Wacoal Corp. History

Company Perspectives:

Wacoal Corp. is dedicated to being the world leader in the women's apparel industry.

Company History:

Wacoal Corp. was the first and is the leading lingerie maker in Japan. The multinational public company is headquartered in Kyoto, Japan, and manufactures and sells women's intimate apparel and outerwear (such as slips, bra-slips, and briefs) and children's nightwear, sportswear, underwear, outerwear, and other products under a variety of brand names, including the top-priced "Wacoal" line of innerwear, the licensed "Donna Karan Intimates" line of innerwear, and mid-price label "Parfage."

From Jewelry to Innerwear, 1945-49

Following World War II, Koichi Tsukamoto returned home to Japan, got married, and went into business selling crystal necklaces. He opened a tiny shop in Kyoto, took out a buyer's ad in a trade magazine called Shiire-Annai, and received a response from Yoshinao Yoda, who had a factory in another part of Japan and who, after manufacturing parts for the Nakajima Airplane Plant during the war, had returned to making crystal products. Tsukamoto sent Yoda ¥3,000, his entire savings, and received ¥3,600 worth of products in return. Eventually, Tsukamoto's sales grew to ¥10,000 per month and then to ¥100,000 per month, and the two men developed a friendship beyond the business, which culminated with Yoda teaching Tsukamoto how to succeed in business.

In October 1947, Tsukamoto discovered jewelry by Hirano-Shoukai which was much more beautiful and of better workmanship than what he was currently selling. Approaching the dealer, Mr. Hirano, he was turned away many times. But, through persistence and the clever use of a disguise, he managed to secure an audience with Hirano. Impressed by Tsukamoto's tenacity, Hirano gave the budding entrepreneur a chance, providing him with nearly ¥100,000 worth of product to sell. By April of the following year, Tsukamoto's monthly turnover was at ¥500,000.

In June 1948, as sales of crystal necklaces were petering out, Tsukamoto looked around, found hair clips were coming into style in Japan, and decided to start manufacturing them in Kyoto. At the same time, he met Takeo Yasuda, who worked in the outerwear division of a department store before World War II. Yasuda produced what Tsukamoto would describe later as "a curious thing which looked like a small cake made of cloth. On the top of a spiral spring made of aluminum was some cotton stuffing and the whole was covered with cloth. When it was put on a woman's bust, it made it look glamorous." Yasuda called it a "brapad," and said that it would sweep through Japan. Tsukamoto, knowing that men already used pads to enhance their shoulders, agreed. Prior to World War II, Japanese women wore "juban" or "kosbimaki," or wrap-around undergarments of cotton, wool, or silk.

Traveling to the famous Ginza shopping center in Tokyo, Tsukamoto sold out his first batch of brapads, then selling for ¥100 each, and discovered a rival company, Aoyama Shouten. Having seen brassieres in a U.S. magazine by this time, Tsukamoto rushed home and decided to try putting the pad in a cloth bag that would be held against the breast with straps. Since no one else was making bras in Japan at the time, he tried to devise a paper pattern in the shape of a bowl by fitting it to the bust of his wife. He eventually bought cloth and found a sewing subcontractor, but met with much failure early on. Eventually, he fashioned a workable prototype. Naming his first original product "No. 101," Tsukamoto's product began selling well.

How the West Was Worn: Founding, 1949

Tsukamoto then began the difficult task of bringing people into his fledgling company. Finally, he found Ikuo Kawaguchi and Iichi Nakamura, both graduates of The Hachiman School of Commerce. Kawaguchi left a steady job working in Mitsubishi Heavy Industry's Kyoto Apparatus Factory. Nakamura, who had moved from Hachiman to Yokohama Commercial School and Tokyo Commercial College (now Hitotsubashi University) to study management and accounting, left his teaching job at Hachiman in March 1949 to join the company as well. Tsukamoto took the name of his father Kumejiro's former company, Wako Shoji.

On October 9 of that year, Wako Shoji exhibited brapads and brassieres at a department store exhibition, which went well. But the same day, Kumejiro, who had taken ill while working for the company and died, was buried. In honor of his father, Tsukamoto incorporated the company on November 1, as Wako Shoji Co. Ltd. and one of his early customers, Hanzawa Shouten, ordered 50 dozen brapads.

But the new company floundered in the seasonal clothing market, which slumped traditionally in the fourth quarter of the year, and Tsukamoto's friends ridiculed his choice of business. However, Yasuda, the brapad designer, provided fabrics and Tsukamoto, driven by a desire to not lay off any of the employees he had attracted, formulated an ambitious series of five 10-year plans toward becoming a global leader in the industry.

The First and Second Ten-Year Plans, 1950-70

During the first ten years, Tsukamoto wanted to concentrate on the domestic market. Sales did begin to grow as Japanese women became more and more conscious of changing fashions and looked to the West for new ideas. Hanzawa ordered a hundred dozen in February 1950, but Tsukamoto, seeing in their warehouse piles of lingerie he had never encountered before, asked to be paid in trade for the new items. He took them back to Kyoto and began selling the items there, while Hanzawa sold the brapads in Tokyo. Also that year, Tsukamoto met Kohiro Kihara, a sewing manufacturer who was looking for civilian contracts. Kihara put up ¥50,000 and began manufacturing brassieres and packaging them with care, infusing Wako Shoji with pride in production that led it to worldwide success.

In June 1950, Tsukamoto met with Takashimaya Department Store's fashion department chief and asked him to take them on as a client. The chief refused, Tsukamoto took it to the chief's boss, and got a one-week trial period in the Kyoto store. Set in an out-of-the-way corner of the building, Tsukamoto packaged goods and ran the cash register while saleswoman Miyo Uchida sold the products. In one week, the company sold five times more lingerie than Takashimaya's larger store in Aoyama had done. Asking to have product included in the Osaka store, Tsukamoto again was turned down. Again, he found a new ear, this time the Osaka store manager, who looked at the products Wako Shoji offered and bought enough to fill three of the four display cases in the Osaka store.

In May 1951, Tsukamoto approached Kihara about merging the two companies. Kihara refused, but Tsukamoto offered him the presidency. Kihara capitulated and Tsukamoto demoted himself to senior managing director. Wako Shoji bought Kihara's factory from the owner, with ¥150,000 of Tsukamoto's money, a ¥1.5 million loan from a bank, using the building title as security, paid ¥1.25 million up front, leveraged the rest on debt, and bought electric sewing machines with the remaining ¥250,000.

By the fall of 1952, Wako Shoji was in most major Japanese department stores except Hankyu, who unexpectedly asked Tsukamoto if they would hold a fashion show. Ensconced in a very traditional society, the company could not find any professional models who were willing to wear such skimpy clothing, especially on the runway, so Tsukamoto was forced to hire strippers in order to hold the company's first fashion show. The second ten years, from 1960 to 1970, the plan was to steadily expand the domestic market in Japan, which the company did very successfully.

The Third and Fourth Ten-Year Plans, 1970-90

The third and fourth ten-year plans were to gradually move into overseas markets. The Thai Wacoal Public Company Ltd. was established in 1970, and entry into Korea, Hong Kong, and Singapore followed, as the company, now called "Wacoal Ltd.," introduced the innovative clothing items for the first time to those countries as well, expanding throughout the Far East during the 1970s.

Tsukamoto set his sights on the United States in the late 1970s, convinced that U.S. women were looking for higher quality and better service than the cluttered department store lingerie counters offered. When the Japanese innerwear giant entered the U.S. market in 1983, it was aiming at the upper end of the market, providing products at a premium price, and marketing them through boutiques in "classy" department stores such as Bloomingdale's, Saks Fifth Avenue, and I. Magnin.

Then competition abounded as companies including Victoria's Secret and Frederick's of Hollywood began springing up, eventually becoming huge household names in the lingerie industry. Faced with such competitors, and following the lead of the cosmetics industry, Tsukamoto and the company refused to mark down prices or have "fire" sales.

In 1984, the company created Wacoal America Inc., a U.S. subsidiary located in Carlstadt, New Jersey; and Sri Racha Wacoal Co. Ltd. in Thailand, which would run as separate entities from the parent company.

In October 1986, the company released a "high-tech" brassiere that "remembered" its original shape while tumbling in the clothes dryer. A byproduct of a special metal alloy with so-called "shape memory" which was developed in the late 1950s-early 1960s by the U.S. military, the company began marketing the "Memory Wire Bra" in the United States. The bras, which retailed for around US$30, avoided a difficulty common to many regular wire bras, which often can become twisted and more rigid after each washing. Total revenue for 1986 reached US$750 million.

The Fifth Ten-Year Plan, 1990-2000

As the company entered the 1990s, it had 14 principal subsidiaries and six joint ventures in Korea, Hong Kong, Taiwan, Thailand, China, and The Philippines and was distributing 64 lingerie brands worldwide. The venture in The Philippines, known as Wacoal Philippines Corp., was created in the spring of 1991 specifically to strengthen the business in Southeast Asia.

In 1990, clothes designer Carlos Falchi, who made his name as a handbag and belt designer, entered the lingerie market in Japan, as his Carlos Falchi Enterprises (who also signed licenses with Pancaldi for shoes, Grandoe for gloves, and Ashear Bros. for scarves) signed a license with Wacoal Corp. Falchi's first entry into designing intimate apparel came in 1972, when he designed a group of kimonos for Henri Bendel.

In-store Falchi innerwear boutiques were opened that year at Seibu, Isetan, Takashimaya, Daimaru, and Mitsukoshi department stores. The first (fall) line for the Japanese market featured seven groups broken into four categories (sleepwear, loungewear, daywear, and bras and panties), as well as slippers and lingerie bags. Two cohesive themes worked throughout the collection&mdash⁄ake-patterned nylon and Lycra spandex lace, and "croco-patterned" silks and polyesters, designed to complement Falchi's signature "whip stitch" used on the lingerie bags. Colors ranged from jewel brights to black, spice tones, and gold lamé, with prints including foulards, geometrics, tapestry, and Falchi's signature patchworks of solid and printed textures. In addition to Falchi, Wacoal Corp. introduced a second licensed product line in Japan, with Karl Lagerfeld lingerie, launched during the fall season.

About this time, the company was turning its attention toward the markets of Europe, West Asia, and Canada. The first Wacoal Europe S.A. offices were opened in Paris (selected as the European headquarters due to its consideration as a fashion capital and with plans to expand throughout the European Community and into Eastern Europe) in April, with intimate apparel as the primary focus for European sales, although the Kyoto-based parent firm also marketed the textiles and other apparel it manufactured. The European arm was also designed to operate as a separate entity, as its U.S. counterpart did.

In June 1991, the intimate apparel manufacturer reported that profits for the fiscal year ended March 31 declined some 10 percent when earnings were expressed in yen. However, when profits for the year were expressed in dollars, the total net income came to approximately US$54.5 million, some 21 percent more than the previous year. The Kyoto-based company blamed the earnings decline on increased sales and new business development costs, including installation of point-of-sale computer systems. The company also reported that sales in the United States were flat as a result of the recession going on at the time, but the Southeast Asian market continued to grow in spite of the ongoing Gulf War. Total sales for the company for the year reached US$1 billion.

The Wacoal America branch launched the "Parfage" line of products, featuring five bras and three panties, at the fall market in May, with wholesale prices debuting at US$6.72 for bikinis and US$12.48 for bras, and wholesale prices for the "Wacoal" brand beginning at US$15.36 for bras and US$6.96 for panties.

In July of that year, the company introduced a computer software system with which retail shoppers could select garments. Following four years of testing and nearly US$3 million in research and development costs, the company created a computer graphic system which enabled women to see how to hide or highlight their curves by using the right undergarment. The process involved the customer stripping down to their underwear and standing in front of a video camera which displayed their outline on a computer screen, allowing the customer to see how her shape compared with one that store consultants considered ideal for her age, weight, and condition. The customer then tried on the lingerie which improved her figure and could see the new outline on the screen. The company reported that nearly 60 percent of women wore underwear which was the wrong size for their body types, but after the so-called "proportion clinic," Wacoal Corp. reported an approximately 10 percent increase in lingerie sales at the 12 stores utilizing the system, including Tokyo Department Store.

Nonetheless, despite continued growth, by November 1991 the company was losing the market lead to its competitors. As sales on luxury goods slumped in late 1991-early 1992, the company reported, for the fiscal year ending March 31, 1992, profits slipping to US$51.1 million on total sales of US$1.2 billion.

As the Japanese economy weakened during the 1992-93 fiscal year, consumer spending declined, and, in women's fashion apparel, consumer orientation shifted from high-quality, high-priced items to reasonably priced value items; the year ending March 31, 1993 yielded earnings of US$57.5 million on sales of US$1.3 billion for the company, making Wacoal Corp. the world's largest manufacturer of intimate apparel. The company was also able to expand in most innerwear markets. That year also saw the company's U.S. subsidiary successfully manufacture and launch the licensed "Donna Karan Intimates" collection of innerwear in the United States, with distribution of the collection focusing mainly on high-end specialty stores such as Neiman Marcus, Nordstrom, and Saks Fifth Avenue, and department store flagships like Macy's Herald Square.

By 1994, the latest trend in women's underclothing was smooth underwear which could not be detected beneath tight-fitting clothes. That year, the Japanese underwear manufacturing giant unexpectedly found a hit item on its hands with its "Body Balance Wear," a pair of upholstered underpants that fulfilled a function similar to a woman's girdle. The company also sold a product called "Good Up," a seamless girdle. For the fiscal year ending in March 1994, Wacoal Corp. reported net earnings of US$71.8 million, with total sales of US$1.5 billion.

Helped by the U.S. economic recovery, which bolstered sales of women's innerwear under the "Wacoal" and licensed "Donna Karan" labels, and French sales surging 60 to 70 percent, Wacoal Corp. reported pretax profit for the fiscal year ended March 31, 1995 at US$151 million, as sales rose to US$1.8 billion. That year also marked the first profitable year for the U.S. subsidiary Wacoal America.

By late 1995, the women's fashion merchandise industry was facing difficult times as personal consumption levels slowed down and consumers shifted toward lower-priced goods. But many high quality and high value-added products, such as various brands of women's stockings and panties, performed well and sales grew twice as fast as the previous year for the company. For the fiscal year ended March 31, 1996, the company had pretax profits of US$111.3 million on sales of US$1.24 billion.

Operating in a weak Japanese economy in 1996-97 in which levels of consumer spending were stagnant, the company continued to develop new products in the Japanese market, with its "Make-Up" bra and "Mune-Tsun" bra lines continuing to perform well; the company's new "Slender Bra," "Hip Star" panties, and "Q-T-Up" panties lines were quite successful. Sales in the United States on both the "Wacoal" and the "Donna Karan Intimates" brands grew steadily, and the company continued to have strong growth in other Asian countries, particularly China.

For the year ending March 1997, Wacoal reported net profits of US$52.3 million on sales of US$1.36 billion, some of which was broken into segments as follows: sales of foundations and lingerie at US$903.2 million and nightwear at US$103.4 million.

In May of that year, the company increased its investment in a joint venture in China to strengthen manufacturing and sales there, starting a manufacturing operation in Guandong, China.

In January 1998, the company established a manufacturing subsidiary in Vietnam for use as a production base and began marketing "Wacoal Petites" for small-breasted women (sizes ranging from 30-36, with AA, A, and B cups), retailing for US$30-US$40. For the year ending March 31, 1998, net profits rose to US$60 million, while sales only reached US$992.6 million.

Also early in 1998, in a move to enter an industry already entrenched in a battle between two world-class heavyweights (Warnaco Group's "Calvin Klein Underwear" and Sara Lee Corporation's "Ralph Lauren Intimates"), Donna Karan International signed a second licensing deal with Wacoal Corp., this one for a line of women's intimate apparel and men's underwear, launching the "DKNY" designer label into the competitive innerwear market. The agreement, which called for Wacoal Corp. to manufacture the line and Donna Karan to merchandise the "DKNY" innerwear line at upscale department stores such as Neiman Marcus, Nordstrom, and Saks Fifth Avenue; as well as Macy's; Dillard's; Jacobson Stores' 24 units in the Midwest and Florida; and Jenns, a four-unit specialty chain in Amherst, New York; was merely the latest move in the Karan company's ambitious licensing strategy, following deals with Liz Claiborne Inc. for jeans and activewear and The Estée Lauder Companies for beauty and fragrance products. Donna Karan planned to showcase a full range of women's underwear, sleepwear, and at-home wear in 600 to 800 DKNY innerwear in-store shops in the spring of 1999, with distribution initially aimed at stores already selling DKNY apparel in the United States, Canada, and Europe, before moving into about 100 locations in Japan and elsewhere in Asia.

Warnaco's "Calvin Klein" line of men's underwear and women's innerwear debuted in 1995 and, by 1998, was being distributed in some 1,500 specially created in-store shops, bringing in combined yearly wholesale sales figures exceeding US$310 million in 1997. Sara Lee Intimates' licensed "Ralph Lauren Intimates" debuted on the retail market in June 1997 in approximately 1,300 in-store shops, with another 100 opening up by June 1998, bringing in an estimated several hundred million dollars more by the year 2000. The "DKNY" line would also compete against other high-end lingerie labels such as "Chantelle," "Hanro," and "La Perla." To contend with "Calvin Klein" and "Ralph Lauren" innerwear, the "DKNY" bras would be listed at a suggested US$25-US$38 retail, compared to the "Donna Karan Intimate" bras, which listed at between US$40-US$60.

In mid-1998, Wacoal partnered with Damart, the world leader in thermal underwear, who had been selling in Japan since 1979. The alliance created a line of feminine lingerie called "Chaleur et Glamour" for marketing in Japan. As the Japanese lingerie giant moved into the 21st century, an interesting battle between Wacoal and its competitors could be expected to unfold.

Principal Subsidiaries: Wacoal International Corp.; Thai Wacoal Public Company Ltd. (Thailand); Wacoal America Inc. (U.S.A.);

Wacoal Europe S.A. (Paris); Wacoal Philippines Corp.

Further Reading:

• Cohen, Joyce, "Priming for Petites," WWD, July 28, 1997, p. S2.
• "DKNY Signs Underwear License," Daily News Record, February 13, 1998, p. 4.
• Do Rosario, Louise, "Frills and Spills," Far Eastern Economic Review, November 14, 1991, p. 69.
• Hirano, Koji, "Karan Line Spurs Wacoal," WWD, June 8, 1998, p. 22.
• ------, "Wacoal Earnings up 1.5% for Year," WWD, May 27, 1997, p. 18.
• "Karan Said Nearing Deal for Intimate Apparel Line," WWD, February 11, 1998, p. 20.
• Katayama, Hiroko, "Western Wear," Forbes, November 16, 1987, p. 305.
• "Memories Are Made of This," Time, October 6, 1986, p. 63.
• Monget, Karyn, "Carlos Falchi: Eyeing Lingerie Fame," WWD, January 24, 1991, p. 6.
• ------, "DKNY Aims to Be Key Player," WWD, February 23, 1998, p. 13.
• ------, "Karan Confirms Wacoal Deal," WWD, February 13, 1998, p. 2.
• ------, "Wacoal's World: The Japanese Giant Broadens Its International Appeal with Fashion and Fit," WWD, January 3, 1991, p. I12.
• "Murray Named Wacoal President in U.S.," WWD, May 6, 1993, p. 9.
• Nanami, Akito, "Underwear Maker Firms up U.S. Base," Nikkei Weekly (Japan), April 17, 1995, p. 10.
• ------, "Unlimited Market for Unseen Underwear," Nikkei Weekly (Japan), July 18, 1994, p. 15.
• Okabe, "Wacoal--Company Report," Okasan Economic Research Institute Co., Ltd., June 18, 1997.
• Sakamaki, Sachiko, "Tight Fit," Far Eastern Economic Review, April 4, 1996, p. 64.
• Taylor, Craig, and Fredric Frank, "Assessment Centers in Japan," Training & Development Journal, February 1988, p. 54.
• Terazono, Emiko, "Japanese Underwear Group Advances 5%," Financial Times, November 25, 1993, p. 28.
• Thornton, Emily, "Software for Fitting Lingerie," Fortune, July 29, 1991, p. 18.
• "Wacoal Corp.," Wall Street Journal, June 11, 1998, p. A10.
• "Wacoal Earnings Increase 2.9% in Year; Sales Up 0.1%," WWD, June 25, 1993, p. 15.
• "Wacoal Licensed to Create Underwear and Sleepwear," Wall Street Journal, February 13, 1998, p. B4.
• "Wacoal Net Declines 0.7% in 12 Months," WWD, June 25, 1992, p. 7.
• "Wacoal Net Declines 22.4% for Year," WWD, June 30, 1997, p. 8.
• "Wacoal Net Off 10.8% in Year," WWD, June 24, 1991, p. 6.
• "Wacoal Notes '95 Pretax Net Climbed 9.6%," WWD, May 20, 1996, p. 13.
• "Wacoal Posts 8.5% Growth in Yearly Net," WWD, June 30, 1994, p. 6.
• "Wacoal Pretax Profit Up 4.1%," WWD, June 12, 1995, p. 8.
• "Wacoal Profits Up," WWD, November 20, 1995, p. 6.
• "Wacoal Weighs In," WWD, December 27, 1994, p. 11.

Source: International Directory of Company Histories, Vol. 25. St. James Press, 1999.

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