LTH continues to improve the value of the Theory brand, through the implementation of targeted events such as the one entitled “THEORY 10-BACK TO THE ROOTS”, which commemorated the 10th anniversary of the brand. Moreover, LTH has intensively reinforced its growth potential, by focusing on nurturing the new brands such as Helmut Lang and Proof, to complement and add to Theory.
In Japan, LTH recorded ¥11,748 million (+0.1% year-on-year) in net sales, as a result of refraining from the new opening of retail stores, with the goal of maintaining and enhancing Theory’s brand value. Boosted by new retail store openings in the U.S. coupled with a sales increase of new brands such as Helmut Lang and Premise, net sales from U.S. operations reached ¥16,193 million (+18.2% year-on-year). In Europe, net sales decreased to ¥4,223 million (-12.1% year-on-year) due to the sluggishness of the performance of Rosner brand.
LTH’s consolidated net sales increased by 4.8% year-on-year. As a result of a number of measures of cost cuts such as stringent inventory control in Japan, U.S. and Europe, costs of sales were down ¥637 million to ¥14,224 million from the previous corresponding period. Consequently, consolidated gross profit margin was 54.2%, significantly improving 4.4 points from 49.8% year-on-year. Consolidated selling, general and administrative expenses (SG&A) reached ¥15,421 million, up ¥787 million from the previous corresponding period. SG&A of Japan operations increased to ¥5,284 million by ¥272 million year-on-year, due to reasons such as the increase of personnel cost caused by the shortage of manpower. SG&A of the U.S. operations rose to ¥7,792 million, up ¥739 million year-on-year as consequence of increased expenses related to opening of new retail stores, and expenses associated with sales promotion and development related to growing brands. In Europe, SG&A shrunk to ¥2,306 million by ¥244 million from the previous corresponding period. Because of the valuation loss of Yen-denominated loans to overseas subsidiaries due to the appreciation of Yen against U.S. Dollar, LTH recorded a foreign exchange loss in the amount of ¥895 million. LTH received a distribution attributable to the sale of its indirect investment in Seven For All Mankind, LLC, a casual clothing brand in the U.S. As a result of the distribution receipt, LTH included ¥1,014 million of extraordinary income. A wholly-owned subsidiary of LTH has been the exclusive distributor for all 7 For All Mankind products sold in Japan and there will be no change to that relationship as a result of the sale.
As a result, LTH recorded, on a consolidated basis, ¥31,045 million (+4.8% year-on-year) in net sales, ¥1,399 million (+1,122.1% year-on-year) in operating income, ¥429 million (+2.2% year-on-year) in ordinary income and ¥360 million (¥4,640 million net loss in the interim 2007) in net income.
In Japan, LTH recorded ¥11,748 million (+0.1% year-on-year) in net sales, as a result of refraining from the new opening of retail stores, with the goal of maintaining and enhancing Theory’s brand value. Boosted by new retail store openings in the U.S. coupled with a sales increase of new brands such as Helmut Lang and Premise, net sales from U.S. operations reached ¥16,193 million (+18.2% year-on-year). In Europe, net sales decreased to ¥4,223 million (-12.1% year-on-year) due to the sluggishness of the performance of Rosner brand.
LTH’s consolidated net sales increased by 4.8% year-on-year. As a result of a number of measures of cost cuts such as stringent inventory control in Japan, U.S. and Europe, costs of sales were down ¥637 million to ¥14,224 million from the previous corresponding period. Consequently, consolidated gross profit margin was 54.2%, significantly improving 4.4 points from 49.8% year-on-year. Consolidated selling, general and administrative expenses (SG&A) reached ¥15,421 million, up ¥787 million from the previous corresponding period. SG&A of Japan operations increased to ¥5,284 million by ¥272 million year-on-year, due to reasons such as the increase of personnel cost caused by the shortage of manpower. SG&A of the U.S. operations rose to ¥7,792 million, up ¥739 million year-on-year as consequence of increased expenses related to opening of new retail stores, and expenses associated with sales promotion and development related to growing brands. In Europe, SG&A shrunk to ¥2,306 million by ¥244 million from the previous corresponding period. Because of the valuation loss of Yen-denominated loans to overseas subsidiaries due to the appreciation of Yen against U.S. Dollar, LTH recorded a foreign exchange loss in the amount of ¥895 million. LTH received a distribution attributable to the sale of its indirect investment in Seven For All Mankind, LLC, a casual clothing brand in the U.S. As a result of the distribution receipt, LTH included ¥1,014 million of extraordinary income. A wholly-owned subsidiary of LTH has been the exclusive distributor for all 7 For All Mankind products sold in Japan and there will be no change to that relationship as a result of the sale.
As a result, LTH recorded, on a consolidated basis, ¥31,045 million (+4.8% year-on-year) in net sales, ¥1,399 million (+1,122.1% year-on-year) in operating income, ¥429 million (+2.2% year-on-year) in ordinary income and ¥360 million (¥4,640 million net loss in the interim 2007) in net income.
CONSOLIDATED INTERIM BALANCE SHEETS
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| CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN NET ASSETS | |||||||||||||
| Millions of yen | |||||||||||||
| Shareholders’ equity | Valuation, translation adjustments and other | ||||||||||||
| Common stock | Capital surplus | Retained earnings | Total Share holders’ equity |
Unrealized holding gain on securities | Unrealized gain and loss on hedging instruments | Translation adjustments | Total valuation, translation adjustments and other | Minority interests | Total net assets | ||||
| Balance as of August 31, 2007 | 6,369 | 7,956 | (2,008) | 12,317 | |
(0) | 10 | 297 | 308 | 13 | |
12,638 | |
| Changes during the term | |||||||||||||
| Issuance of common stock | 27 | 27 | 54 | 54 | |||||||||
| Decrease in capital surplus | (3,503) | 3,503 | - | - | |||||||||
| Net income | 360 | 360 | 360 | ||||||||||
| Net changes in items other than those in shareholders’equity | (0) | (53) | (600) | (653) | 1 | (652) | |||||||
| Total changes during the term | 27 | (3,476) | 3,846 | 414 | (0) | (53) | (600) | (653) | 1 | (237) | |||
| Balance as of February 29, 2008 | 6,396 | 4,479 | 1,856 | 12,732 | (0) | (42) | (302) | (345) | 14 | 12,401 | |||
Financial Position
Assets, liabilities and net assets
At interim fiscal period end, LTH had consolidated total current assets of ¥18,889 million, down ¥2,061 million from the previous fiscal year end, primarily due to a decrease in cash and cash equivalents by the repayment of loans made by the U.S. and German subsidiaries and a decrease in notes and account receivables. The total fixed assets were down ¥1,815 million to ¥21,666 million as a result of decrease in trademarks and goodwill and a dividend income from an investment by a subsidiary. As a result, consolidated total assets stood at ¥40,555 million, down ¥3,876 million from the previous fiscal year end.
Total current liabilities amounted to ¥10,199 million at interim fiscal year end, down ¥2,593 million from the previous fiscal year end. The decline mainly stemmed from a decrease in accounts payable for Fall/Winter season items and the loan repayment made by the U.S. subsidiary. Total fixed liabilities fell ¥1,045 million to ¥17,954 million, primarily due to the loan repayment by German subsidiary. Consequently, total liabilities declined ¥3,639 million to ¥28,153 million. Total net assets fell ¥237 million to ¥12,401 million as a decrease in translation adjustments overwhelmed net income.
Assets, liabilities and net assets
At interim fiscal period end, LTH had consolidated total current assets of ¥18,889 million, down ¥2,061 million from the previous fiscal year end, primarily due to a decrease in cash and cash equivalents by the repayment of loans made by the U.S. and German subsidiaries and a decrease in notes and account receivables. The total fixed assets were down ¥1,815 million to ¥21,666 million as a result of decrease in trademarks and goodwill and a dividend income from an investment by a subsidiary. As a result, consolidated total assets stood at ¥40,555 million, down ¥3,876 million from the previous fiscal year end.
Total current liabilities amounted to ¥10,199 million at interim fiscal year end, down ¥2,593 million from the previous fiscal year end. The decline mainly stemmed from a decrease in accounts payable for Fall/Winter season items and the loan repayment made by the U.S. subsidiary. Total fixed liabilities fell ¥1,045 million to ¥17,954 million, primarily due to the loan repayment by German subsidiary. Consequently, total liabilities declined ¥3,639 million to ¥28,153 million. Total net assets fell ¥237 million to ¥12,401 million as a decrease in translation adjustments overwhelmed net income.
Cash Flows
At interim fiscal year end, cash and cash equivalents totaled ¥5,159 million, down ¥512 million from ¥5,672 million at the previous fiscal year end.
Net cash provided by operating activities increased 71.8% to ¥700 million. Major factors in the increase were mainly attributable to ¥1,248 million income before income tax and ¥550 million decrease in accounts receivable in contrast of ¥477 million increase in inventories and ¥676 million decrease in accounts payable.
Net cash provided by investing activities amounted to ¥756 million compared to ¥1,549 million in net cash used in a year earlier. The main increasing factor was that U.S. subsidiary received a cash distribution on the sale of its indirect investment, off set by purchases of property and equipment in the amount of ¥731 million.
Net cash used in financing activities decreased 65.1% to ¥1,949 million compared to the previous fiscal year. This is mainly a result of a net decrease of ¥2,001 million in bank debt.
At interim fiscal year end, cash and cash equivalents totaled ¥5,159 million, down ¥512 million from ¥5,672 million at the previous fiscal year end.
Net cash provided by operating activities increased 71.8% to ¥700 million. Major factors in the increase were mainly attributable to ¥1,248 million income before income tax and ¥550 million decrease in accounts receivable in contrast of ¥477 million increase in inventories and ¥676 million decrease in accounts payable.
Net cash provided by investing activities amounted to ¥756 million compared to ¥1,549 million in net cash used in a year earlier. The main increasing factor was that U.S. subsidiary received a cash distribution on the sale of its indirect investment, off set by purchases of property and equipment in the amount of ¥731 million.
Net cash used in financing activities decreased 65.1% to ¥1,949 million compared to the previous fiscal year. This is mainly a result of a net decrease of ¥2,001 million in bank debt.
