■FORECASTS FOR FISCAL YEAR ENDING AUGUST 2008
In the interim fiscal period, net sales resulted in a slight shortfall against the forecast; however, operating income, ordinary income and net income exceeded the original estimate primarily due to successful inventory control and expense curtailment. However, our estimated consolidated net sales of ¥66,000 million, operating income of 1,900 million, ordinary income of ¥740 million, and net income of ¥50 million remain unchanged because the U.S. retail sales market condition is still facing instability, as the economy experiences a slow down due to the subprime mortgage loan problem, and also because concerns persist that Yen-denominated loans to overseas subsidiaries may take foreign exchange losses as Yen stays strong. We will focus on the sustainable growth of Theory as well as improving the profitability of other brands in our portfolio. Detailed initiatives are as follows:
(1）Europe
LTH will accelerate the growth of the Theory business in Europe first by executing an aggressive advertisement campaign in U.K., while also continuously focusing on turning around the Rosner operations through bolstering our management structure, aiming to make Rosner profitable by fiscal year 2010. A new chief designer has been assigned in order for Rosner to increase its sales by focusing on women’s in their forties, who has been originally Rosner’s constituency. Also, additional cost cutback policy will be continuously implemented.
(2）Japan
Theory stores will be renovated and expanded to maintain and improve efficiency. We will reinforce sales by promotion campaigns in cooperation with major department stores. Casual enterprise such as Urbanholics Co., Ltd. seeks to be profitable at the fiscal year end through strict profit and losses control, improving net sales and gross margin by closing and combining unprofitable stores.
(3）North America
U.S. operations has been on a track of steady sales growth and continuously seeks a healthy growth with well-balanced sales between wholesale and retail operation. We will nurture Helmut Lang as the second core brand to Theory and turn it into black in the fiscal year 2010 by expanding business. Premise seeks profit in the next fiscal year by extending sales channel with department stores.
Consolidated ordinary income may result below the amount in the last fiscal year as foreign exchange loss will be recognized (foreign exchange gain for the fiscal year 2007 was ¥918 million. estimated foreign exchange loss for this fiscal year is ¥901 million). Please note that U.S, subsidiaries’ royalty receivable offsets against principal and interest payment of Yen-denominated loan, and, thus, no impact is recognized on consolidated cash flow.
■Medium-Term Plan: LTH2010
We have announced Medium-term Plan “LTH2010” on October 10, 2007. The fundamental strategy of the new plan is to achieve “growth with sound profitability.” LTH is pursuing three initiatives under the plan: (1) optimize the brand portfolio, (2) achieve profitability of growing and turnaround brands and (3) ensure steady growth of Theory. The financial targets for the year ending 2010 are ¥80 billion in net sales, ¥6 billion in operating income with 7.5% operating margin.
In the interim fiscal period, net sales resulted in a slight shortfall against the forecast; however, operating income, ordinary income and net income exceeded the original estimate primarily due to successful inventory control and expense curtailment. However, our estimated consolidated net sales of ¥66,000 million, operating income of 1,900 million, ordinary income of ¥740 million, and net income of ¥50 million remain unchanged because the U.S. retail sales market condition is still facing instability, as the economy experiences a slow down due to the subprime mortgage loan problem, and also because concerns persist that Yen-denominated loans to overseas subsidiaries may take foreign exchange losses as Yen stays strong. We will focus on the sustainable growth of Theory as well as improving the profitability of other brands in our portfolio. Detailed initiatives are as follows:
(1）Europe
LTH will accelerate the growth of the Theory business in Europe first by executing an aggressive advertisement campaign in U.K., while also continuously focusing on turning around the Rosner operations through bolstering our management structure, aiming to make Rosner profitable by fiscal year 2010. A new chief designer has been assigned in order for Rosner to increase its sales by focusing on women’s in their forties, who has been originally Rosner’s constituency. Also, additional cost cutback policy will be continuously implemented.
(2）Japan
Theory stores will be renovated and expanded to maintain and improve efficiency. We will reinforce sales by promotion campaigns in cooperation with major department stores. Casual enterprise such as Urbanholics Co., Ltd. seeks to be profitable at the fiscal year end through strict profit and losses control, improving net sales and gross margin by closing and combining unprofitable stores.
(3）North America
U.S. operations has been on a track of steady sales growth and continuously seeks a healthy growth with well-balanced sales between wholesale and retail operation. We will nurture Helmut Lang as the second core brand to Theory and turn it into black in the fiscal year 2010 by expanding business. Premise seeks profit in the next fiscal year by extending sales channel with department stores.
Consolidated ordinary income may result below the amount in the last fiscal year as foreign exchange loss will be recognized (foreign exchange gain for the fiscal year 2007 was ¥918 million. estimated foreign exchange loss for this fiscal year is ¥901 million). Please note that U.S, subsidiaries’ royalty receivable offsets against principal and interest payment of Yen-denominated loan, and, thus, no impact is recognized on consolidated cash flow.
■Medium-Term Plan: LTH2010
We have announced Medium-term Plan “LTH2010” on October 10, 2007. The fundamental strategy of the new plan is to achieve “growth with sound profitability.” LTH is pursuing three initiatives under the plan: (1) optimize the brand portfolio, (2) achieve profitability of growing and turnaround brands and (3) ensure steady growth of Theory. The financial targets for the year ending 2010 are ¥80 billion in net sales, ¥6 billion in operating income with 7.5% operating margin.
