| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1715.1B | ¥1739.0B | -1.4% |
| Operating Income | ¥198.8B | ¥32.9B | +504.5% |
| Profit Before Tax | ¥196.5B | ¥56.8B | +246.0% |
| Net Income | ¥129.4B | ¥70.2B | +84.4% |
| ROE | 6.1% | 3.6% | - |
For the fiscal year ended March 2026, Wacoal Holdings reported Revenue of ¥1,715.1B (YoY -¥23.9B, -1.4%), Operating Income of ¥198.8B (YoY +¥165.9B, +504.5%), Ordinary Income of ¥32.6B (YoY -¥56.6B, -63.5%), and Net Income attributable to owners of parent of ¥131.2B (YoY +¥61.0B, +81.8%). Despite a decline in sales, Operating Income expanded significantly and final profit remained robust. Operating margin improved to 11.6% (prior year 1.9%), up +9.7pt, and gross margin rose to 57.3% (prior year 56.0%), up +1.3pt. However, there is a large gap between Operating Income ¥198.8B and Ordinary Income ¥32.6B, driven by an impairment loss on equity-method investments of ¥20.5B and the impact of "Other income" of ¥240.8B (non-recurring gains such as gains on disposal of fixed assets) included in Operating Income. Net Income bore corporate tax and other expenses of ¥67.1B (prior year tax income ▲¥13.4B) yet achieved a strong YoY increase of +84.4% owing to one-off gains.
Revenue amounted to ¥1,715.1B (YoY -1.4%), a slight decline. By region, Japan was ¥1,019.5B (-3.4%), Asia & Oceania ¥175.9B (-12.2%) decreased, while Europe & Americas ¥519.7B (+7.6%) remained strong. Within Europe & Americas, the UK grew substantially to ¥164.4B (+42.0%), offsetting a decline in the US to ¥280.9B (-6.9%). By segment, domestic Wacoal Business was ¥877.2B (prior ¥878.3B) almost flat, Wacoal Overseas ¥684.7B (prior ¥672.4B), Peach John ¥111.4B (prior ¥104.7B, +6.4%), Others ¥41.8B (prior ¥83.6B, -50.1%). Overall top-line was broadly flat, but margin support came from price/mix improvement and cost control, reflected in gross margin improvement to 57.3% (prior 56.0%).
Operating Income was ¥198.8B (YoY +504.5%), primarily driven by a large increase in "Other income" to ¥240.8B (prior ¥112.1B). This primarily comprises one-off items such as gains on disposal of fixed assets, consistent with the reversal in the cash flow statement item for gain/(loss) on disposal of fixed assets of -¥192.9B (prior -¥92.3B). SG&A was ¥986.9B (SG&A ratio 57.5%, prior 58.0%), an improvement of -0.5pt, but in absolute terms only declined from ¥1,008.8B to ¥986.9B (-¥21.9B), indicating limited contribution from core operating improvements. Ordinary Income was ¥32.6B (prior ¥89.2B, -63.5%), mainly due to recording an impairment loss on equity-method investments of ¥20.5B (prior ¥0.2B) at non-operating stage. Financial income ¥20.8B (prior ¥21.7B), financial expenses ¥7.9B (prior ¥5.9B), and equity-method income ¥5.4B (prior ¥8.3B) were roughly stable; the large gap between Operating Income and Ordinary Income is due to one-off losses. Profit Before Tax was ¥196.5B (prior ¥56.8B, +246.0%); after corporate tax and other of ¥67.1B (prior tax income ▲¥13.4B), Net Income attributable to owners of parent was ¥131.2B (prior ¥72.2B, +81.8%). While prior year benefited from tax income, the current period achieved profit growth despite normalized tax burden due to one-off gains. In summary, this is an unusual result: despite lower sales, one-off gains (gains on disposal of fixed assets) and improved gross margin drove a large operating profit increase, impairment on equity-method investments led to an Ordinary Income decline, but Pretax and Net Income increased.
By segment operating profit, Domestic Wacoal Business improved sharply to ¥187.9B (prior ¥29.7B, margin 21.4%), driving consolidated profit. Wacoal Overseas was ¥4.9B (prior ¥4.2B, margin 0.7%) a slight increase but at low level, Peach John turned profitable to ¥1.5B (prior ▲¥2.7B, margin 1.3%), Others improved to ¥4.5B (prior ¥1.7B, margin 10.8%). The large domestic improvement is estimated to be primarily due to one-off gains (gains on disposal of fixed assets) rather than core operating improvement, suggesting an outcome of asset efficiency measures. Overseas business, despite Europe & Americas revenue growth, remains at a low margin of 0.7%, suggesting pressure from logistics costs and front-loaded investments. Peach John achieved revenue growth and turned profitable, but margin at 1.3% indicates significant room for improvement.
Profitability: Operating margin 11.6% (prior 1.9%) rose sharply due to one-off gains such as gains on disposal of fixed assets; gross margin 57.3% (prior 56.0%) reflects price/mix improvement; ROE 6.5% (prior 3.6%) improved with higher Net Income but remains below the company's historical average (estimated 7–8%). Cash Quality: Operating Cash Flow/Net Income is a low 0.65x, indicating one-off gains inflate P&L profits while cash conversion is weak. OCF/EBITDA (Operating Income ¥198.8B + Depreciation & Amortization ¥111.7B ≒ EBITDA ¥310B) is about 0.27x, highlighting working capital efficiency issues. Investment Efficiency: Total asset turnover 0.59x (Revenue ¥1,715B ÷ average total assets ≒ ¥2,825B) is low; inventory days about 255 days (Inventories ¥511.1B ÷ daily cost of goods sold), CCC about 230 days, both prolonged and necessitating urgent inventory reduction. Financial Soundness: Equity Ratio 71.7% (prior 70.4%) is solid; interest-bearing debt (short-term borrowings ¥68.2B + long-term borrowings ¥54.4B) ¥122.6B vs. cash and equivalents ¥441.7B results in net cash position; current ratio 265% indicates ample liquidity.
Operating Cash Flow improved to ¥84.9B (prior ¥49.7B, +70.9%) but remains low at 0.65x of Net Income ¥131.2B, leaving questions on cash generation. Operating cash flow subtotal (before working capital changes) was ¥104.7B (prior ¥85.6B); adding non-cash expenses of Depreciation & Amortization ¥111.7B and impairment losses ¥11.9B (prior ¥23.7B), and adjusting for gain/(loss) on disposal of fixed assets -¥192.9B (prior -¥92.3B) resulted in the P&L one-off gains being deducted from OCF. Working capital contributed negatively: inventories +¥12.8B (cash out), trade payables -¥29.3B (reduction in payables), retirement benefit assets ▲¥42.3B (increase in assets) were negative contributors, and corporate tax payments ▲¥54.5B (prior ▲¥62.5B) also weighed. Investing Cash Flow was +¥361.0B (prior +¥93.8B) largely due to proceeds from disposal of fixed assets ¥274.2B (prior ¥115.7B) and disposal of financial assets ¥131.6B (prior ¥78.3B), while capital expenditures were ▲¥33.2B and intangible asset additions ▲¥8.1B. Financing Cash Flow was ▲¥262.9B (prior ▲¥229.5B) including share buybacks ▲¥124.7B (prior ▲¥170.1B), dividend payments ▲¥50.7B (prior ▲¥54.6B), lease repayments ▲¥57.3B (prior ▲¥57.5B), and long-term borrowings repayments ▲¥64.8B (prior ▲¥16.8B). Free Cash Flow was Operating CF ¥84.9B + Investing CF ¥361.0B = ¥445.8B (prior ¥143.5B), a high level but heavily dependent on asset sale proceeds, raising sustainability concerns. Cash and cash equivalents increased by +¥207.5B from ¥234.2B to ¥441.7B, significantly improving liquidity.
Earnings quality is limited: one-off gains in "Other income" ¥240.8B (equivalent to 121% of Operating Income) are the main driver, indicating limited recurring earning power. The composition of "Other income" is mainly non-recurring gains centered on disposal of fixed assets, and the cash flow statement adjustment of gain/(loss) on disposal of fixed assets -¥192.9B shows these P&L one-offs reduce cash-based Operating Cash Flow. Financial income ¥20.8B (including ¥18.2B dividends) is a stable non-operating income source, but the impairment loss on equity-method investments ¥20.5B worsened non-operating profitability. From an accrual perspective, Operating CF/Net Income 0.65x is low; inventory increase +¥8.9B (B/S increase) and trade payables decrease ▲¥33.7B (B/S decrease) are factors causing divergence between profit and cash. Increase in retirement benefit assets (+¥39.1B) lifted comprehensive income via OCI but is a non-cash valuation gain and does not contribute to core cash earnings. Overall, the large P&L profit increase depends on asset disposal gains and other temporary factors, necessitating cautious assessment of sustainable earnings quality.
Full-year guidance anticipates Revenue ¥1,876.0B, Operating Income ¥15.0B (YoY -92.5%), and Net Income attributable to owners of parent ¥18.0B (YoY -86.3%), signaling a sharp profit decline. The Operating Income guidance of ¥15.0B is ¥183.8B below this fiscal year’s actual ¥198.8B, reflecting an expected reversal of one-off gains (gains on disposal of fixed assets) and a conservative plan that incorporates inventory correction and potential re-escalation of costs. Revenue guidance ¥1,876.0B implies an increase of +9.4% vs. this fiscal year, but Operating margin is forecast to drop substantially to 0.8% (this year 11.6%), making core business profitability improvement the top priority next year. The company intends to maintain annual dividend at ¥50 per share, but against forecast EPS of 36.41 yen this implies a Payout Ratio of 137%, which is high and suggests dividend funding will likely draw on retained earnings and cash reserves. Achieving guidance will hinge on inventory efficiency improvements, appropriate SG&A control, and raising overseas business margins.
Annual dividend is ¥100 (interim ¥50, year-end ¥50, same as prior year), total dividend amount ¥52.9B (the cash flow statement shows ¥50.7B as parent company portion). Dividend payout relative to current Net Income ¥131.2B is approximately 40%, a reasonable level, but against next year’s forecast EPS of 36.41 yen, a ¥50 dividend implies a payout ratio of 137%, indicating a high payout in a lower-profit scenario. Share buybacks totaled ¥124.7B (prior ¥170.1B), and ¥140.6B worth were retired during the period. Dividends ¥52.9B + share buybacks ¥124.7B = total return ¥177.6B; relative to FCF ¥445.8B this yields a Total Return Ratio of 39.8%, which appears reasonable, but FCF is heavily dependent on asset sale proceeds and sustainability of returns depends on improved OCF generation. The policy is stable dividends, with two consecutive years of ¥100 annual dividend, but maintaining payout amid the next-year large profit decline guidance will depend on progress in inventory correction and Operating CF improvement.
Inventory stagnation & high CCC risk: Inventory days ~255 days and CCC ~230 days are prolonged, raising risks of markdowns/obsolescence and downward pressure on gross margin. Poor working capital efficiency is reflected in Operating CF/Net Income 0.65x; if inventory compression does not progress, cash generation could be further impaired.
One-off gain dependency risk: Of Operating Income ¥198.8B this period, "Other income" ¥240.8B (gains on disposal of fixed assets, etc.) was the main driver, indicating limited core operating strength. Next-year guidance Operating Income ¥15.0B assumes a sharp reversal of one-offs and costs associated with inventory correction. Sustainability of earnings is uncertain.
Low profitability in overseas business: Wacoal Overseas operating margin at 0.7% remains low; despite Europe & Americas sales growth of +7.6%, profit contribution is limited. Upside risks include logistics cost overruns and front-loaded investments; failure to monetise overseas operations would limit company-wide margin improvement.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 6.5% | 5.9% (2.6%–12.0%) | +0.6pt |
| Operating Margin | 11.6% | 4.6% (1.7%–8.2%) | +7.0pt |
| Net Margin | 7.5% | 3.3% (0.9%–5.8%) | +4.2pt |
All profitability metrics exceed industry medians, particularly Operating Margin which is +7.0pt above the median, but given the large one-off contribution, sustainability requires scrutiny.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.4% | 4.3% (2.2%–13.0%) | -5.7pt |
Revenue growth lags the industry median by -5.7pt; earnings improvement was mainly from one-offs and cost actions, indicating competitive challenges on growth.
※ Source: Company compilation
This period’s large Operating Income increase was mainly driven by one-off gains such as gains on disposal of fixed assets (¥240.8B), and core operating improvement appears limited. Next-year guidance of Operating Income ¥15.0B indicates a large year-on-year profit drop, presumably reflecting the reversal of one-offs and costs for inventory correction. Key monitoring points are progress in normalizing inventory turns and CCC (≈230 days), and whether domestic Wacoal Business can maintain double-digit operating margin (21.4% this period) after the one-off items fall away.
Financial base and liquidity are strong with Equity Ratio 71.7% and cash & equivalents ¥441.7B, giving capacity for dividends and buybacks. However, given next-year guidance implying a Payout Ratio of 137%, shareholder returns will likely be calibrated against profit levels and inventory correction progress. Weak cash conversion (Operating CF/Net Income 0.65x) indicates that transitioning to OCF-led FCF generation is key for medium-term sustainability of returns. Improving inventory efficiency, raising overseas margins, and reducing dependence on one-off gains are structural challenges for sustainable ROE and dividend growth.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the company based on publicly disclosed financial statements and are for reference only. Investment decisions are your own responsibility; consult a professional advisor as necessary.