
(b) This class includes common stock of approximately 52% Japanese companies and 48% foreign companies as of March 31, 2020 and 50% and 50%, respectively, as of March 31, 2019.
(c) This class includes approximately 83% of foreign government bonds and 17% of corporate bonds investments as of March 31, 2020 and 79% and 21%, respectively, as of March 31, 2019.
(d) This class consists of hedge funds that invest in both securities and equity securities as of March 31, 2020 and 2019.
(e) This class includes approximately 20% corporate bonds, 0% common stock of Japanese companies, 29% common stock of foreign companies, 17% real estate and 34% other short-term investments
as of March 31, 2020. This class includes approximately 34% corporate bonds, 1% common stock of Japanese companies, 30% common stock of foreign companies, 20% real estate and 15% othershort-term investments as of March 31, 2019.

I N TEG RATE D RE P O RT 2020

93

FACTS

FACTS

Equity securities and debt securities presented in Level 1 are primarily
valued using a market approach based on the quoted market prices
of identical instruments. Life insurance company general accounts
categorized in Level 2 include contracts with insurance companies withguaranteed rates of return and capital, and those values are based on thesum of principal amount and return. Pooled funds are valued using the
net asset, value per share provided by the administrator of the fund.
The funding policy for the funded plans of certain subsidiaries of
the Company is to contribute amounts computed in accordance withactuarial methods accepted by Japanese tax law. Certain subsidiariesof the Company expect to contribute ¥564 million to their plans in thefiscal year ending March 31, 2021.
The following benefit payments, which reflect expected futureservices, are expected to be paid:
Years Ending March 31

Millions of Yen

2021¥2,198

2022

2,152

2023

2,358

2024

2,113

2025

2,163

Thereafter

10,757

Defined Contribution Plan—Certain subsidiaries of the Company havedefined contribution plans. The amounts of cost recognized for theircontributions to the plan were ¥407 million, ¥394 million and ¥327 million
for the years ended March 31, 2020, 2019 and 2018, respectively.
Termination Plan for Directors—The Company previously had, and acertain subsidiaries of the Company currently has, termination plansfor directors. Payment of termination benefits to directors is made in alump sum upon termination and requires the approval of the shareholders
before payment. In June 2005, the Company rescinded its termination
plan for directors upon the approval of its shareholders. The amount ofbenefits for each individual was fixed as of June 29, 2005 and will remainfrozen until the retirement of each respective director. Outstanding
liabilities of ¥344 million and ¥349 million as of March 31, 2020 and
2019, respectively, were recorded in other long-term liabilities. A certain
subsidiary has plans for its directors and recorded a liability for termination benefits for directors at the amount that would be needed if all
directors were to resign at each balance sheet date in accordance withthe guidance for determination of vested benefit obligations for a defined
benefit pension plan.

13. COMMITMENT AND CONTINGENT LIABILITIES 
The Company entered into a construction supervision and construction
contract in the amount of ¥4,290 million, in connection with a new logistics
center that will be established next to the Moriyama Distribution Center inMoriyama, Shiga on March 16, 2020.
The Company had contractual obligation of ¥4,290 million as of March
31, 2020.

The annual payments of contractual obligation as of March 31, 2020
were as follows:
Years Ending March 31

Millions of Yen

2021

¥ 900

2022

3,200

2023

190

Total

¥4,29014. SHARE-BASED COMPENSATION The Company adopted an annual stock option plan in the fiscal year ended
March 31, 2009. Under the stock option plan, the Company granted sharesof its common stock to directors of the Company, excluding outside
directors and directors of the Company’s wholly owned subsidiary,
Wacoal Corp., in the fiscal years ended March 31, 2020, 2019 and 2018.
The Company believes that such awards better align the interests of its
directors with those of its shareholders by sharing both risk and returnfrom fluctuations in stock prices and giving motivation to enhance
corporate value. Each stock option is exercisable to acquire 100 shares of
the Company’s common stock at ¥1 per share (for stock option granted
prior to September 1, 2017, it is exercisable to acquire 500 shares of theCompany’s common stock). The compensation cost is measured at fairvalue on the grant date. Options vest over one year in proportion to theservices rendered by the directors, and are exercisable from the day after
the date of retirement up to (i) 20 years from the grant date or (ii) 5 years
from the day after the date of retirement, whichever is earlier.

The fair value of the options is estimated by using the Black-Scholes
option-pricing model with the following assumptions.
Expected dividend yield is based on the actual payout of dividends inthe last fiscal year and the closing price of the Company’s common stockon the grant date. Expected volatility is based on the historical volatility of
the Company’s share price over the most recent period commensuratewith the expected term of the Company’s stock options. The risk-freeinterest rate is based on the Japanese government bond yield curve in
effect at the time of grant for a period commensurate with the expected
term of the Company’s share options. The expected term of options
granted is based on the average remaining service period of directors,
assuming that those who are granted options will render service until thestated retirement and they will exercise options immediately after theirretirement.

2020

2019

2018

Expected dividend yield

2.6%

2.2%

2.3%

Expected volatility

25.0%

24.6%

23.7%

Risk-free interest rate(0.2)%

Expected term

94

4.0 years

IN T EG R AT ED R EPORT 2020

(0.1)%(0.2)%

3.7 years

3.4 years

A summary of stock option activities under the plan for the years ended March 31, 2020 and 2019 is as follows:
Yen

Years
Weighted-Average
Remaining
Contractual Term

Millions of Yen

Shares

Weighted-Average
Exercise Price

Outstanding as of April 1, 2019249,900¥1

Granted

28,500

1

Exercised

22,5001

Outstanding as of March 31, 2020

255,900

1

12.95 years¥600

Exercisable as of March 31, 2020

36,8001

3.23 years

86

Yen
Shares

Weighted-Average
Exercise Price

Years
Weighted-Average
Remaining
Contractual Term

Aggregate
Intrinsic Value

Millions of Yen
Aggregate
Intrinsic Value

Outstanding as of April 1, 2018

240,500¥1

Granted20,900

1

Exercised

11,5001

Outstanding as of March 31, 2019249,900

1

13.09 years¥687

Exercisable as of March 31, 201940,5001

3.68 years

111

The total intrinsic value of options exercised was ¥62 million, ¥33 millionand ¥16 million as of the years ended March 31, 2020, 2019 and 2018,
respectively.
The total compensation costs recognized for the years ended March
31, 2020, 2019 and 2018 were ¥71 million, ¥62 million and ¥68 million,
respectively. The total recognized tax benefits related thereto for theyears ended March 31, 2020, 2019 and 2018 were ¥22 million, ¥19 millionand ¥21 million, respectively.

The weighted-average grant date fair values of options granted for theyears ended March 31, 2020, 2019 and 2018 were ¥2,516, ¥3,005 and¥2,918, respectively.
As of March 31, 2020, there was ¥11 million in total unrecognizedcompensation cost related to nonvested share-based compensation
arrangements granted under the plan. That cost is expected to berecognized over three months.

15. EQUITY 
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution
at the shareholders’ meeting. Additionally, for companies that meet certain
criteria including (1) having a Board of Directors, (2) having independent
auditors, (3) having an Audit and Supervisory Board, and (4) the term ofservice of the directors being prescribed as one year rather than thenormal two-year term by its articles of incorporation, the Board of Directors
may declare dividends (except for dividends-in-kind) at any time during the
fiscal year if the company has prescribed so in its articles of incorporation.
The Company meets all the above criteria and, accordingly, the Board of
Directors may declare dividends (except for dividends-in-kind) at any time
during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind(noncash assets) to shareholders subject to a certain limitation andadditional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of thecompanies so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock.

The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends
must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus),depending on the equity account charged upon the payment of such
dividends, until the total of the aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, othercapital surplus and retained earnings can be transferred among theaccounts under certain conditions upon resolution of the shareholders.
(c) Treasury Stock
The Companies Act also provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of the Board of
Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders, which is determinedby a specific formula.

I N TEG RATE D RE P O RT 2020

95

FACTS

FACTS

16. OTHER COMPREHENSIVE (LOSS) INCOME 

17. INCOME TAXES 

Changes in the components of accumulated other comprehensive income, including amounts attributable to noncontrolling interests, were as follows:

The Companies are subject to a number of different taxes based on income. The effective income tax rates differed from the normal effective statutory
tax rates for the following reasons for the years ended March 31, 2020, 2019 and 2018:

Millions of Yen

2020
Foreign
Currency
Translation
Adjustments

Balance at the beginning of the year (after-tax)

2019

Unrealized Gainon Securities

2020

Pension Liability
Adjustments

Foreign
Currency
Translation
Adjustments

Unrealized Gainon Securities

Pension Liability
Adjustments¥(5,679)¥2,274¥ 27,424¥(1,101)¥ 1,551Cumulative effects (net of tax) of the adoption of
ASU 2016-01 and 2018-03

Normal Japanese effective statutory tax rates(27,320)

Amount arising during the year:
Pre-tax amountTax credit
Net amount(2,529)

265

(795)

(10)

(6,866)

(3)

(140)

45

3

2,079

(2,532)

125

(750)

(7)

(4,787)

Reclassification adjustments:
Pre-tax amount

1,357

Tax credit(397)

Net amount960

Other comprehensive (income) loss attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)(52)¥(1,033)¥(4,594)

(140)
¥

202

43

(2)

(97)

200

27

9

¥1,551¥(5,679)

30.9%

Permanently nondeductible expenses

7.3

22.9

3.0

Change in valuation allowance

10.3

25.5

2.8

Undistributed earnings of associated companies

2.3

3.9

0.7

Differences in foreign subsidiaries’ tax rate

(7.2)

(27.3)(1.3)

Tax exemption

(2.0)

(2.9)

(0.9)

Unrecognized tax benefits

(1.0)

1.4

(0.1)

Impairment losses on goodwill

1.3

60.1

0.1

Changes in Japanese income tax rates

(0.1)

(0.4)

2.0

Other – net

(8.2)

1.2

1.6

Effective tax rates

33.3%

115.0%

38.8%

Increase (decrease) in taxes resulting from:

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances as of March 31, 2020 and 2019 wereas follows:
Millions of Yen

2020

Millions of Yen

Balance at the beginning of the year (after-tax)

Unrealized Gainon Securities

Pension Liability
Adjustments

Deferred Tax
Assets¥1,212¥21,075¥ (414)

Refund liabilities

Cumulative effects (net of tax) of the adoption of
ASU 2016-01 and 2018-03
Pre-tax amount

1,158

9,309

Tax credit(45)(2,815)168

Net amount

1,113

6,494

(487)

(655)

(201)

(278)

Tax credit

6285

Net amount

(139)

(193)

(51)

(6)

(7)

¥2,274¥27,424¥1,101

Reclassification adjustments:
Pre-tax amountOther comprehensive (income) loss attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)

Reclassification adjustments (pre-tax) of unrealized gain or loss on securities are included in “(Loss) gain on sales, exchange and valuation of marketablesecurities and investments – net” in the consolidated statements of income.
Reclassification adjustments (pre-tax) of pension liability adjustments are included in “Other – net” in the consolidated statements of income as thenet periodic benefit costs.

734

Deferred Tax
AssetsDeferred Tax
Liabilities

¥ 963
9

Accruals not currently deductible

205

226

Inventory valuation

1,089

837

Accrued bonuses

882

990
¥ 1,839¥ 1,912

Undistributed earnings of associated companies

2,485

2,400

Net unrealized gain on marketable securities and investments

5,848

10,394

Net realized gain on exchange of investments

416

792

Capitalized supplies

137

172

Enterprise taxes

352

245

Accrued vacation

741

Operating leases right-of-use assets
3,616

Asset retirement obligation

250

Prepaid pension expense
Liability for termination and retirement benefit

611

357
430

266

Property, plant and equipment

1,591

Tax loss carryforwards

2,388

Intangible assets

Total

250
720

Return assets

Other temporary differences

739
3,580

Operating lease liabilities

Valuation allowance

IN T EG R AT ED R EPORT 2020

Deferred Tax
Liabilities

15

Total

96

¥

2019

Allowance for doubtful receivables

Advanced depreciation on property, plant and equipment

Amount arising during the year:

2018

30.6%

2018
Foreign
Currency
Translation
Adjustments

2019

30.6%

361
1,393
1,838

1,151

1,261

36

277

602

245

12,647

16,582

8,694

17,722¥16,582¥ 6,517(2,858)¥ 9,789

I N TEG RATE D RE P O RT 2020

(2,177)¥17,72297

FACTSFACTS

The valuation allowance decreased by ¥681 million and increased by¥160 million for the years ended March 31, 2020 and 2019, respectively.
The Companies also utilized ¥245 million and ¥661 million of tax loss
carryforwards, and recognized tax benefits of ¥29 million and ¥215
million for the years ended March 31, 2020 and 2019, respectively.
As of March 31, 2020, certain subsidiaries had tax loss carryforwards
which are available to offset future taxable income of such subsidiaries
and expire as follows:
Years Ending March 31

Millions of Yen

2021

¥ 186

2022

421

2023

554

2024

390

2025

818

2026

656

2027

577

2028

164

2029

1,047

2030

1,033

Thereafter

3,215

Total

¥9,061

There was no portion of undistributed earnings of foreign subsidiaries
and foreign corporate joint ventures which was deemed to be permanently reinvested as of March 31, 2020 and 2019.

A reconciliation of beginning and ending amounts of unrecognized tax
benefits is as follows:
Millions of Yen

2020

2019

Balance at the beginningof the year

¥ 101

Additions based on tax
positions related to thecurrent year

1Additions based on tax
positions related tothe previous years

¥

2018

5

¥4

60

1

36

Reductions for tax positionsof previous years(100)

Balance at the end of the year

¥

2

98

Basic net income attributable to Wacoal Holdings Corp. per share has
been computed by dividing net income attributable to Wacoal Holdings
Corp. by the weighted-average number of common shares outstanding
during each year. Diluted net income attributable to Wacoal Holdings
Corp. per share assumes the dilution that would occur if share-based
options to issue common stock were exercised.
The weighted-average number of common shares outstanding used in
the computations of basic net income attributable to Wacoal Holdings
Corp. per share was 63,989,561 shares, 66,143,405 shares and67,928,557 shares for the years ended March 31, 2020, 2019 and 2018,
respectively. The weighted-average number of diluted common shares
outstanding used in the computations of diluted net income attributable
to Wacoal Holdings Corp. per share was 64,242,244 shares, 66,393,127
shares and 68,157,430 shares for the years ended March 31, 2020, 2019and 2018, respectively.
Note: As of October 1, 2017, the Company effected a one-for-two ordinary share reverse stock
split. Net income attributable to Wacoal Holdings Corp. per share was calculated assumingthat the reverse stock split had occurred at the beginning of the earliest fiscal year presented
in the consolidated financial statements.

20. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK 
¥101

¥5

The total amount of unrecognized tax benefits that, if recognized, would
affect the effective tax rate is ¥2 million, ¥101 million and ¥5 million as ofMarch 31, 2020, 2019 and 2018, respectively.
The Companies recognize interest and penalties accrued related tounrecognized tax benefits in income taxes in the consolidated statements of income. Total amounts of interest and penalties recognized in
the consolidated statements of income for the years ended March 31,
2020, 2019 and 2018 were not material.
The Companies file income tax returns in Japan and various foreign
tax jurisdictions. In Japan, the Companies are no longer subject toregular income tax examinations by the tax authorities for years before
2017, with few exceptions. For other countries, the Companies are nolonger subject to regular income tax examinations by the tax authorities
for years before 2010, with few exceptions. For certain subsidiaries inJapan, the United States, and Asia, the transfer pricing examinations forthe years ended March 31, 2007, 2010 and 2016 were completed
respectively.

18. REVENUE 
The Group focuses on sales of innerwear (women’s foundation garments
and lingerie, nightwear and children’s underwear), sportswear, and othertextile products and related products (“Products”), and our customers
include retail and wholesale distributors and consumers in Japan andoverseas. See Note “23. Segment Information” for revenue informationfor each segment, by each product and service, and by geographic area.
Revenue from sales of our products is recognized when performanceobligations are satisfied, which is upon delivery of the products. We
invoice when we satisfy the performance obligation and receive cash
payment shortly thereafter.
The Group’s revenue is recognized for transactions, net of any trade
discounts or rebates given. We generally provide a right of return to ourcustomers. In order to estimate the transaction price, provision for
expected returns is deducted from revenue based on historical returns.
Contract liabilities from contracts with customers consists mainlyof customer loyalty points. Some of subsidiaries have customer loyalty
programs as part of the promotion and provide loyalty points to

19. EARNINGS PER SHARE 

customers when they purchase the products. The points provided tocustomers are identified as performance obligations, which are satisfied
when the points are redeemed for the products. The unredeemed points
as of the end of years are recorded as contract liabilities, which are
estimated based on actual redemption amounts from previous fiscal
year. Contract liability is included in other current liabilities, and the amountof contract liabilities as of March 31, 2020 and 2019 are as follows:

Fair Value of Financial Instruments
The carrying amounts and fair values of financial instruments as of March 31, 2020 and 2019 were as follows:
Millions of Yen

2020
Carrying Amount2019
Fair Value

Carrying Amount

Fair Value

Assets:Marketable securities¥

Investments
Total assets

656

¥

657

¥

446

¥

445

43,90443,90863,372

63,369¥44,560¥44,565¥63,818¥63,814

¥

85

¥

85

¥

138

¥

138

¥

85

¥

85

¥

138

¥

138

Liabilities:
Long-term debt including current portion
Total liabilities
The carrying amounts of all other financial instruments approximate theirestimated fair values because of the short maturity of those instruments.
For information about fair values of foreign exchange contracts andcurrency swaps, see Note 21.
Marketable Securities and Investments—The fair value of these held-tomaturity debt securities are based on Level 1 inputs. For all other investments included in marketable securities and investments, see Notes 3
and 21.
Long-Term Debt—The fair values for long-term debt are estimated bydiscounted cash flow analysis, using rates currently available for similartypes of borrowings with similar terms and remaining maturities. The
estimated fair value is based on Level 2 inputs.

Limitations—Fair value estimates are made at a specific point in time
based on relevant market information and information about the financial
instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
Concentration of Credit Risk—The Companies’ business consists primarily of sales of women’s intimate apparel to a large number of diverse
customers in the Japanese retail industry, which include well-establisheddepartment stores, general merchandise stores, and other general retailers and specialty stores.

Millions of Yen

2020

Contract liabilities

¥917

2019

¥873

Revenue recognized for the years ended March 31, 2020 and 2019, which
had been included in the contract liabilities balance at beginning of year
were ¥494 million and ¥324 million.

IN T EG R AT ED R EPORT 2020

I N TEG RATE D RE P O RT 2020

99

FACTS

FACTS

21. FAIR VALUE MEASUREMENTS 
The guidance for fair value measurements defines fair value as the pricethat would be received to sell an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants at the measurement
date. The guidance establishes a three-level fair value hierarchy thatprioritizes the inputs used to measure fair value as follows:

Level 1—Inputs are quoted prices in active markets for identicalassets or liabilities.
Level 2—Inputs are quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs that are derived principallyfrom or corroborated by observable market data by correlation orother means.
Level 3—Inputs are unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and 2019 were as follows:
Millions of Yen

2020
Assets:Level 1

Level 2

Level 3

Total

¥2,561¥43,481

2,561

43,575Investments:
Equity securities
Mutual funds
Total¥40,920
94

94

41,014

Investments presented in Level 1 are valued using unadjusted quoted
market prices in active markets with sufficient volume and frequency oftransactions. Bonds presented in Level 2 are valued by financial institutions using quoted market prices for identical instruments in markets
that are not active. Mutual funds presented in Level 2 are valued byfinancial institutions based on quoted prices in an inactive market for
identical instruments which are included in the mutual funds.
As discussed in Note 3, the Companies record impairment charges on
debt securities if a decline in fair value of debt securities is determined tobe other than temporary.
Foreign exchange contracts and currency swaps presented in Level 2
are valued by financial institutions based on market data in both active
and inactive markets.
Equity securities in Level 3 are non-marketable equity securities andare valued by the comparable multiple valuation method using financial
indicators as inputs or other appropriate valuation methods. Contingent
consideration are valued by the Monte Carlo simulation using unobservable inputs.
The tables below show the change in assets presented in Level 3 thatare continuously assessed at fair value as of March 31, 2020 and 2019:

Total assets¥57¥41,014¥57

Derivative instruments:¥24

Currency swap
Total

24

72

72

96

96

Contingent consideration
Total liabilities¥¥96¥3,874

3,874¥3,874¥ 3,970
Millions of Yen

2019
Assets:Level 1

Level 2

Level 3

Total

Mutual funds
Total

276

(Loss) gain on sale, exchange andvaluation of marketable securities andinvestments – net(2)

Selling, general and administrative expenses(304)

Foreign currency translation adjustments

6

Balance at the end of the year

¥2,561¥3,874Unrealized (loss) gain included in earnings
for assets and liabilities still held as ofMarch 31, 2020¥

¥ (304)¥59,911¥2,287¥62,198

50

50

59,961

Foreign exchange contracts

2,287

2019
Investment

Balance at the beginning of the year

¥2,002
201
84

Balance at the end of the year

¥2,287

Unrealized gains included in earnings for assets still held
as of March 31, 2019¥¥27
¥59,961¥27

27¥2,287¥62,275

Millions of Yen

2020
Buildings and structures

Level 1

Level 2

Level 3

Total

Impairment Losses

¥109

¥109

¥ (162)

324

324

(607)

Trademarks (Note 8)

489

489

Software (Note 8)14

14

Machinery and equipment

(217)

¥18

Currency swap

36

Total liabilities¥54

IN T EG R AT ED R EPORT 2020

¥
¥

(65)

Millions of Yen

2019
Buildings and structures

Level 1

Level 2

Level 3Total

18

Trademarks (Note 8)

36

Software (Note 8)

Impairment Losses

¥

(43)
(124)

Goodwill (Note 8)

Foreign exchange contracts(191)¥(1,242)

Machinery and equipment

Derivative instruments:

84

Assets Measured at Fair Value on a Non-recurring Basis
Assets measured at fair value on a non-recurring basis as of March 31, 2020 and 2019 were as follows:

62,248

Liabilities:

10 0

(2)

Millions of Yen

Derivative instruments:
Total assets¥4,172

Total gains or losses for the period:

Goodwill (Note 8)

Investments:
Equity securities¥2,287Purchase/assumed in acquisition(Loss) gain on sale, exchange and valuation ofmarketable securities and investments – net¥43,632

Liabilities:
Foreign exchange contracts

Balance at the beginning of the year

Contingent
Consideration

Total gains or losses for the period:

57¥2,561

Investment

Purchase

Derivative instruments:
Foreign exchange contracts

Millions of Yen

2020(4,325)¥680¥680(1,314)(195)¥(6,001)54

I N TEG RATE D RE P O RT 2020

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FACTSFACTS

As of March 31, 2019, the carrying amount of G Tech’s machinery was
fully written off, resulting in an impairment charge of ¥105 million, whichis included as a charge to earnings for the year ended March 31, 2019.
The impairment arose due to the close of the unprofitable business andthe assets associated with it are considered to be non-recoverable. In
addition, all the carrying amounts of Ai’s buildings, equipment, andsoftware were written off resulting in impairment charges of ¥43 million,¥19 million, and ¥195 million, respectively. To measure their fair values,
the Companies used the expected present value of future cash flows andincorporated relevant unobservable inputs, such as management’s
internal assumptions about future cash flows and appropriately riskadjusted discount rates, and the prices calculated based on market datafor comparable assets which reflected management’s estimate ofassumptions that market participants would use in pricing the asset inan arm’s length transaction as of the measurement date.
As of the end of March 31, 2019, the carrying amount of goodwill in
Peach John Business was fully written off, resulting in an impairment
charge of ¥4,325 million, which is included in earnings for the year ended
March 31, 2019. The impairment arose due to the decline in its fair value,
which was caused by a downturn in consumption due to general market
conditions. To measure the fair values of the reporting units, theCompanies used the expected present value of future cash flows andincorporated relevant unobservable inputs, such as management’s
internal assumptions about future cash flows and appropriately riskadjusted discount rates, which reflected management’s estimate ofassumptions that market participants would use in pricing the asset inan arm’s length transaction as of the measurement date.
Peach John’s trademarks with a carrying amount of ¥1,994 million asof March 31, 2019, were written down to their fair values of ¥680 million,
resulting in recognition of an impairment charge of ¥1,314 million for theyear ended March 31, 2019. The impairment arose due to the decline intheir fair value, which was caused by a downturn in consumption due togeneral market conditions. To measure the fair value of the trademarks,
the Companies used the relief-from-royalty method and incorporated
relevant unobservable inputs, such as management’s internal assumptions about future cash flows, the rate of royalty, and appropriately
risk-adjusted discount rate, which reflected management’s estimate ofassumptions that market participants would use in pricing the asset inan arm’s length transaction as of the measurement date. Future cash
flows were based on management’s cash flow projections for the future
three years, and after three years, future cash flows were estimated using
a perpetuity growth rate from 0% to 3.0%. Management’s cash flow
projections were developed using estimates for expected future revenue
growth rates, profit margins and working capital levels of the reporting
units. The rate of royalty used for the valuation was based on the actual
royalty ratio used in transactions. The risk-adjusted discount rate
represents a weighted-average cost of capital (WACC) adjusted for
inherent risk spread.
As of the end of March 31, 2020, the carrying amount of A Tech’sbuildings, machinery and equipment, and software under the Wacoal
Business (Overseas) were written down to their fair values, resulting in
the recognition of an impairment charge of ¥162 million, ¥607 million,and ¥65 million, respectively. The impairment arose due to the revision of
the future business plan made in response to a decrease in sales. To
measure the fair values of A Tech’s reporting units, the Companies usedthe discounted cash flows method and incorporated relevant unobservable inputs, such as management’s assumptions about future cash flows

1 02

and an appropriately risk-adjusted discount rate, which reflected management’s estimate of assumptions that market participants would use
in pricing the asset in an arm’s length transaction as of the measurement
date. Future cash flows were based on management’s cash flow
projections for the future five years, and after five years, future cash
flows were estimated using a growth rate of 2.0%. Management’s cash
flow projections were developed using estimates for expected future
revenue growth rates, profit margins and working capital levels of thereporting units. The risk-adjusted discount rate represents the weightedaverage cost of capital (WACC).
As of the end of March 31, 2020, the carrying amount of G Tech’s
goodwill under the Wacoal Business (Overseas) was fully written off,
resulting in an impairment charge of ¥217 million. The impairment is dueto the revision of the future business plan made in response to a decrease in sales. To measure the fair values of G Tech’s reporting units,
the Companies used discounted cash flows method and incorporated
relevant unobservable inputs, such as management’s internal assumptions about future cash flows and appropriately risk-adjusted discountrates, which reflected management’s estimate of assumptions thatmarket participants would use in pricing the asset in an arm’s lengthtransaction as of the measurement date.
As of the end of March 31, 2020, Peach John’s trademarks with acarrying amount of ¥680 million were written down to their fair values of¥489 million, resulting in the recognition of an impairment charge of ¥191
million for the year ended March 31, 2020. The impairment is due to thedecline in their fair value, which was caused by a downturn in consumption due to general market conditions. To measure the fair value of the
trademarks, the Companies used the relief-from-royalty method andincorporated relevant unobservable inputs, such as management’s
assumptions about future cash flows, the rate of royalty, and an appropriately risk-adjusted discount rate, which reflected management’s estimate
of assumptions that market participants would use in pricing the asset inan arm’s length transaction as of the measurement date. Future cash
flows were based on management’s cash flow projections for the future
three years, and after three years, future cash flows were estimated using
a perpetuity growth rate from 0% to 3.0%. Management’s cash flow
projections were developed using estimates for expected future revenue
growth rates, profit margins and working capital levels of the reporting
units. The royalty rate used for the valuation was based on the actual
royalty ratio used in transactions. The risk-adjusted discount rate
represents the weighted-average cost of capital (WACC) adjusted for an
inherent risk spread.
Valuation process:
The valuation process involved in Level 3 measurements for applicable
assets and liabilities is governed by the valuation policies and procedures, including evaluation method for fair value measurements, preapproved by the Companies. Based on the policies and procedures,
either personnel from the accounting division or personnel in charge ofvaluation determine the valuation model to be utilized to measure each
asset and liability at fair value. We engage independent external valuation
experts to assist us in the valuation process for certain assets over a
specific amount, and the results of their valuations are reviewed by the
responsible personnel. All of the valuations, including those performed by
the external experts, are reviewed and approved by management of theCompany before being recorded in the general ledger.

IN T EG R AT ED R EPORT 2020

Quantitative information regarding Level 3 fair value measurements:
Information about valuation techniques and significant unobservable inputs used for Level 3 assets measured at fair value for the years ended March 31,
2020 and 2019 is as follows:
March 31, 2020

Millions of Yen
Fair Value

Buildings and structures¥ 109

Machinery and equipment

324

Software14

Trademarks¥ 489

Valuation Technique

Expected present value
methodRelief-from-royalty method

Principal Unobservable Input

Range

Discount rate

10.0%

Short-term revenue growth rates (within five years)(31.1)%–102.5%

Growth rate (over five years)

2.0%

Discount rate

10.3%–13.9%

Royalty rate

3.0%

Short-term revenue growth rates (within three years)
Perpetuity growth rate (over three years)
Contingent consideration

March 31, 2019

Trademarks¥3,874

Millions of Yen
Fair Value

Monte Carlo simulation

0%–3.0%Discount rate

5.2%

Volatility

15%

Valuation Technique¥680 Relief-from-royalty method(14.8)%–24.3%

Principal Unobservable Input

Discount rate

Range

9.9%–13.4%

Royalty rate

3.0%

Short-term revenue growth rates (within three years)
Perpetuity growth rate (over three years)

2.3%–7.0%
0%–3.0%22. DERIVATIVE INSTRUMENTS 
Risk Management Policy—The Companies are exposed to the risk ofchanges in foreign currency exchange rates. Derivative instruments areused to manage such risk. Derivative instruments are used based on
Company policy and administrative provisions. There were no derivative
instruments used for the purpose of speculative trading. The Companies
consider the related credit risk to be low since these derivative instruments are provided by financial institutions with international credibility.
Foreign Exchange Risk—Assets and liabilities denominated in foreign
currencies, which are primarily related to international business, areexposed to the risk of changes in foreign currency exchange rates.

Foreign exchange contracts and currency swaps are used to mitigate
such risk.
Derivative Instruments Not Designated as a Hedge—Foreign exchange
contracts and currency swaps are classified as derivative instruments,
which are not designated as a hedge since these derivative instruments
do not qualify for hedge accounting. These derivative instruments areused to mitigate the risk of changes in foreign currency exchange rates,
and the changes in fair value of such derivative instruments are recordedin earnings immediately.

Notional contract amounts of derivative instruments that are not designated as hedges as of March 31, 2020 and 2019 were as follows:
Millions of Yen

2020

Foreign currency exchange

2019¥2,786¥1,837695

653

Currency swaps

The amounts of derivative instruments at fair value in the consolidated balance sheets as of March 31, 2020 and 2019 were as follows:
Millions of Yen

Balance Sheets Location

2020

2019

Assets:Foreign currency exchange

Other current assets

¥57

¥27

Foreign currency exchange

Other current liabilities

¥24

¥18

Currency swaps

Other current liabilities

72

36

Liabilities:

The effect of derivative instruments in consolidated statements of income for the years ended March 31, 2020, 2019 and 2018 were as follows:
Millions of Yen

Statements of Income Location

2020

2019

2018

Foreign currency exchange

Other – net

¥ 57

¥45

¥ 60

Currency swaps

Other – net

(36)

(5)

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23. SEGMENT INFORMATION 

Millions of Yen

Operating Segment Information
The Companies have three reportable segments: “Wacoal Business(Domestic),” “Wacoal Business (Overseas),” and “Peach John,” which are
based on their locations and brands. These segments represent components of the Companies for which separate financial information isavailable and for which operating income (loss) is reviewed regularly
by the chief operating decision-maker in deciding how to allocate theCompanies’ resources and in assessing their performance. The accounting policies used for these reportable segments are the same as thosedescribed in the summary of significant accounting policies in Note 1.

The “Wacoal Business (Domestic)” segment primarily produces andsells innerwear (consisting of foundation, lingerie, nightwear, andchildren’s innerwear), outerwear, sportswear, and hosiery. The “Wacoal
Business (Overseas)” segment produces and sells innerwear (consistingof foundation, lingerie, nightwear, and children’s innerwear), outerwear,
sportswear, and other textile-related products. The “Peach John” segment produces and sells innerwear (consisting of foundation, lingerie,and nightwear), outerwear, and other textile-related products, which aresold under the Peach John brand. The “Other” produces and sells
innerwear (consisting of foundation, lingerie, nightwear, and children’s
innerwear), outerwear, other textile-related products, and mannequins
and also engages in construction of stores and interior design.

Millions of Yen

2020
Net sales:
External customers
Intersegment
Total

WacoalBusiness(Overseas)

Peach John

Other

¥109,709¥50,552¥10,480¥16,019¥(17,360)(17,360)

860

10,570694

5,236

110,569

61,122

11,174

21,255

Operating costs and expenses:

Elimination

Consolidated¥186,760
186,760(17,360)

Operating costs and expenses

101,20356,656

10,951

21,407

172,857

Depreciation and amortization

3,584

1,922

383

140

6,029

Impairment charges on property, plant and equipment

769

769

Impairment charges on goodwill

217

217

Impairment charges on other intangible assets
Total
Operating income (loss)(17,360)

65

191

104,787

59,62911,525

21,547

180,128

256

5,782

1,493

(351)

(292)

6,632

Total assets and capital expenditures:
Total assets
Capital expenditures

236,961

86,292

9,751

16,708

4,619

2,106

129

127

(72,024)

277,688
6,981
Millions of Yen

2019
Net sales:
External customers
Intersegment

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

¥113,400¥53,100¥10,491¥17,210

Elimination

Consolidated

10,121

1,083

5,543

¥(17,652)

63,221

11,57422,753(17,652)

194,201

Operating costs and expenses

104,224

56,95011,40022,752(17,652)

177,674

Depreciation and amortization

3,499

1,585

394

169

62

105

Operating costs and expenses:

Impairment charges on goodwill
Impairment charges on other intangible assets
Total
Operating income (loss)

195

5,647
167

4,325

4,325

1,314

1,509

107,980

58,64017,43322,921

6,325

4,581

(5,859)(168)

249,141

78,912

8,038

17,395

3,382

1,837

494

70

(17,652)

189,322
4,879

Total assets and capital expenditures:
Total assets
Capital expenditures

Other

Elimination

Consolidated¥116,085¥51,888¥10,795¥16,957

Intersegment

1,051

10,180

1,281

5,283

¥(17,795)¥195,725

Total

117,136

62,06812,07622,240(17,795)

195,725

Operating costs and expenses

106,82256,504

11,29021,712(17,795)

178,533

Depreciation and amortization

3,469

1,506

345

172

Operating costs and expenses:

Impairment charges on goodwill

5,492

206

206

Total

110,291

58,216

11,63521,884

Operating income

6,845

3,852

441

356

260,582

77,374

13,825

18,261

3,649

1,752

365

118

Total assets
Capital expenditures(17,795)

184,231
11,494(71,508)

298,534
5,884

The sum of the operating income (loss) of the reportable segments agrees to the operating income on the consolidated statements of income. For areconciliation from operating income to income before income taxes and equity in net income of affiliated companies, see other expenses (income) on
the consolidated statements of income.
The Companies account for intersegment sales and transfers at cost plus a markup. Operating income (loss) represents net sales less operating
costs and expenses.
Products and Services Information
Net sales information by product and service for the years ended March 31, 2020, 2019 and 2018 is as follows:
Millions of Yen

2020

2019

2018

Innerwear:
Foundation and lingerie¥144,933¥146,525¥146,970

Nightwear

7,459

8,296

8,758

Children’s underwear

1,014

1,213

1,376

Subtotal

153,406

156,034

157,104

Outerwear/sportswear and others¥ 12,746¥ 14,733¥ 16,128

Hosiery

1,563

1,881

1,983

Other textile goods and related products

7,545

9,428

8,907

Others

11,50012,125

11,603¥186,760¥194,201¥195,725

2020

2019

2018

Total
905

Impairment charges on property, plant and equipment

Peach John

¥194,201

114,305

Total

External customers

WacoalBusiness(Overseas)

Total assets and capital expenditures:

Information about operating results and assets for each segment as of and for the years ended March 31, 2020, 2019 and 2018 is as follows:
WacoalBusiness(Domestic)

2018
Net sales:

WacoalBusiness(Domestic)(71,719)

281,767
5,783

Geographic Information
Information by major geographic area as of and for the years ended March 31, 2020, 2019 and 2018 is as follows:
Millions of Yen

Net sales:Japan¥135,273¥140,189¥143,196

Asia and Oceania

20,59622,50921,057

Americas and Europe

30,891

31,50331,472

Consolidated¥186,760¥194,201¥195,725

Long-lived assets:Japan¥ 44,014¥ 45,257¥ 46,367

Asia and Oceania

4,034

4,810

4,916

Americas and Europe

4,035

3,203

3,050

¥ 52,083¥ 53,270¥ 54,333

Consolidated

Countries or areas are classified according to their geographical proximity. Asia and Oceania includes East Asia, Southeast Asia, West Asia, and Australia.
Net sales are attributed to countries or areas based on the location where sold. Long-lived assets represent property, plant and equipment.

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Independent Auditors’ Report

24. SUBSEQUENT EVENTS (Cancellation of Treasury Stock)
On May 15, 2020, the Board of Directors resolved to retire treasury stock as described below pursuant to the provisions of Article 178 of the Companies
Act as follows.
a. Type of Shares to Be Retired:
Common stock of the Company

Deloitte Touche Tohmatsu LCC
Shijokarasuma FT Square,
20 Naginataboko-cho,Karasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008
Japan

b. Total Number of Shares to Be Retired:
3,000,000 shares

Tel: +81 (75) 222 0181
Fax: +81 (75) 231 2703
www.deloitte.com/jp

To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japanc. Date for Retirement:
May 25, 2020
(Dividend Declaration)
On May 15, 2020, the Board of Directors resolved to pay a cash dividend of ¥100 per 5 shares of common stock to holders of record as of March 31,
2020 (aggregate amount of ¥1,248 million).
(Bank Loans)
On May 25, 2020, The Company received bank loans as working capital from MUFG Bank, Ltd., The Bank of Kyoto, Ltd. and The Shiga Bank, Ltd., asfollows.
Bank

Transaction Method

Borrowing AmountInterest Rate

Repayment Term

MUFG Bank, Ltd.

Loan by bill

¥10,000 million

SpreadMay 25, 2021

The Bank of Kyoto, Ltd.

Overdraft¥6,000 million

Base rate + spread

Within a month

The Shiga Bank, Ltd.

Overdraft¥4,000 million

Base rate + spread

Within a month

We have audited the accompanying consolidated financial statements of Wacoal Holdings Corp. and its subsidiaries (the “Company”), which
comprise the consolidated balance sheets as of March 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended March 31, 2020 (all expressed in Japanese yen), and therelated notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance ofinternal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wacoal
Holdings Corp. and its subsidiaries as of March 31, 2020 and 2019, and the results of their operations and their cash flows for each of thethree years in the period ended March 31, 2020, in accordance with accounting principles generally accepted in the United States ofAmerica.

Convenience Translation
Our audit for the year ended March 31, 2020 also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in conformity with the basis stated in Note 2. The translation of the financial statement
amounts into U.S. dollars has been made solely for the convenience of readers outside of Japan.

Report on Management’s Report on Internal Control over Financial Reporting
Notwithstanding the second paragraph of the “Auditors’ Responsibility” section, we have performed an audit of management’s report oninternal control over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act of Japan. A translated copy of management’s report on ICFR along with a translated copy of our report is included within this Annual Securities Report as information for readers.

June 26, 2020
Member of
Deloitte Touche Tohmatsu Limited

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FACTSFACTSManagement’s Annual Report On Internal Control Over Financial Reporting(Translation)

NOTE TO READERS

3. Matters Relating to the Results of Assessment
As a result of the assessment above, we concluded that our ICFR was effective as of March 31, 2020.

Following is an English translation of management’s report on internal control over financial reporting (“ICFR”) filed under the Financial
Instruments and Exchange Act of Japan. This report is presented merely as supplemental information.

4. Supplementary Matters
Not applicable.

There are differences between management’s assessment of ICFR under the Financial Instruments and Exchange Act (“ICFR under FIEA”) and one
conducted under the attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).

5. Special Information
Not applicable

In management’s assessment of ICFR under FIEA, there is detailed guidance on the scope of management’s assessment of ICFR, such as
quantitative guidance on business unit selection and/or account selection. In management’s assessment of ICFR under the attestation standards
established by the AICPA, there is no such detailed guidance. Accordingly, based on the quantitative guidance which provides an approximate
measure of the scope of the assessment of internal control over business processes, we designated the business units that accounted forapproximately two-thirds of the aggregated sales for the previous fiscal year on a consolidated basis as “significant business units” which should
be subject to management’s assessment of the process-level controls.

1. Matters Relating to the Basic Framework for Internal Control over Financial Reporting
Hironobu Yasuhara, President and Representative Director, and Masashi Yamaguchi, Director and Vice President, are responsible for designing andoperating effective ICFR of Wacoal Holdings Corp. (the “Company”), and have designed and operated ICFR in accordance with the basic framework for internal control set forth in “On the Revision of the Standards and Practice Standards for Management Assessment and Audit concerning
Internal Control Over Financial Reporting (Council Opinions)” published by the Business Accounting Council.
The internal control is designed to achieve its objectives to the extent reasonable through the effective function and combination of its basic
elements. Therefore, there is a possibility that misstatements may not be completely prevented or detected by ICFR.

2. Matters Relating to Scope of Assessment, the Assessment Date, and Assessment Procedures
The assessment of ICFR was performed as of March 31, 2020. The assessment was performed in accordance with assessment standards for
ICFR generally accepted in Japan.
In conducting this assessment, we evaluated internal controls which may have a material effect on the entire financial reporting in a consolidation(“company-level controls”) and, based on the result of this assessment, we appropriately selected business processes to be evaluated, analyzed
these selected business processes, identified key controls that may have a material impact on the reliability of our financial reporting, and assessed the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of the internal controls.
We determined the required scope of the assessment of ICFR for the Company, as well as its consolidated subsidiaries and equity method
affiliated companies, from the perspective of the materiality that may affect the reliability of our financial reporting. We determined the materialitythat may affect the reliability of the financial reporting taking into account the materiality of quantitative and qualitative impacts. We confirmedthat we had reasonably determined the scope of assessment of internal controls over business processes in light of the results of the assessmentof company-level controls conducted for the Company, its consolidated subsidiaries and equity method affiliated companies. We did not include
those consolidated subsidiaries and equity method affiliated companies which do not have any quantitatively or qualitatively material impact on
the consolidated financial statements in the scope of the assessment of company-level controls.
Regarding the scope of assessment of internal control over business processes, we selected business units for testing as “significant business
units,” whose combined sales were at least two-thirds of total consolidated sales for the prior year on a consolidated basis.
At the selected significant business units, we included in the scope of our assessment those business processes leading to sales or accounts
receivable and inventories as significant accounts that may have a material impact on our business objectives. Further, not only at selectedsignificant business units, but also at other business units, we added to the scope assessment the following as business processes with greater
materiality considering their impact on financial reporting:(1) those business processes relating to greater likelihood of material misstatements and significant accounts involving estimates and management’s judgment, and (2) those business processes relating to businesses or operations dealing with high-risk transactions.

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Independent Auditors’ Report

NOTE TO READERS:
Following is an English translation of the Independent Auditors’ Report filed under the Financial Instruments and Exchange Act (“FIEA”) of Japan.
This report is presented merely as supplemental information.
There are differences between an audit of internal control over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act andone conducted under attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).
In an audit of ICFR under FIEA, the auditors express an opinion on management’s report on ICFR, and do not express an opinion on the Company’s
ICFR directly. In an audit of ICFR under attestation standards established by the AICPA, the auditors express an opinion on the Company’s ICFR
directly. Also, in an audit of ICFR under FIEA, there is detailed guidance on the scope of an audit of ICFR, such as quantitative guidance on business units selection and/or account selection. In an audit of ICFR under attestation standards established by the AICPA, there is no such detailed
guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for the scope of assessment of internal
control over business process, we used a measure of approximately 70% of total assets on a consolidated basis and income before income taxes
on a consolidated basis for the selection of significant business units.

(TRANSLATION)

Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our other ethical responsibilities asauditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in the United States ofAmerica.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the Directors’ execution of duties relating to
the design and operating effectiveness of the controls over the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT
June 26, 2020
Deloitte Touche Tohmatsu LLC
Kyoto office
Designated Engagement Partner,
Certified Public Accountant:
Wakyu Shinmen
Designated Engagement Partner,
Certified Public Accountant:Hiroaki Sakai
Designated Engagement Partner,
Certified Public Accountant:
Tomomi Tsuji
To the Board of Directors of Wacoal Holdings Corp.

Audit of Financial Statements
OpinionPursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited the consolidated financial
statements of Wacoal Holdings Corp. and its consolidated subsidiaries (the “Group”) included in the Financial Section, namely, the consolidatedbalance sheet as of March 31, 2020, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated
statement of equity and consolidated statement of cash flows for the fiscal year from April 1, 2019 to March 31, 2020, and a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of
the Group as of March 31, 2020, and its consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America pursuant to the provisions of Article 95 of the Ordinance on
Terminology, Forms and Preparation Methods of Consolidated Financial Statements.

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks. The procedures selected depend on the auditor’s judgement. In addition, we obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting principles
generally accepted in the United States of America, as well as the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought tobear on our independence, and where applicable, related safeguards.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the110

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Audit of Internal Control
OpinionInterest Required to Be Disclosed by the Certified Public Accountants Act of Japan

Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited management’s report oninternal control over financial reporting of Wacoal Holdings Corp. as of March 31, 2020.

Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

In our opinion, management’s report on internal control over financial reporting referred to above, which represents that the internal control overfinancial reporting of Wacoal Holdings Corp. as of March 31, 2020, is effectively maintained, presents fairly, in all material respects, the results of
the assessment of internal control over financial reporting in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.

Basis for Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally accepted inJapan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Internal Control Audit section of ourreport. We are independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled ourother ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board for Reporton Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the preparation and fair presentation of its report on internal control in accordance with assessment standards for internal control over financial reporting generally accepted inJapan.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing and verifying the design and operating
effectiveness of internal control over financial reporting. There is a possibility that misstatements may not be completely prevented or detected byinternal control over financial reporting.

Auditor’s Responsibilities for the Internal Control Audit
Our objectives are to obtain reasonable assurance about whether management’s report on internal control over financial reporting is free frommaterial misstatement and to issue an auditor’s report that includes our opinion.
As part of an audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:•P erform audit procedures to obtain audit evidence regarding the results of the assessment of internal control over financial reporting in management’s report on internal control. The procedures selected depend on the auditor’s judgment, including the significance of effects on reliability offinancial reporting.
•E xamine representations on the scope, procedures and results of the assessment of internal control over financial reporting made by management, as well as evaluating the overall presentation of management’s report on internal control.
•O btain sufficient appropriate audit evidence regarding the results of the assessment of internal control over financial reporting. We are responsible for the direction, supervision and performance of the internal control audit. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among other matters, the planned scope
and timing of the internal control audit, result of the internal control audit, including any identified material weakness which should be disclosed
and the result of remediation.
We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought tobear on our independence, and where applicable, related safeguards.

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Principal Subsidiaries
As of August 31, 2020

Wacoal Business (Domestic)

Wacoal Business (Overseas)

Wacoal Corp. Manufacturing and sales company

Wacoal America, Inc. Manufacturing and sales company

29 Nakajima-cho, Kisshoin, Minami-ku,

136 Madison Avenue, New York, N.Y. 10016, U.S.A.

Kyoto 601-8530, Japan

Product design and distribution of innerwear

R&D, product design and distribution of innerwear, etc.

Wacoal China Co., Ltd. Manufacturing and sales company

Eveden Inc. Sales company

Wacoal International Hong Kong Co., Ltd.

Lecien Nagasaki Corporation Manufacturing company

Wacoal Service Co., Ltd. Other company

65 Sprague Street, Hyde Park, MA 02136, U.S.A.

Procurement company

1588 Nakagumi-go, Kawatana-cho,

29 Nakajima-cho, Kisshoin, Minami-ku,

Distribution of innerwear

8th Floor, EGL Tower, No. 83 Hung To Road,

Higashisonogi-gun, Nagasaki-ken, Japan

Kyoto 601-8530, Japan

Kwun Tong, Kowloon, Hong Kong

Manufacturing and wholesale distribution

Sale of products, travel agency, real estate business,

Procurement of products and raw materials ofof innerwear

insurance agency

Eveden Canada Ltd. Sales company

181 Bay Street, Suite #4400, Toronto, Ontario,
Canada, M5J 2T3

innerwear, subsidiary management

Dalian Lecien Fashion Co., Ltd. Manufacturing company

Wacoal Career Service Corp. Other company

Wacoal International Corp. Other company

Dalian Hai Na Chuang Ye Yuan, No. 75 Double D2

Sumitomoseimei Bldg. 8F, 62 Shijodori Shin-machi,

One Wacoal Plaza, Lyndhurst, N.J. 07071, U.S.A.

Street, Double D Port, Dalian Economic andHigashiiru Tsukihokocho, Shimogyo-ku,

Investment and funding in U.S. affiliates

Technological Development Zone

Kyoto 600-8492, Japan

Contract manufacturing of innerwear

Temporary employment agency

Unenana Cool Corp. Sales company

Jia 16 Tongji North Road, Beijing, Economic &Wacoal New Kyoto Bldg. 5F, 6 Kitanouchi-cho,Technological Development Area Beijing 100176,

Nishikujo, Minami-ku, Kyoto 601-8506, Japan

P.R. of China

Wacoal India Private Limited Sales company

Product design and distribution of innerwear, etc.

Product design, manufacturing and distribution

403/4th Floor, Ackruti Star Building, Central Road,of innerwear

MIDC, Andheri (East), Mumbai, Maharashtra,

Wacoal Investment Co., Ltd. Other company

400093, India

8F, No. 2 Fusing N. Rd., Jhongshan Dist., Taipei,

Zhe Jiang Jiaxing Lecien Co., Ltd. Manufacturing company

Distribution of innerwear

Taiwan R.O.C.

361 Heping St. Xiuzhou, Jiaxing, Zhejiang

Investment in Taiwan affiliates

Contract manufacturing and distribution

Wacoal Minette Co., Ltd. Sales company

Distribution of innerwear

Wacoal Sapporo Branch 1F, 27-1-20 Minami Ichijo-

Wacoal EMEA Ltd. Manufacturing and sales company

Nishi Chuo-ku, Sapporo, Hokkaido 064-0801, JapanThe Corsetry Factory, Rothwell Road, Desborough,Distribution of innerwear, etc.

Northamptonshire, NN14 2PG, UK

Intimates Online, Inc. Sales company

Product design and distribution of innerwear

48 West 38th Street 10th Floor, New York, N.Y.

Wacoal Europe Ltd. Other company

U.S.A.

The Corsetry Factory, Rothwell Road, Desborough,Lecien (Cambodia) Co., Ltd. Manufacturing company

Distribution of innerwear

Northamptonshire, NN14 2PG, UK

PLOT P1-021, 022, Phnom Penh Special Economic

Investment in affiliates

Zone (Sangkat Kantouk, Sangkat Phleung Chhes

Linge Noel Co., Ltd. Sales company

Wacoal New Kyoto Bldg. 5F, 6 Kitanouchi-cho,Vietnam Wacoal Corp. Manufacturing and sales company

Nishikujo, Minami-ku, Kyoto 601-8506, Japan

110 Amata Road, Amata Modern Industrial Park,

Distribution of innerwear, etc.

Long Binh Ward, Bien Hoa City, Dong Nai Province,

Guangdong Wacoal Inc. Manufacturing company

Socialist Republic of Vietnam

Huahai Industrial District, Xinhua Town, Huadu Qu,

WACOAL VENTURES LIMITED

Contract manufacturing and distribution

Guangzhou City, Guangdong, P.R. of China

Investment in affiliates

of innerwear

Contract manufacturing of innerwear

859-1206, Japan

Wacoal Hong Kong Co., Ltd. Sales company

Dalian Wacoal Co., Ltd. Manufacturing company

Contract manufacturing of innerwear

8th Floor, EGL Tower, No. 83 Hung To Road,

No. 6 Fu An Street Economic and TechnicalKwun Tong, Kowloon, Hong Kong

Development Zone, Dalian, Liaoning,

Distribution of innerwear

P.R. of China 116600

Kyusyu Wacoal Manufacturing Corp.
Manufacturing company

1572, Saigoshin, Mizuho-cho, Unzen-shi, Nagasaki

Niigata Wacoal Sewing Corp. Manufacturing company

263, Hataya, Niigata-shi, Niigata 959-0423, Japan
Contract manufacturing of innerwear
Hokuriku Wacoal Sewing Corp. Manufacturing company

254-31-1 Shimohyogo, Sakai-cho, Sakai-shi,
Fukui 919-0527, Japan
Contract manufacturing of innerwear
Torica Inc. Manufacturing company

3-2-10 Higashi-Oota, Ibaraki-shi,
Osaka 567-0012, Japan
Contract manufacturing of innerwear
Wacoal Distribution Corp. Other company

1-1 Chishiro-cho, Moriyama-shi,

Wacoal Singapore Private Limited Sales company

215 Henderson Road, #01-08

Wacoal Dominicana Corp. Manufacturing company

Henderson Industrial Park, Singapore 159554

Las Americas Industrial Free Zone,

Distribution of innerwear

KM. 22, aut. Las Americas Santo Domingo,

Philippine Wacoal Corp. Sales company

3F, 6788 Ayala Avenue, Oledan Square,
Makati City 1226, Philippines
Distribution of innerwear
Wacoal Direct Corp. Sales company

136 Madison Avenue, New York, N.Y. 10016, U.S.A.
Distribution of innerwear

Shiga 524-0034, Japan

Wacoal Canada Inc. Sales company

Logistics

1000 de la Gauchetiere Street West,

Wacoal Art Center Co., Ltd. Other company

5-6-23 Minami-Aoyama, Minato-ku,

Suite 2400 Montreal, QC, Canada, H3B 4W5
Distribution of innerwear

Tokyo 107-0062, Japan

Adden Limited Sales company

Food service, culture, service business

The Corsetry Factory, Rothwell Road, Desborough,Wacoal I Next Corp. Other company

29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto

Contract manufacturing of innerwear

Northamptonshire, NN14 2PG, UK
Distribution of innerwear

601-8530, Japan

Wacoal Europe SAS Sales company

Office service business

81 Rue Saint Lazare, 75009 Paris, France
Distribution of innerwear

Dominican Republic
Contract manufacturing of innerwear

OPTIONHUNT LIMITEDManagement services of pension assetsof lace

Shinyoung Wacoal Inc. Manufacturing and sales company

Rotes and Sangkat Beung Thom), National Road
No. 4, Khan Posenchey, Phnom Penh, Cambodia
Contract manufacturing of innerwear
Lecien (Vietnam) Co., Ltd. Manufacturing company(TAN THUAN EXPORT P.Z) TAN THUAN DONG
WARD, District 7 Ho Chi Minh City,
Socialist Republic of Vietnam

Other BusinessContract manufacturing of innerwear

Peach John Co., Ltd. Sales company

Shanghai Lecien Co., Ltd. Procurement company

AOYAMA St. SHION BLDG., 3-1-2 Kitaaoyama,#2407 Jiangnan Bldg., No. 600 Luban Road,

Minato-ku, Tokyo 107-0061, Japan

Huangpu District, Shanghai, P.R. of China, 200023

Product design and retail sales of innerwear

Procurement of innerwear

Peach John Shanghai Co., Ltd. Sales company

Nanasai Co., Ltd. Other company#2306 Jiangnan Bldg., No. 600 Luban Road,
Myanmar Wacoal Company Limited

1-7-51 2F, Nishimiyahara, Yodogawa-ku,

Huangpu District, Shanghai, P.R. of China, 200023

Osaka-shi, Osaka 532-0004, Japan

Manufacturing company

Distribution of innerwear

Manufacture and sale of mannequins and display

Lot No. B2, Thilawa SEZ Zone A, Yangon,

fixtures & interior design and construction of storesRepublic of the Union of Myanmar

Taiwan Peach John Ltd. Sales company

Contract manufacturing of innerwear

3F, No. 2 Fusing N. Rd., Jhongshan Dist., Taipei,

Nanasai Shanghai Co., Ltd. Other company

Taiwan R.O.C.

#808 8th Floor Jiangnan Bldg., No. 600 Luban Road,

Distribution of innerwear

Huangpu District, Shanghai, P.R. of China, 200023

Wacoal Lanka (Private) Limited Manufacturing company“Wepz” Nittambuwa Wathupitiwela Sri Lanka
Contract manufacturing of innerwear

Peach John Hong Kong Company Limited

Rental of mannequins, design and constructionof stores

241, 243, 245, 247, Soi Charoenrat 7, Bangklo,
Bangkholaem, Bangkok 10120, Thailand
Manufacturing of raw materials

8th Floor, EGL Tower, No. 83 Hung To Road,Ai Co., Ltd. Sales company

Kwun Tong, Kowloon, Hong Kong

Wacoal Asakusabashi Bldg. 8F, 1-23-6 Yanagibashi,

Procurement and distribution of innerwear

Taito-ku, Tokyo 111-8540, Japan

Lecien Corp. Manufacturing and sales company
G Tech Material Co., Ltd. Manufacturing company

241, 243, 245, 247, Soi Charoenrat 7, Bangklo,
Bangkholaem, Bangkok 10120, Thailand
Manufacturing of raw materials

1-7-51 6F, 7F, Nishimiyahara, Yodogawa-ku,

104, Gasandigital 1-ro, Geumcheon-gu,
Seoul, South Korea 08590
Manufacturing and wholesale distributionof innerwear
Taiwan Wacoal Co., Ltd. Manufacturing and sales company

15, Ching Kuo Road, Taoyian, Taiwan R.O.C.
Manufacturing and wholesale distributionof innerwear
Thai Wacoal Public Company Limited
Manufacturing and sales company

132 soi Charoenrat 7, Bangklo, Bangkholaem,
Bangkok, Thailand
Manufacturing and wholesale distributionof innerwear
PT. Indonesia Wacoal Manufacturing and sales company

Jl. Tarikolot Rt. 01/Rk. 001 No. 59 Citeureup-Bogor,
16810 Indonesia
Manufacturing and wholesale distributionof innerwear
House of Rose Co., Ltd. Other company

2-21-7 Akasaka, Minato-ku, Tokyo 107-8625, Japan
Development and sales of cosmetics,
hair-care products
Wacoal Malaysia Sdn. Bhd. Sales company

5th Floor, Plaza Hamodal, Lot 15, Jalan 13/2,

Procurement company Sales company

A Tech Textile Co., Ltd. Manufacturing company

Equity-method Affiliates

Product design and distribution of swimwear
and innerwear(Section 13) 46200 Petaling Jaya, Selangor,
Malaysia
Distribution of innerwear
Pattaya Myanmar Co. Ltd. Manufacturing company

16 Panchatun U Shwe Road,
Hlaing Tharyar Industrial Zone 2 Hlaing Tharyar

Osaka-shi, Osaka 532-0004, Japan

Township Yangon, Republic of the Union

Product design and wholesale distributionof Myanmarof innerwear

Contract manufacturing of innerwear

Wacoal Australia Pty Ltd. Sales company

Suite 3, 169 Pascoe Vale Road, Moonee Ponds,
VIC 3039, Australia
Distribution of innerwear
Eveden Israel Limited Sales company

11 Kehilat Saloniki St., Tel Aviv 69513, Israel
Distribution of innerwear

Note: B eginning from fiscal 2020, information on Ai Co., Ltd., which was previously presented in our “Wacoal Business (Domestic)” segment and “Peach John Business” segment, is now
reflected and presented in our “Other” segment following review of certain management classification of performance within our Group.

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FACTS

FACTS

Corporate Information

Investor Information

As of March 31, 2020

As of March 31, 2020

Company Name

Wacoal Holdings Corp.

Stock Listing

Tokyo Stock Exchange

Head Office

29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

Fiscal Year-end

March 31Founding

June 15, 1946

Securities Code3591

Establishment

November 1, 1949

Fiscal Year

From April 1 to March 31

Capital¥13,260 million

Number of Shares Issued

68,589,042 (Treasury Stock: 6,186,410)

Representative Director
and Chairman

Yoshikata Tsukamoto

Trading Unit

100 shares

Representative Director
and President

Hironobu Yasuhara

Shareholder Register Agentfor Common Stock

Mitsubishi UFJ Trust and Banking Corporation,
1-4-5, Marunouchi, Chiyoda-ku, Tokyo
100-8212, Japan

Line of Business

Wacoal’s mainstay business is the manufacture, wholesale, and direct sales to
consumers (for some products) of intimate apparel (mainly women’s foundation
garments, lingerie, nightwear, and children’s underwear), outerwear, sportswear, andother textile products and accessories. In addition, Wacoal operates other business
related to food, culture, services, and interior furnishing of shops.

American Depositary
Receipts

Cusip No.: 930004205
Ratio (ADR:ORD): 1:5Market: OTCQX
Symbol: WACLY

Number of Employees

20,984 (Consolidated)

Depositary he Bank of New York Mellon, 101 Barclay Street, New York, NY 10286, U.S.A.
T
Tel: 1-212-815-8161
U.S. toll free: 888-269-2377 (888-BNY-ADRS)
https://www.adrbnymellon.com/

Number of Shareholders

15,121

Stock Price / Trading Volume
Stock Price (¥)
4,000

Ownership and Distribution of Shares

Major Shareholders

3,000

Securities firms
0.90%

2,000

Financial
institutions
42.81%

1,000

Individuals and others
23.95%

0

Trading Volume (Thousand shares)
8,000

Other Japanesecompanies
17.66%

6,000

Foreign institutions
and individuals
14.67%

4,000

2,000

0
2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/4

2016/42017/42018/4

2019/42020/3

Number ofPercentage ofshares held
shares out(Thousand shares) standing (%)
The Master Trust Bank of Japan, Ltd. (Trust Account)

3,447

5.52

The Bank of Mitsubishi UFJ, Ltd.

3,195

5.12

Japan Trustee Services Bank, Ltd. (Trust Account)

3,081

4.94

Meiji Yasuda Life Insurance Company

3,050

4.89

The Bank of Kyoto, Ltd.

2,352

3.77

Nippon Life Insurance Company

1,836

2.94

The Shiga Bank, Ltd.

1,775

2.84

Mitsubishi UFJ Trust and Banking Corporation

1,525

2.44

The Dai-ichi Life Insurance Company, Ltd.

1,366

2.19

Asahi Kasei Corp.

1,241

1.99

Note: The percentages exclude treasury stock.

Note: As of October 1, 2017, Wacoal Holdings Corp. conducted a one-for-two ordinary share reverse stock split. For relative comparison, periods prior to the split have been adjusted in
the graphs above.

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