Major Items of the Revised Medium-Term Management Plan (Financial Strategy) ■A Message from the Director in Charge of FinanceWe will transform our business model toimprove earnings and capital efficiency,transition into a stronger profit structure,and achieve sustainable growth.

Review of Fiscal 2023 and the Medium-Term Management PlanFiscal 2023 shed light on the weakness of the Group’s supplyinventories to increase significantly over the past two years. Inchain management in response to changes in customeraddition to overly optimistic market forecasts, there wereneeds and purchasing behavior. In some regions such asinadequacies in management and supervisory functions,Europe, we were able to maintain our growth trajectory due towhich limited the effectiveness of strategy, and many issuesstrong sales of our core brands, but in Japan, China, and theremain to be addressed in order to enhance profitability.
We take seriously the fact that the results of fiscal 2023,United States, results were significantly lower than initiallyAkira MiyagiRepresentative Director, Vice President, Executive Officer and CFOWacoal Holdings Corp.

planned due to the effects of COVID-19, sluggish growth inthe first year of the medium-term management plan, fellcustomer traffic at our retail stores, and restraints onsignificantly short, and determined that it will be impossible topurchases by business partners. In addition, due to the largeachieve the targets if we do not change the way we manageimpairment loss recorded in our U.S. operations, we recordedthe Company. For this reason, we decided to conduct aa loss for the first time since our founding. As previouslycomprehensive review of our strategy. The revisedannounced, we expect to post a loss for fiscal 2024 due tomedium-term management plan was formulated with a strongweaker sales, the impact of structural reforms, and anintention to accept the reality that we are disconnected fromimpairment loss recorded due to our exit from the U.S. Weour customers and the market, and to transition to a structurefully understand that our shareholders and other stakeholdersthat can generate large amounts of cash even in the face ofare deeply disappointed about the losses that we havedrastic changes in the external environment. In the revisedincurred for two consecutive fiscal years.

medium-term management plan, in light of the severe externalThe reason we fell short of the plan was the Group’senvironment, we have pushed back our goals by one yearinability to respond to changes in the external environment.

from fiscal 2025 to fiscal 2026, and revised our initial salesNot only was our response to changes in consumer needs ingoal downward to ¥203.0 billion. On the other hand, we planterms of products and sales delayed, but our profit and lossto improve capital efficiency by strengthening our ability toplanning was overly optimistic, resulting in delays in measuresrespond to changes in customers and profitability bysuch as cost reductions. In addition, inventory controls failedreforming our business model and implementing our growthto function effectively in response to sudden sales fluctuationsstrategy, aiming for ROE of 7%.

and production delays in recent years, causing the Group’sQuantitative Targets for Wacoal in the Revised Medium-Term Management PlanInitial goalFY202545 ■ WACOAL HOLDINGSRevised target+1 yearFY2026No changeFY2031(VISION 2030)Sales revenue¥220 billion¥203 billion¥270 billionBusiness profit¥16.5 billion¥13 billion¥27 billionBusiness profit margin7.5%6.4%More than 10%ROE

6%7%More than 10%ROIC—6 to 7%More than 10%EPS¥200 or higher¥200 or higher—+1 %INTEGRATED REPORT 2023■ 46Major Items of the Revised Medium-Term Management Plan (Financial Strategy) ■A Message from the Director in Charge of FinanceRestoring Basic Earnings Power through Business Model ReformPromoting Asset Reduction to Increase Capital EfficiencyTo restore Wacoal’s profitability—a top priority for theincluding 22 directly managed stores and 10 stores inWe regard the return of profits to stakeholders as oneMedium-Term Management Plan, to restore our coreGroup—we intend to proceed with both cost structuredepartment stores, for the fiscal year under review, and wemanagement’s tasks, and place emphasis on ROE.

profitability and strengthen our financial position.

reforms and supply chain management reforms.

are currently negotiating terms for the remaining 150 or soCurrently, we recognize that our cost of equity is in the 6%In order to improve asset and capital efficiency, we haveWith regard to cost structure reforms, we have beenstores. The total cost reduction effect of these measures isrange, and the ROE level of 7% set in the revisedadopted a basic policy of selling assets that do not contributeworking to control various costs, including workforce planestimated to be approximately ¥7 billion by fiscal 2026, andmedium-term management plan is a figure that we shouldto the enhancement of corporate value. At the time of sale,management. As a result of carefully reassessing the outlookwe plan to improve the profit margin by 3 to 4 points andachieve at a minimum. Therefore, during the period of thewe will search for investment opportunities that will contributefor future sales revenues in light of the current severe businessSG&A expenses by 4 to 5 points compared to fiscal 2023.

revised medium-term management plan, we intend toto business growth and make investment decisions from theIn addition, we will consider plans to deal withimprove profitability through growth strategies and costperspective of ROIC. First, with regard to the reduction ofthe cost structure is necessary in order to transition to aunprofitable businesses and unprofitable subsidiaries. Westructure reforms, as well as promote asset reduction suchcross-shareholdings, we plan to sell approximately ¥30 billionstructure that can secure a certain level of profitability.

have already decided to exit the LIVELY business of Intimatesas lowering inventories, reducing cross-shareholdings, andworth of the agreed upon shareholdings, and reduce them toSpecifically, as part of “brand selection and concentration,”Online, Inc. in the U.S. and liquidate the company. For otherrestructuring real estate holdings. We will achieve ROE ofless than 10% of net assets by fiscal 2026. In addition, we willwe expect to reduce production lines by 40% and the numberbusinesses, we will examine the future approach without10% in VISION 2030 by improving the elements of netalso verify our real estate holdings in accordance with ourof products by 10% by fiscal 2025, resulting in costcreating sanctuaries, and decide on an action plan forincome margin, total asset turnover, and financial leverage,basic policy and respond accordingly.

reductions of ¥1.9 billion. In addition, we believe that “lowerbusiness continuity, sale, and withdrawal. During the period ofwhich represent ROE, even during the period of the nextmanufacturing costs,” “lower production and material costs,”the revised medium-term management plan, we will steadilyand “improved store profit/loss” will occur as a result of theimplement these cost structure reforms and transition to areview of the supply chain, and we expect a total effect ofstronger earnings structure that will enable us to continue toapproximately ¥2 billion. In particular, with regard to “improvedinvest in growth toward the realization of our VISION 2030.

situation, however, we have determined that further reform ofImplemented itemsReducinginventoriesstore profit/loss,” we plan to withdraw a total of 32 stores,Reducing crossshareholdingsIntroduced ROIC Management to Strengthen Our Business Management FoundationStreamlining realestate holdingsSpecific activitiesGoals●Reducing inventories through business model reforms (supply chainmanagement reform and cost structure reform)● Appropriate disposal of inventory resulting from the withdrawal andconsolidation of unprofitable brandsWacoal:Inventory turnover ratio in FY2026: 2.5 turns●Gradually selling the shareholdings that we have agreed to sellDuring FY2024 to FY2026 we will sell approx.
¥30 billion of cross-shareholdings (Reducingless than 10% of net assets by FY2026)●As for real estate that does not contribute to enhancing corporatevalue, we will proceed with consideration based on the basic policyof sellingWhile carefully examining the feasibility andvalidity, we will gradually respond (starting thephase from FY2024)The fact that we receive many comments from investors andoperating company and each division that is more consciousother external stakeholders shows that they want us toof profitability and capital efficiency than ever before, wecorrect our losing habits, correctly evaluate the value of ourintend to generate cash by promoting disciplined businessbrands, and boldly take on the challenge of growth. In fact,operations and continuously allocate these funds to humanour business performance has been downtrodden for a longresources and growth investments to achieve sustainabletime, and we have been unable to achieve not only the goalsenhancement of corporate. In preparation for the start ofThe cash allocation plan for the period of the revisedwhich necessitates the determination of the technologies andset out in the medium-term management plan but also theROIC management in April 2024, we will hold briefings on themedium-term management plan can be found on page 26.

systems that will contribute to the transformation of ourinitial plan for each fiscal year. Capital efficiency has alsointroduction of ROIC for the presidents and corporate officerOf the cash generated, net income is expected to bebusiness model. As for investments in existing businesses, weremained low. This was due to inadequacies in managementof operating companies in Japan and overseas during fiscalapproximately ¥10 billion due to the impact of one-offexpect to invest in strengthening our own e-commerce, butand supervisory functions.

2024, and then proceed with the establishment of an ROICexpenses associated with structural reforms. As mentionedwe believe that it is necessary to conduct detailed verificationGrowth Investments Focused on Capital Efficiencytree for Wacoal Corp. In addition to using ROIC as anearlier, as a result of our efforts to reduce assets and useof individual investments, run the PDCA cycle at high speed,reflected on this point and decided to introduce ROICindicator for managing financial targets, we also plan to use itdebt, we expect the total amount of cash generated over theand make appropriate corrections based on what we havemanagement to improve capital efficiency. In addition toas a means of accurately measuring results, and in the future,three-year period to be around ¥110 billion.

learned. In terms of new investments, we will seek to expandtransitioning to management at the Wacoal Holdings, eachwe plan to link it to executive compensation.

In the revised medium-term management plan, we deeplyOn the other hand, in terms of cash used, we willour business footprint in Europe and invest in growth in thecontinue to flexibly repurchase shares to improve capitalfields of beauty and health, as well as sports. We aim toefficiency, and we plan to pay dividends of approximatelyimprove the asset efficiency of the entire Group by searching¥15 billion to shareholders. With regard to growth investmentsfor investment opportunities that contribute to growth andin existing and new businesses, in addition to the drasticmaking investment decisions from the perspective of capitalchanges in customer needs and the purchasing environment,efficiency, and striving to maximize the effects.

information and communication technology is rapidly evolving,47 ■ WACOAL HOLDINGSINTEGRATED REPORT 2023■ 48Major Items of the Revised Medium-Term Management Plan (Financial Strategy) ■A Message from the Director in Charge of FinanceIntroducing ROIC managementIt has been decided to introduce ROIC management at the Group to improve capital efficiency and achieve a muscular corporatestructure. ROIC will not only be used to manage company-wide financial targets, but also as a performance management tool toaccurately measure results, quantitatively linking onsite improvement activities with the improvements in profitability and capitalefficiency expected by investors and other stakeholders.

Responsibilities as CFOIn fiscal 2024, Wacoal Corp. launched a project to create an ROIC tree, and starting in fiscal 2025, the company will operate itsbusinesses using ROIC. Furthermore, the company plans to link this to the compensation of officers starting in fiscal 2026 in orderBased on the philosophy of “empowering people with theIn the process of formulating the revised medium-termconfidence that comes from looking and feeling their best” ofmanagement plan, we held a number of discussions with anour customers, we have aimed to make the lives of all peopleunwavering determination to never undertake painful reformsaround the world better through the development andagain. In order to restore solid profit growth, going forward,provision of innerwear that satisfies both the body and thewe will check the effectiveness of our strategies at the Boardmind. However, we were unable to abandon theof Directors and the Group Strategy Committee whilemanufacturer’s belief that “Wacoal’s products are goodcooperating with external directors to regularly monitorproducts, so if we make them, they should sell,” and weprofitability, and make prompt management decisionscontinued to make overly optimistic predictions that once theaccording to business conditions. In addition, we will revitalizepandemic is under control, our business performance will gointernal communication and encourage the creation of newback to normal, which has created the current difficultcorporate value through collaboration between departments.

situation. I myself solemnly accept that we will not be able toThe situation surrounding the Group is becoming increasinglyovercome this situation and will record losses for the secondsevere. In order to steadily put the Group back on a path ofconsecutive fiscal year. I believe that the key to growing againgrowth, we will return to the customer's perspective andis for all employees to recognize the fact that they are in theundertake business revitalization with a fresh mindset.

to increase the certainty of achieving targets and effectiveness of related strategies.

Purpose of Introducing ROIC ManagementStrengthening business management functionsUse witha corporateperspectiveFinancial assessment of targetachievement status▶ Managing financial targets across theCompany▶ Optimizing the business portfolio▶ Managing new investment profitabilityEnsuring strategy effectivenessUse witha businessoperationperspective▶ Managing capital returns by theoperating company▶ Improving capital returns using theROIC tree▶ Linking with PDCA management andperformance evaluationscurrent earnings situation as a result of this disconnect fromcustomers and the market.

Achievinga returnexceedingcapital costsCash the Groupgenerates (return)Inventors/banks’expected returnSource of growthProfit as percentageof capital (ROIC)Inventors/banks’ expectedyield (WACC)Corporate value(ROIC spread)Wacoal Group about 6%Growth investments (reinvestments) and return to multi-stakeholdersIntroducing the Process of ROIC Management to Business DepartmentsKPIsInculcation ProcessTarget CompaniesFY202449 ■ WACOAL HOLDINGSFY2026HDConsider introducing ROICConducting simulations tograsp ROIC valuesStarting ROIC managementLinking to compensationWacoal (Japan)Sharing ROIC managementintroduction policyROIC study meetingsIncorporating into businessactivities (ROIC tree building)Starting ROIC managementLinking to compensationof officersLinking to compensationDomestic andoverseassubsidiariesSharing ROIC managementintroduction policyROIC study meetingsIncorporating into businessactivities (ROIC tree building)Starting ROIC managementLinking to compensationFY2026ROIC6 to 7%FY2025INTEGRATED REPORT 2023■ 50