A Message from Management

A Message from Management

A Message to Our Shareholders

Takeshi Hirouchi
Representative Director
and Chairman
Michinobu Yasumoto
Representative Director
and President

We would like to take this opportunity to express our heartfelt sympathy to the people affected by the Kumamoto earthquakes in 2016. Our thoughts are with you, and we pray for the earliest possible reconstruction of the disaster-affected region.
Fiscal year 2016, ended February 29, 2016, marked our 69th business year.
The business domain of the Onward Group is “a world of fashion that gives refreshment and beauty to people’s lives.” Our management philosophy is to propose “fashions” suited to all kinds of life scenes as a part of our living culture. By creating new values and lifestyles, we aim to contribute to the enrichment of people’s lives.
In fiscal year 2017, we will launch a new medium-term management plan. Under this plan, we will implement growth strategies guided by the basic policies of providing a diverse sense of value and broadening our customer base.
Among business strategies, we will accelerate our omni-channel strategy, which combines the strengths of our e-commerce and store operations. We will also forge ahead with expansion in global markets, with our eyes turned, in particular, to the future growth of the Asian market. In addition, we will endeavor to boost managerial efficiency in accordance with capital measures, thereby targeting improvements in corporate value and shareholder value.
We would like to express our gratitude to all our shareholders for their continuing support, cooperation, and trust.

Operating Environment and Overall Performance

In fiscal year 2016, the Japanese economy experienced a modest recovery, supported by economic stimulus measures instituted by the Japanese government and monetary easing policies implemented by the Bank of Japan. Overseas, however, conditions were sluggish in China and other economies, and geopolitical risks plagued the Middle East and Europe. The outlook remained opaque as a result.
In the apparel and fashion industries, luxury items and demand from inbound tourists supported performance, but overall store sales faced difficult conditions, owing to frugal consumer behavior and the adverse impact of a warm winter on sales of winter clothing.
In this operating environment, the Onward Group proceeded with the reinforcement of its core businesses, as well as growth businesses. We also continued to be proactive in the development of new businesses for future growth.
In the domestic business, performance suffered from lower March sales, which fell from the previous year when sales were buoyed by the demand rush preceding the consumption tax hike, as well as the adverse impact of the warm winter beginning in November, which placed downward pressure on sales. We were unable to counterbalance the heavy weight of these negative factors despite our efforts to bolster promotions for key brands and to deploy our omni-channel strategy, which aims to improve customer satisfaction by integrating the management of inventories for brick-and-mortar stores and directly managed e-commerce website Onward Crosset.
Overseas, attempts to improve earnings in the European business were delayed, leading to poor performance. Meanwhile, earnings continued to recover in our North American and Asian businesses.

Consolidated operating performance in fiscal year 2016
Sales 263,516 million yen (down 6.4% year on year)
Operating profit 3,778 million yen (down 34.1%)
Recurring profit 5,504 million yen (down 23.1%)
Net income 4,278 million yen (up 1.8%)

Overview of Operations by Segment

Apparel Business

In domestic business, at core operating subsidiary Onward Kashiyama Co., Ltd., the e-commerce business posted strong performance in line with plans, and global brands, such as JOSEPH and TOCCA, continued to sell well. However, costs rose in conjunction with yen depreciation, and clothing sales struggled in department stores and other major distribution channels. As a result, both sales and profits were down.
Overseas, we strengthened operating foundations and secured stable earnings for production operations in Europe, but performance suffered in brand businesses due to delays in our response to demand fluctuations that resulted from external factors. We were able to improve performance in North America and Asia, however, through streamlining business structures and store networks.

Apparel business
Sales 248,467 million yen (down 6.0% year on year)
Operating profit 5,557 million yen (down 36.8%)

Other Business

In our service business, selectively concentrated efforts led to reduced sales but higher profits. Our resort business performed favorably, also posting higher profits despite lower sales.

Other business
Sales 15,048 million yen (down 12.5% year on year)
Operating profit 629 million yen (up 61.5%)

Outlook for Fiscal Year 2017

Amid the continuation of the quantitative and qualitative easing policies of the Bank of Japan, the domestic economy will continue to be affected by deflation. One factor behind this outlook is a strong sense of wariness about the direction of the global economy, itself a product of the slowdown in the Chinese economy.
In the apparel and fashion industries, progress in globalization and the trend toward selection and concentration of business activities will serve as a backdrop for ongoing difficult conditions characterized by fierce competition. In this operating environment, the Onward Group will seek to improve product value and enhance customer service in its core businesses with the aim of steadily improving profitability. At the same time, we will develop new business fields with a promising outlook for growth.
In our domestic operations, we will focus on improving the margins of existing core operations at Onward Kashiyama and other important subsidiaries and on expanding operations in new business fields.
Overseas, we will heighten our growth potential by utilizing our manufacturing platform in Europe to globalize our operations while strategically expanding our Asian business.

Consolidated operating performance forecast for fiscal year 2017
Sales 254.0 billion yen (down 3.6% year on year)
Operating profit 4.5 billion yen (up 19.1%)
Recurring profit 5.6 billion yen (up 1.7%)
Net income 4.5 billion yen (up 5.2%)