MIZUNO Corporation
Financial Report The 97th Period (Year ended March 31, 2010)
This report includes forecasts based on our assumptions, outlook and plans for the future as of May 20, 2010, which may substantially differ from the actual results due to risks and uncertainties relating to the global economy, competitors’ situations, changes in exchange rates, etc. 1/22 ContentsContents
FY09 Business Results
Progress of Current Business Tasks
Principal Category Highlights for Regrowth
Regional Highlights
FY10-FY12 Medium-Term Plan
2/22 IncomeIncome StatementStatement Revenue decreased in Japan, the Americas and Asia ( in local currency). Operating profit ratio maintained previous level by reduction of SG&A expenses (A&P expenses, etc.) (billion JPY) FY08 FY09 Versus 2008
Revenue 162.0 148.7 –8.2%
Gross margin 65.8 60.6 –7.9%
Gross margin ratio 40.6% 40.8% +0.2 P
SG&A expenses 62.9 57.9 –8.1% SG&A expenses ratio 38.8% 38.9% +0.1 P
Salaries and bonus 20.4 19.9 –2.5%
A&P expenses 12.7 10.4 –17.8%
Operating profit 2.9 2.8 –4.4%
Operating profit ratio 1.8% 1.9% +0.1 P
Ordinary profit 1.5 3.0 +10.3.6%
Ordinary profit ratio 0.9% 2.1% +1.2 P Net income (Loss) (2.4) 1.6 -
JPY / USD 103.68 93.52
JPY / GBP 175.05 147.27 3 JPY / EUR 144.40 130.59 /22 BalanceBalance SheetSheet Inventory reduced in all consolidated companies toward the right conditions. Debt reduction (reduction of interest expenses), derived from efficient control of current capital . (billion JPY) March 31, 2009 March 31,2010 +/– Total assets 132.6 128.8 –3.8 Cash and cash equivalents 9.5 12.5 +3.0 Accounts receivable 32.8 32.5 –0.3 Inventories 27.4 24.3 –3.1 Fixed assets 40.2 38.9 –1.3 Investment in securities 7.7 8.0 +0.3 Deferred tax assets 5.5 4.5 –1.0 Total liabilities 58.1 52.9 –5.2 Short-term debt 15.6 8.8 –6.8 Long-term debt 9.8 10.8 +1.0 Other liabilities 32.7 33.3 +0.6 4 Net assets 74.5 75.9 +1.4 /22 OutlineOutline ofof FY09FY09 BusinessBusiness ResultsResults Revenues decreased in Japan, the Americas and Asia (in local currency). Operating profit ratio maintained previous level by reduction of SG&A expenses (A&P expenses, etc.) Ordinary profit and Net income increased due to improvement of non-operating factors. vs. 2008 RevenueRevenue JPYJPY 148.7148.7 billibillionon –13.3–13.3 billionbillion (–8.2%)(–8.2%)
Impact of exchange rate fluctuations –4.6 billion (–2.8%) Decrease excl. impact of exchange rate fluctuations –8.7 billion (–5.4%) Sales of golf items and sporting footwear grew in Europe on a currency-neutral basis. Sales shows signs of recovery from later in the year, despite the large impact of slackness of golf items and fall in revenues at the beginning of the year in Japan and the Americas.
OperatingOperating profitprofit JPYJPY 2.82.8 billionbillion –0.1–0.1 billionbillion (–4.4%)(–4.4%)
Healthier conditions have been set to gain higher level of gross margin ratio from successful reduced inventory. Effect of cutbacks on SG&A expenses (A&P Expenses, etc.) keeps SG&A expenses ratio at same level the previous year.
OrdinaryOrdinary profitprofit JPYJPY 3.03.0 billionbillion –1.5–1.5 billionbillion (+103.6%)(+103.6%) Reduction of exchange rate loss from yen translation of European branch assets, etc. (current term end: JPY 140.37/GBP, JPY 124.89/EUR; Previous term end: JPY 140.52/GBP, JPY 129.84/EUR)
NetNet profitprofit JPYJPY 1.61.6 billbillionion +4.0+4.0 billionbillion (–)(–) Due to extraordinary loss (from write-downs of securities), reversal of deferred tax assets (deferred income taxes), etc. in previous year 5/22 Revenue Increase/Decrease Analysis (by region)
Revenue by region without impact of exchange rates, and with the impact of exchange rates
162.0 Europe Americas +0.6 billion Japan –1.9 billion Asia/Aus (105.7%) Incl. export (91.4%) –2.1 billion Impact of (81.1%) Exchange rate –5.2 billion –4.6 billion (95.6%) Europe: -1.5 Americas: -2.1 148.7 Asia: –0.9 Japan: Revenues decreased due to decline in footwear sales prices and fall in sales of golf items at the beginning of the year. Europe: Growth of footwear (England, Germany, etc.) and golf items (England, northern Europe, etc.) Americas: Revenues decreased while inventory adjustments at retailers were settled and recovery trended in latter part of the year. Asia/Aus: In China, Sales decreased due to shops scrapping-and-building with tough competition in the background such as emerging domestic brands.
FY2008 Revenue FY2008 FY2009 111.8 10.1 18.4 8.3 Japan Europe Americas Asia/Aus
(incl. exports) Revenue FY2009 FY2008 117 11 22.5 11.4
FY2008 FY2009 (Unit: billion JPY) 6/22 Revenue Increase/Decrease Analysis (by product) Increase/decrease in consolidated revenue by product, including impact of exchange rates
Golf items 162.0 Europe: Marked a decrease due to impact of exchange rates, though steady growth was shown on a local currency basis. Japan, Americas: Effect of decreased sales early on but recovered later in the year. Baseball goods (incl. shoes, wear) –1.1 billion Sports Apparel (97.2%) –3.0 billion (91.0%) Sports Footwear –2.6 billion 148.7 Apparel, footwear (91.7%) Europe: Marked a decrease due to impact of Golf goods Other exchange rates, despite increase on a (incl. shoes, wear) –2.9 billion local currency basis. –3.8 billion (90.8%) Japan: Average unit prices fell (sales price range fell.) (86.3%) China: Sales decreased greatly. FY2009 FY 2008 Revenue FY 37.3 29.9 28.3 24.5 28.5
Baseball Sports Sports Golf Other apparel footwear FY2008 Revenue 2009 FY 38.4 32.9 30.9 28.3 31.4
FY2008 (Unit: billion JPY) FY2009 7/22 IndexIndex ofof FinancialFinancial ConditionsConditions
Efficiency (defensive) strategy such as reduction in assets, etc. show certain results on a decreasing stage. The issue is high-value added growth (offensive) strategy (described on next page). FY2008 FY2009 Versus 2008
Return on Assets (ROA) 2.3% 2.3% No change
Return on Equity (ROE) –3.1% 2.1% +5.2 P
Shareholder’s equity ratio 56.1% 58.8% +2.7 P
Earnings per share (EPS) –¥19.35 ¥12.86 +¥32.21
Book-value per share (BPS) ¥596.67 ¥607.87 +¥11.20
Price book-value per ratio (PBR) 0.68 0.68 No change
Price at end of fiscal year ¥404 ¥413 —
Dividend payout ratio n/a 77.8% —
8/22 CurrentCurrent businessbusiness taskstasks 1. Golf Business Recovery trend of sales since 2nd Golf Club: Integrate all processes from development half of FY09 to just before mass production Custom fitting programs got results Strengthen sales of irons with Enhancement of in each region. Custom Fitting program Inventory balance at end of FY09 Increase business efficiency Inventory amount: 80% year-on-year For regrowth of business Custom Fitting Programs Staple items Global: introducing new JPX AD series fitting system for efficiency They have the best-suited shaft length for Japan: Collaboration with long distance. the biggest key account
MP iron series works very well. Shaft optimizer and MP-58 received Editor’s choice award by Success of contract players new fitting cart Golf Digest USA. Mayu Hattori won the “Fuji Sankei Classic”. Increase Global models Improving efficiency for cost and marketing Development for Asian Market Expanding products for women “Gateway to the Open - Mizuno Dream Cup” Introduction of JPX series for women Started 23 games New items produced by Moe Oshikiri, in 8 countries who is a famous fashion model Anyone can enter the games and have a chance to participate “The Open” if they win the final stage. 9/22 CurrentCurrent businessbusiness taskstasks 2. Business in China Excess inventory Strengthen competitive sports Improved efficiency Decrease of accumulated categories inventory from previous period • Reducing inventory and Start of “Mizuno Dream Cup” is completed. expenses Renew official shoes provider FY09 Ending balance: • Improve operational efficiency of contract with China table tennis 75% year-on-year existing stores. national team “Scrap & Build” stores Rebuilding brand image End of Mar ‘09: 817 stores • Differentiation as a “serious sports brand” End of Mar ‘10: 576 stores (direct store ratio: 38%) 3. Inventory control Return to proper inventory Enhancing purchasing control levels Reducing accumulated stock FY09 Ending balance: 89% year on year (JPY –3.2 billion) The Next Step Recovering healthy balance Cut interest-bearing debt Improve inventory turns sheet FY09 Ending balance: Sales growth with current inventory levels 77% year-on-year 29.2 30 28.5 7.0 28 27.0 27.4 6.5 Inventory Balance by region 26 24.3 (billion JPY) Mar '09 Delta Mar '10 24 6.0 6.1 6.0 Japan 18.7 -2.2 16.5 22 5.8 5.8 5.8 5.5 Europe 1.2 -0.2 1.0 20 5.0 Americas 5.3 -0.7 4.6 18 Asia/Aus 3.7 -0.9 2.9 16 4.5 Adjustment -1.5 0.8 -0.7 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10 Total 27.4 -3.2 24.3 10 /22 Ending Balance Inventry Turns ForFor RegrowthRegrowth –– OutlineOutline
Running Promotion activities
Work on running business globally Mizuno Running Series Exhibit a booth at some major marathon Staple Items events Add value to the “Mizuno Wave” Start “Precision Fit Online” “Gender engineering” Set up a Running Station at Yodoyabashi “Dynamotion Fit” retail shop Increase the number of high functional apparels “Bio Frame” Soccer Promotion activities Support Japanese national team member’s Expand soccer business with Traditional & soccer shoes Innovative items Staple Items 25th anniversary model of “MORELIA” MF Keisuke Honda MF Yuki Abe Our masterpiece soccer shoes (IGNITUS MD) (WAVE IGNITUS MD) IGNITUS Bio-control panel Support Keisuke Honda’s non-spinning kicks FW Shinji Okazaki MF Kengo Nakamura 11 /22 (WAVE CUP SUPER LIGHT) (MORELIA II) ForFor RegrowthRegrowth –– OutlineOutline Promotion activities Baseball Active players around the world Work on baseball business with Ichiro and Hideki Matsui move about as advisory staff Japan & USA mainly USA Introduce “Glove Steamer” to retailer shops Staple Items Support sales with courteous services. New sub brand “Global Elite” Koshien Baseball Stadium “Mizuno Square” Main concept is “lightness” & “durability” Use naming rights and promote at some events. Grow up with two major sub brands.
Racket sports Promotion activities Establish Racket business including Expand channels with artificial shuttlecock. Asian market. Use official supplier contracts Staple Items Japanese table tennis national team Chinese table tennis national team (shoes) Artificial shuttlecock “NS300” Japanese soft tennis national team Sales beyond our expectations. “Mizuno Wave” table tennis shoes 12 /22 ForFor RegrowthRegrowth –– OutlineOutline
Swimming Promotion activities Year of Resurrection Held around some test swimwear events Future plans to expand overseas Active swimmers who wear Mizuno swimwear Staple Items Kousuke Kitajima: achieved a new Japan record RX: a textile fabric swimwear Hidemasa Sano: achieved a new Japan record that holds a flat position Aya Terakawa: 3 gold medals at Japan championships MX-01: a lightweight textile Frederic Basket: 2 gold medals at France championships fabric swimwear that has Federica Pellegrini: 4 gold medals at Italy championships RX MX-01 excellent fit Walking, Health, etc. Promotion activities Collaboration with JTB Deploy to other fields of competition. Promote at some walking events. Staple Items Straw sandals make the body Walking shoes LD series lean forward. Sold over 220,000 pairs Therefore, it is easy to walk WAVE REVIVE with little power. Easy to walk long distances like straw sandals Managing 64 facilities nationwide Sports facility service (including our facilities) To offer places for sports and health Started new company, “Mizuno Sports 13 activities /22 Service Corp.” OverallOverall ConditionCondition byby RegionRegion andand BusinessBusiness Global business unit (unit of decision-making for global strategies) Outline of FY09 sales amount (growth rate compared to previous year) based on local currency, without currency translation influence
Increasing more than 5% –5% through 5% Japan Europe Americas Asia/Aus Decreasing more than 5%
■ Baseball products ■ Racket Sports, Judo, other Diamond Business
■ Sports apparel Footwear & Apparel ■ Sports footwear ■ Other Business
■ Golf products ■ Other Golf Business
■ Wellness, Walking ■ Swimming Wellness Business ■ Other 14 /22 RegionalRegional HighlightsHighlights (Japan)(Japan) Summary of results FY09 results by business FY09 Results (incl. exports to Asia) Footwear & Apparel business : Sales decreased Footwear & (billion JPY) Total Diamond Golf Wellness Other slightly due to a reduction trend with good sellers Apparel while shipments were steady. Diamond sports business: Remained at previous Revenue 111.8 28.9 39.4 13.4 20.1 9.9 level though tough conditions; contributed to boom of new sub brand
0 0 (Note) Results by business are based on FY06 FY07 FY08 FY09 FY10 internal company documents. 15 Forecast /22 RegionalRegional HighlightsHighlights (Europe)(Europe) Summary of results
FY09 Results by business (Unit: billion JPY) FY09 Results Footwear & Apparel business : Stock adjustments Footwear & Golf Total Apparel were completed in Eastern Europe. Revenues grew due to booms in England, Germany, France, Revenue 10.1 6.8 3.3 etc. Golf business: Revenues increased due to vs. 2008 91% 91% 90% custom-ordered products, booms in England and Currency Northern Europe, etc. 106% 106% 105% neutral basis Forecast Revenue Revenue Ordinary profit (billion JPY) Operating profit (billion JPY) Footwear & Apparel business: Strengthen 15 4 promotion at specialized stores, local meets, etc. 13 to gain market share of running footwear and 12 11 11 apparel, while uncertain conditions are predicted in 10 10 3 Southern Europe and Russia. 9 Golf business: Put new fitting-system to practical 2 use for growth in sales of custom-ordered iron 6 clubs. 1.1 0.7 1 3 0.6 0.4 0.3
0 0 (Note) Results by business are based on FY06 FY07 FY08 FY09 FY10 internal company documents. 16 Forecast /22 RegionalRegional HighlightsHighlights (Americas)(Americas) Summary of results FY09 Results by business FY09 Results (Unit: billion JPY) Overall: both orders and shipments achieved solid Footwear & Diamond Golf Total Apparel results particularly in specialty stores in latter part of the year though sales decreased early on due Revenue 18.4 7.6 6.5 4.2 to stock adjustments by major retailers. Golf business: Had a tough time in sales due to vs. 2008 82% 89% 84% 69% fierce price-cutting competition, but recovery trend seen later; contributed to new custom-fitting Currency 91% 100% 94% 77% neutral basis system.
Revenue Revenue Operating profit (billion JPY) (billion JPY) Forecast Operating profit 30 4 Overall: Try to gain market share by strengthening 26 pro service for specialty stores and horizontal 24 25 23 development of large-scale stores. 3 19 Golf business: Strengthen healthy custom- order 20 18 system and anticipate sales recovery from profits. 15 1.7 2 1.5 10 1 0.6 5 0.2 0.4 0 0 (Note) Results by business are based on FY06 FY07 FY08 FY09 FY10 internal company documents. 17 Forecast /22 RegionalRegional HighlightsHighlights (Asia,(Asia, Australia)Australia) Summary of results (excl. exports from Japan) FY09 Results by business FY09 Results (Unit: billion JPY) China: Sales unit price and gross margin rate fell Footwear & due to early inventory reduction. Total Diamond Golf Apparel Taiwan: Both revenue and profit exceeded last year. Revenue 8.3 6.4 0.3 1.5 Production: Though profit from product management charges decreased due to vs. 2008 73% 69% 87% 89% inventory control by sales companies early on, Currency recovery trend seen in latter part of year. 81% 75% 101% 99% neutral basis Forecast Revenue Revenue Operating profit (billion JPY) Operating profit (billion JPY) China: Cut down inventories according to plan. 15 5 Try to recover performance from next fiscal year 13 due to not expanding scale, but by improving 12 11 11 4 gross margin rate. 9 Australia: Start selling sports products such as 9 8 3 running footwear in addition to golf items from FY2010 Production: Forward production base policy, 6 1.5 2 1.3 China+One, and try to reduce product costs and 3 1 disperse risks. 0.2 -0.5 0 0 -0.1 (Note) Results by business are based on internal company documents. -3 FY06 FY07 FY08 FY09 FY10 -1 18 Forecast /22 MidMid --TermTerm PlanPlan (Consolidated)(Consolidated)
Revenue Recover to FY2007 level before the financial crisis by FY2012 Ordinary profit
Revenue 174.0 Ordinary profit (billion JPY) 162.0 171.0 (billion JPY) 162.0 148.7 153.0 150 15
100 10 7.4 7.0 5.0 4.0 50 3.0 5 1.5
0 0 FY07 FY08 FY09 FY10 plan FY11 plan FY12 plan
Exchange rate history for JPY / USD 117.82 103.68 93.52 93 consolidated financial statement JPY / GBP 229.27 175.25 147.27 145 The last column shows exchange rate for FY10-12 estimate. JPY / EUR 161.86 144.40 130.59 125 19 /22 MidMid --TermTerm PlanPlan (by(by businessbusiness andand region)region)
We still focus on growth in non-Japan regions based on the Footwear & Apparel business, though it may shrink due to exchange rate issues.
Revenue Revenue Non-Japan revenue ByBy Business Business Unit Unit Non-Japan revenue (billion JPY) (billion JPY) (ratio(ratio of of non-Japan non-Japan revenue) revenue) 70 70 33.6% 59.3 58.4 60 56.5 55.9 60 29.5% 55.2 51.9 31.1% 6.1 29.0% 49.6 49.8 28.4% 50.5 49.5 48.6 48.0 48.9 50.4 50 46.3 50 27.9% 47.0 5.4 43.5 6.3 12.9 41.5 5.5 4.8 40 34.6 40 11.4 4.6 10.6 9.9 9.1 26.8 26.6 13.3 8.3 30 22.4 23.4 25.2 30 24.4 11.1 11.8 22.6 22.9 11.1 20.2 19.6 21.3 10.1 10.4 20 20
26.1 22.5 10 10 18.4 19.2 20.5 21.8
0 0 FY07 FY08 FY09 FY10 plan FY11 plan FY12 plan FY07 FY08 FY09 FY10 plan FY11 plan FY12 plan
Wellness Golf Diamond Footwear&Apparel Americas Europe Asia/Au Asia(export)
(Numbers for Golf and Wellness in the chart above have (Numbers for Europe are slightly different from other been adjusted according to internal reorganization.) charts due to export sales from Japan to Europe.) 20 /22 MidMid --TermTerm PlanPlan (ROA,(ROA, ROE)ROE) ROA Target 7%: In FY2008 and 2009, the gap from the target increased under severe market conditions amid the ongoing financial crisis. To reach the target as soon as possible, we have addressed reducing excess assets, especially inventory, and improving our profit ratio.
% 8
5.7 6 5.7 4.1 5.5 4 3.3 2.3 3.9 2.9 2.3 3.0 2 2.1
0 FY07 FY08 FY09 FY10 FY11 FY12 -2 Plan Plan Plan -3.1 -4
ROA ROE 21 /22 ClosingClosing Business Slogan “Attack and Defend”
In FY2009, we focused mainly on defensive countermeasures, such as inventory reduction, and strengthened our foundation for growth for the future by striving for fiscal soundness and efficiency in the balance sheets. We need to maintain our current good management efficiency, but we also need to take the chance for growth and turn offensive operations in FY2010.
FY 2010 Company Policies
Show Entrepreneurial Spirit Show Innovative and Positive Drive Be Lively and Vigorous
22 /22