Aderans Shares Tumble as Wigmaker Cuts Profit Target (Update2)

Aderans Shares Tumble as Wigmaker Cuts Profit Target (Update2)

By Akiko Ikeda and Kiyotaka Matsuda

Aug. 18 (Bloomberg) -- Aderans Holdings Co. plunged the most in 10 months in Tokyo trading after the Japanese wigmaker cut its profit forecast citing a slump in sales.

Aderans tumbled 191 yen, or 9.7 percent, to close at 1,770 yen, on the Tokyo Stock Exchange, the sharpest slide since Oct. 12. Aderans had the sixth-largest drop among 1,718 companies on the Topix index.

The Tokyo-based company cut its net income forecast for the year ending Feb. 28 by 78 percent to 500 million yen ($4.55 million), as spending cuts on advertising and administration failed to offset slumping sales in Japan and the U.S., it said on Aug. 15. It earned 590 million yen a year earlier. The change marked expectations of the company's new leaders after its previous management was voted out.

``It was necessary for the newly appointed management to make a clear break with the former executives by revising earnings forecasted by them,'' Yoku Ihara, head of equity research at Retela Crea Securities Co., said by phone today.

New York-based Steel Partners, led by Warren Lichtenstein, voted out Aderans Chief Executive Officer Takayoshi Okamoto and six directors on May 29, the first time a foreign fund ousted management at a publicly traded Japanese company. Steel Partners owned about 27 percent of the company's shares, making it the biggest shareholder, as of Feb. 29, according Bloomberg data.

Consumption Drop

``Decline in personal consumption was sharper than expected,'' said company spokeswoman Kaoru Kondo. ``Confusion in our management organization may have affected our customers emotionally.''

Aderans cut its sales forecast for its domestic core business by 2.1 billion yen to 37.7 billion yen and its Fontaine business, which offers ready-made wigs for women, by 1.3 billion yen to 11.3 billion yen, Kondo said. The company reduced its sales outlook for its hair-transplant business in the U.S. by 6 billion yen to 159.4 billion yen.

``We are not surprised by the slump in the domestic order- made wig operation, but the profit decline in the Fontaine operation was steeper than we had assumed,'' UBS AG analyst Mariko Watanabe wrote in a report dated Aug. 16. Watanabe rates Aderans shares ``neutral.''

The stock has risen 0.5 percent this year, compared with a 14 percent drop in the benchmark Topix index.

To contact the reporters on the story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net.

Last Updated: August 18, 2008 03:20 EDT