Presentation 3 q08
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This presentation summarizes Cia. Hering's 3Q08 performance and outlines its business strategy and outlook. Key highlights include 53.8% domestic market revenue growth and 66.4% growth in Hering brand sales. The presentation reviews the company's operating results, stock market performance, and store expansion plans. Cia. Hering aims to continue growing through increasing its Hering store count to 229 locations and marketing campaigns to promote the Hering brand and store card.
Presentation 3 q08
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- 2. Disclaimer This presentation contains forward-looking statements regarding the prospects of the business, estimates for operating and financial results, and those regarding Cia. Hering's growth prospects. These are merely projections and, as such, are based exclusively on the expectations of Cia. Hering management concerning the future of the business and its continued access to capital to fund the Company’s business plan. Such forward- looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Cia. Hering’s filed disclosure documents and are, therefore, subject to change without prior notice. 2
- 3. AGENDA: • Highlights • Operating Performance • Stock Market • Business Strategy and Outlook• Business Strategy and Outlook
- 4. 3Q08 Highlights RESULTS SHOW GROWTH POTENTIAL • Gross revenue in domestic market increased 53.8% • Hering brand sales rose 66.4% • Same-store sales for the Hering Stores grew 25.4% • EBITDA Margin of 16.4%, +4.7 p.p over 3Q07 CONTINUED GROWTH PLANCONTINUED GROWTH PLAN • Price repositioning well accepted by the consumers • Continuous store expansion plan • Marketing campaign “eu uso Hering desde sempre” with a new approach • Actions focused on improving the Hering Store card base SUSTAINABLE GROWTH • R$ 5.3 million cash flow • R$ 10.3 million capex 4
- 5. AGENDA: • Highlights •Operating Performance • Stock Market • Business Strategy and Outlook
- 6. 147.3 14.6 9.2 80 100 120 140 37.0% 41.8% Domestic Foreign Market 110.4 156.5 By Market Gross Revenue (R$ million) 95.8 147.3 0 20 40 60 80 3Q07 3Q08 37.0% 53.8% Domestic Market Domestic market gains more relevance. 6
- 7. Gross Revenue – Domestic Market (R$ million) 56.7 84.0 90 110 130 150 115.6 15.7 11.2 13.0 2.9 3.0 90 110 130 150 By Brand 147.3 15.8% 28.3% PUC dzarm Others 95.8 Multi-brand Hering By Distribution Channel 53.8% 147.3 95.8 39.1 63.3 -10 10 30 50 70 3Q07 3Q08 69.5 12.2 -10 10 30 50 70 3Q07 3Q08 28.3% 66.4% Franchised / Owned 48.3% 61.8% Hering Consolidation of the strategy for the Hering brand pushed up the sales. 7
- 8. 4.2 0.3 Gross Revenue – Foreign Market (R$ million) Private Label vs. Own Brands By Destination 10.0 4.28 10 12 14 16 18 20 58.1% 14.6 9.2 37.0% 9.2 14.6 North America 1.2 0.6 2.2 1.1 0.4 6.5 7.0 3Q07 3Q08 Own Brands are the focus for the foreign market. 8 4.6 5.0 4.2 0 2 4 6 8 3Q07 3Q08 Private Label Own Brands8.8% North America Mercosul Latin America Europe Others
- 9. 58,3 7.6 p.p. Gross Profit and Gross Margin Adjusted EBITDA and EBITDA Margin 37.9% 45.5% Gross Profit and EBITDA (R$ million) 35,0 3Q07 3Q08 10.8 21.1 11.7% 16.4% 3Q07 3Q08 4.7 p.p. Sales increase, costs drop and larger participation of own stores. 9 95.3% 66.4%
- 10. Stores Distribution Brands are present in 22 brazilian states with 209 Hering Stores, 50 PUC Stores and 14,272 clients in the multi-brand retail. 10
- 11. 176 192 226 274 48 151 229 277 325 48 181 Expansion Plan 209 160 20 Hering Store Chain Expansion 10 14 25 33 37 51 51 141 146 156 176 192 2006 3Q07 2007 3Q08 2008 2009 2010 Owned StoresFranchise * estimated * * * 14 Hering Stores were opened in the third quarter. By the end of 2008, there will be 20 more. 11
- 12. 39 42 44 50 57 19 23 23 22 22 Goal: 172 281 248 225 Distribution Network Evolution 308 209 Distribution Network (number of stores) Goal: 224 151 160 181 209 229 2006 3Q07 2007 3Q08 2008 Hering PUC Abroad Seventeen stores were launched in the quarter: 14 Hering Stores and three PUC Stores. * * estimated 12
- 13. Period State City Location Status 1Q08 PI Teresina Shopping Riverside Walk Opened 1Q08 SP São Paulo Bourbon Shopping Pompéia Opened 2Q08 SP São Paulo Rua Dr. Diogo de Farias Opened 2Q08 SP Santa B.D'Oeste Tivoli Shopping Opened 2Q08 SP São Paulo Rua Juventus Opened 2Q08 MG Juiz de Fora Independência Shopping Opened 2Q08 SP Guaratinguetá Shopping Buriti Guará Opened 2Q08 PB João Pessoa Shopping Tambiá Opened 2Q08 SE Aracaju Shopping Jardins Opened Expansion until September 2008 - Franchise Status 1Q08 2 Franchises opened 2Q08 10 Franchises opened 2Q08 SE Aracaju Shopping Jardins Opened 2Q08 PR Maringá Shopping Avenida Center Opened 2Q08 PE Caruaru Shopping Caruaru Opened 2Q08 DF Brasília Liberty Mall Opened 3Q08 MG Divinópolis Rua A.Olimpio de Morais Opened 3Q08 SP Botucatu Rua Monsenhor Ferrari Opened 3Q08 SC Florianópolis Floripa Shopping Opened 3Q08 SP São Vicente Brisamar Shopping Opened 3Q08 SP Campinas Campinas Shopping Opened 3Q08 BA Feira de Santana Shopping Iguatemi Opened 3Q08 MG Patos de Minas Rua Agenor Maciel Opened 3Q08 SP Jau Rua Amaral Gurgel Opened 3Q08 PR S. José dos Pinhais Shopping São José Opened 3Q08 SP São Paulo Rua Bernardino de Campos Opened 3Q08 10 Franchises opened 13
- 14. Period State City Location Status 4Q08 SP São Paulo Shopping Metrô Blvd. Tatuapé Confirmed 4Q08 SP São Paulo Rua Min. Roberto Cardoso Alves Confirmed 4Q08 PE Recife Shopping Plaza Casa Forte Confirmed 4Q08 SP Votuporanga Rua Pernambuco Confirmed 4Q08 SC Criciuma Shopping Della Giustina Confirmed 4Q08 MG Três Corações Rua Julião Arbex Confirmed 4Q08 GO Rio Verde Shopping Rio Verde Confirmed 4Q08 SP Limeira Center Plaza Shopping Confirmed 4Q08 SC Jaraguá do Sul Shopping Center Breithaupt Confirmed Status 4Q08 20 Franchises confirmed 1 Franchise forecasted Expansion Plan for the 4Q08 - Franchise 4Q08 SC Jaraguá do Sul Shopping Center Breithaupt Confirmed 4Q08 MG Montes Claros Montes Claros Shopping Center Confirmed 4Q08 SP São Paulo Shopping Central Plaza Confirmed 4Q08 RO Porto Velho Porto Velho Shopping Confirmed 4Q08 RS Porto Alegre BarraShoppingSul Confirmed 4Q08 RJ Macaé Shopping Plaza Macaé Confirmed 4Q08 GO Anápolis Brasil Park Shopping Confirmed 4Q08 SC Itajaí Itajaí Shopping Confirmed 4Q08 SP Bauru Bauru Shopping Confirmed 4Q08 PR Curitiba Shopping Jardins das Américas Confirmed 4Q08 SP São B. do Campo Loja de Rua Confirmed 4Q08 SP Pindamonhangaba Rua Bicudo Leme Confirmed 4Q08 SP Taubaté Taubaté Shopping Forecasted 14
- 15. Period State City Location Status 2Q08 RJ Rio de Janeiro Ilha Plaza Shopping Opened 2Q08 SP São Paulo Shopping Taboão Opened 2Q08 PR Curitiba Palladium Shopping Center Opened 3Q08 SP São Paulo Shopping Penha Opened 3Q08 SP São Paulo Shopping Metrô Itaquera Opened 3Q08 RJ Rio de Janeiro Shopping Tijuca Opened 3Q08 PR Curitiba Rua XV de Novembro Opened Status 2Q08 3 Stores Opened 3Q08 4 Stores Opened Expansion Plan for 2008 – Owned Stores 3Q08 PR Curitiba Rua XV de Novembro Opened 4Q08 RJ Rio de Janeiro Shopping Grande Rio Confirmed 4Q08 1 Store Confirmed 15
- 16. Hering Store Network - Indicators Hering Store Performance 3Q07 3Q08 Var. 9M07 9M08 Var. Number of Stores 160 209 30.6% 160 209 30.6% Franchise 146 176 20.5% 146 176 20.5% Own 14 33 135.7% 14 33 135.7% Sales (R$ thous.) 59,046 91,792 55.5% 167,879 269,816 60.7% Same-Store Sales Growth 25.4% 34.4% Sales Area (m²) 21,669 27,588 27.3% 21,669 27,588 27.3% Sales (R$ per m²) 2,776 3,395 22.3% 8,006 10,480 30.9% Check-Outs (thous.) 719,861 1,123,907 56.1% 1,972,850 3,184,937 61.4% Units 1,743,140 2,654,189 52.3% 4,669,980 7,461,892 59.8% Average Sales Ticket (R$) 82.02 81.70 -0.4% 85.09 84.70 -0.5% 16
- 17. 5.2 2.0 1.5 6 8 10 Stores IT Other By Activity 10.3 8.0 Capex (R$ million) 0.3 1.6 3.3 4.4 0 2 4 3Q07 3Q08 Industry Investments to remodel and open owned stores and update industrial technology 17
- 18. Short Term 46% Long Term 54% Indebtedness Evolution Short Term X Long Term Indebtedness 201.3 184.6 4.6 * Last 12 months EBITDA 54% Net Debt/EBITDA* Net Debt (R$ million) Total Debt= R$ 132.1 million Adequated cash to support growth plan 18 -42.2 -33.4 -5.3 4.6 3.5 -1.0 -0.7 -0.1 2005 2006 3T07 2007 3T08
- 19. AGENDA: • Highlights •Operating Performance •Stock Market •Business Strategy and Outlook•Business Strategy and Outlook
- 20. Indicators - HGTX3 3Q07 3Q08 Var. Number of Trades 11,259 1,699 -84.9% Participation in Trading Sessions (%) 100.0% 95.4% 4.6p.p. Quantity Traded (thous.) 23,070 10,872 -52.9% Average Daily Volume Traded (R$ thous.) 3,691 1,485 -59.8% Total Volume Traded (R$ thous.) 232,520 95,096 -59.1% Share Price - (R$ 1 ) 10.39 7.69 -26.0% Total Shares Outstanding (thous.) 53,927 53,927 0.0% Market Cap (R$ thous. 1 ) 560,302 414,699 -26.0% Stock Market 560,302 414,699 (1) End of period 76.2 72.6 30/9/200830/6/2008 31/7/2008 31/8/2008 1/10/2008 Ibovespa HGTX3 09/30/200808/31/200807/31/200806/30/2008 Cia. Hering Vs. Bovespa Base 100 = 06/30/2008 20
- 21. AGENDA: • Highlights •Operating Performance •Stock Market •Business Strategy and Outlook•Business Strategy and Outlook
- 22. Actions to guarantee the growth strategy Expansion of Hering Store chain – goal upgraded to 229 stores The implementation of the new architectural project for the PUC Stores Campaigns to promote the Hering Store card Strategy & Outlook Campaigns to promote the Hering Store card Marketing campaign “eu uso Hering desde sempre” 22
- 23. InvestorInvestor RelationsRelations Fabio HeringFabio Hering –– ViceVice PresidentPresident andand IRIR DirectorDirector Vilmar da CostaVilmar da Costa –– CFOCFO Karina KoerichKarina Koerich –– IR ManagerIR Manager Tel. +55 (47) 3321Tel. +55 (47) 3321--34693469 EE--mailmail: ri@heringnet.com.br: ri@heringnet.com.br WebsiteWebsite: www.ciahering.com.br/ir: www.ciahering.com.br/ir Investor Relations Consulting Firm FIRB – Financial Investor Relations Brasil Tel: +55 (11) 3897-6857 E-mail: ligia.montagnani@firb.com