Slide presentation 2 q09
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This document contains a summary of Cia. Hering's 2Q09 performance and business outlook: - Gross revenue grew 48.9% in the domestic market and Hering brand sales increased 57.7%. Same-store sales grew 29.3% and EBITDA margin increased 4.1 percentage points. - 14 new Hering stores and 2 new PUC stores were opened in 2Q09. The expansion plan aims to open 81 new stores by the end of 2010. - Capex was invested in store openings, remodels, and industrial equipment upgrades. Financial results improved due to exchange rate variations and derivative reversals. - Shareholders were paid dividends and interest on
Slide presentation 2 q09
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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 • Business Strategy and Outlook
- 4. 2Q09 Highlights CIA. HERING ENDS 2Q09 WITH GROWTH • Gross revenue in domestic market up 48.9% • Hering brand sales up 57.7% • Same-store sales growth of 29.3% in the Hering Store Network • EBITDA Margin up 4.1 percentual points • 14 Hering Stores and 2 PUC Stores were opened in the 2Q09 4
- 5. AGENDA: • Highlights • Operating Performance • Business Strategy and Outlook
- 6. Gross Revenue (R$ million) By Market 378.4 8.4 39.1% 209.3 272.0 54.8% 42.5% Foreign 3.5 Market 18.6 59.8% 46.0% 370.0 146.9 48.9% 205.8 Domestic 253.4 8.7 Market 138.2 2Q08 2Q09 1H08 1H09 Gross revenue in the domestic market represented 98.3% of the total gross revenue in the 2Q09. 6
- 7. Gross Revenue – Domestic Market (R$ million) By Brand 370.0 9.0 46.0% 23.8 33.1 253.4 48.9% 205.8 Others 5.9 4.7 22.9 12.6 dzarm 4.0% 26.4 16.9 3.7% 25.4% 304.1 138.2 PUC 3.3 12.2 21.4% Hering 198.2 53.4% 13.9 171.6 57.7% 108.8 2Q08 2Q09 1H08 1H09 Hering brand shows continuous growth potential 7
- 8. Gross Revenue – Domestic Market (R$ million) 370.1 By Distribution Channel 49.6% 174.3 205.8 253.4 53.0% Multi 108.5 42.6% Brand 130.8 138.2 70.9 44.6% Franchise/ 195.7 Own Store 97.3 122.6 67.3 2Q08 2Q09 1H08 1H09 Expressive growth on Hering Store and PUC networks, as well as in multi brand. 8
- 9. Gross Revenue – Foreign Market (R$ million) Private Label vs. Own Brands 18.6 54.8% 59.8% 10.2 8,7 Private Label 100.0% 8.4 5.1 100.0% 3.5 0.3% 8.4 8.4 3.2% Own 3.6 3.5 Brands 2Q08 2Q09 1H08 1H09 Focus on Own Brands sales in the foreign market mainly in Latin America and Mercosur. 9
- 10. Gross Profit Gross Profit (R$ million) and Gross Margin (%) 44.1% 0 .4 5 14 0 43.4% 43.4% 0 .4 12 0 0 .3 5 1 00 45.4% 1 00 9 0 0 .4 5 44.9% 0 .3 8 0 44.4% 0 .4 8 0 7 0 6 0 0 .3 5 37.8% 133.6 0 .2 5 43.3% 6 0 0 .3 5 0 97.0 0 .2 76.5 4 0 0 .2 5 4 0 3 0 53.4 0 .2 0 .1 5 2 0 2 0 0 .1 5 1 0 0 0 .1 0 0 .1 2Q08 2Q09 1H08 1H09 Without AVP With AVP Excluding the amount of R$ 4 million registered as AVP (Current Value Adjustment), the gross margin in the 2Q09 would be 45.4% and in the 1H09 it would be 44.1%. 10
- 11. EBITDA EBITDA (R$ million) and EBITDA Margin (%) 1 00 0 .2 9 0 0 .1 8 8 0 0 .1 6 17.3% 1 2 0 0 .2 5 7 0 0 .1 4 14.6% 1 00 0 .2 6 0 2.7 p.p 0 .1 2 8 0 19.1% 5 0 0 .1 4.1 p.p 0 .1 5 60 15.0% 4 0 0 .0 8 62.8% 0 .1 3 0 0 .0 6 40 53.3 80.6% 2 0 0 .0 4 20 0 .0 5 32.8 32.5 1 0 0 .0 2 18.0 0 0 0 0 2Q08 2Q09 1H08 1H09 The higher EBITDA margin is due to the better operational performance of the Company and the dilution of the fixed expenses. 11
- 12. Stores Distribution Fourteen Hering Stores were opened in the quarter, of which 2 owned stores. Two PUC Stores were also opened. Our multibrand clients totaled 15,114 in 23 brazilian states. 12
- 13. Distribution Network (number of stores) Evolution of the Distribution Network Goal: 57 329 311 314 22 22 22 248 63 209 59 Goal: 224 61 23 Goal: 172 19 44 39 230 231 244 151 181 2006 2007 2008 1Q09 2Q09 Abroad PUC Hering For 2009, the openings are already mapped and in line with the strategic growth plan. 13
- 14. Hering Store Expansion Expansion Plan 57 325 38 268 49 244 49 230 30 195 181 274 151 226 193 205 156 167 141 37 42 51 39 10 25 28 2006 2007 2008 2009* 2010* 2Q08 2Q09 Owned Stores Franchises *estimated The expansion plan is maintained with 81 stores to be opened up to the end of 2010. 14
- 15. HS network: New project versus old project New Project Old Project 111 stores 133 stores 45% 55% Out of the total 244 Hering Stores, 133 are already in the new architectural project, 11 of which were remodeled in 2Q09. 15
- 16. Hering Store Indicators Hering Store Performance 2Q08 2Q09 Chg. 1H08 1H09 Chg. Number of Stores 195 244 25.1% 195 244 25.1% Franchise 167 205 22.8% 167 205 22.8% Own 28 39 39.3% 28 39 39.3% Sales (R$ thousand) 109,372 162,989 49.0% 178,024 259,446 45.7% Same Store Sales growth 38.4% 29.3% -9.1 p.p. 39.0% 25.3% -35.1% Sales Area (m²) 26,124 31,275 19.7% 26,124 31,275 19.7% Sales (R$ per m²) 4,259 5,301 24.5% 7,085 8,541 20.6% Check-Outs 1,145,453 1,607,123 40.3% 2,061,030 2,881,380 39.8% Units 2,657,161 3,598,040 35.4% 4,807,703 6,497,557 35.1% Average Sales Ticket (R$) 95.48 101.40 6.2% 86.38 90.00 4.2% The increase of 49.0% on sales is a result of the 19.7% in sales area, 29.3% increase in SSS and a 6.2% growth in the average sales ticket, reflecting the increase of fashion and jeanswear products participation. 16
- 17. Capex (R$ million) By activity 15.0 24.7% 0.5 52.0% 3.3 10.0 Outros 11.3 0.2 39.4% 0.3 1.7 2.0 23.5% TI 5.6 4.8 0.1 16.1% 3.6 4.7 1.3 33.3% Lojas 2.4 5.6 23.2% 4.5 75.6% 4.3 1,1 Indústria 2Q08 2Q09 1H08 1H09 Capex destinated to the stores´ opening and remodeling, as well as equipment acquisition to update the industrial units. 17
- 18. Indebteness Indebtedness Evolution Short Term x Long Term 201.3 184.6 Long Term Short 45% 4.6 Term 3.5 55% 11.0 -0.1 -0.7 0.1 2005 2006 2007 2008 2Q09 -4.0 -33.4 Total Debt = R$ 96.5 million Net Debt/EBITDA* Net Debt (R$ million) * EBITDA of the last 12 months 18
- 19. Financial Result R$ thousand 2Q08 2Q09 Chg. 1H09 1H08 Chg. Net Financial Results (6,098) (200) -96.7% (7,579) (1,997) -73.7% Net Foreign Exchange (136) 3,223 -2469.9% 123 3,922 3088.6% Net Financial Derivative Instruments Results - 3,021 N.D - 25,059 N.D Total Financial Results (6,234) 6,044 -197.0% (7,456) 26,984 -461.9% • Positive Financial Result – On june 30 2009, Cia. Hering registered a revenue of R$ 3.0 million due to the reversal of part of the expense accrued at the end of 2008, referring to the fair value of the derivatives. • Swap – April/09 and May/09 verifications: exchange rate lower than R$/USD 2.80 – On 05/04/09, Cia. Hering renegotiated the contract, eliminating nine monthly verifications, from Jun/09 to Feb/10 (included), at a cost of R$ 3.2 million. – On 07/07/09 the Company renegotiated the contract, eliminating four monthly verifications, from Mar/10 to Jun/10(included), at a cost of R$ 2.0 million. • Fair Value of Derivatives – On 07/30/09 the fair value of derivatives accounted on the Company’s liabilities in its financial statements, totaled R$ 3.2 million regarding the current operations at that time. The Company will remain searching alternatives to minimize and/or to eliminate the exchange risk of the remaining derivatives operations: 19
- 20. Shareholder’s Remuneration Payment of Interest on Shareholder’s Equity The payment on 10/August/09 in the amount of R$ 15.2 million refers to: R$0,1411/share related to the year ended on December 31 2008; R$0,1405/share related to the first half of 2009; Dividends On May 11th 2009 the amount of R$ 10.6 million (R$ 0.19616/share) was paid, regarding the 2008 year ended on December 31 2008, in accordance to the General Shareholders´ Meeting held on April 28th 2009. Date of Gross Value Value per Shareholders´ remuneration Year End Payment (R$ million) Share (R$) Payment of Interest on Equity 2007 02/22/08 4,853 0.09000 Payment of Interest on Equity 2008 09/17/08 4,853 0.09000 Dividends 2008 05/11/09 10,578 0.19616 Payment of Interest on Equity 2008 08/10/09 7,609 0.14110 Payment of Interest on Equity 1H09 08/10/09 7,576 0.14050 20
- 21. AGENDA: • Highlights • Operating Performance • Business Strategy and Outlook
- 22. Strategy & Outlook Hering brand and Hering Store network Continuity of brand potential exploration Sales increase (per square meter and SSS) in existing stores Ongoing expansion plan – 325 stores by the end of 2010 Communication strategy focusing on sales points. PUC and dzarm. brands Development of a plan for the children segment dzarm. brand repositioning plan currently being carried out. 22
- 23. Investor Relations Fabio Hering – CEO and IR Director Frederico de Aguiar Oldani – CFO Karina Koerich – IR Manager Gracila Camargo Lopes – IR Analyst Tel.: +55 (47) 3321-3469 3321- E-mail: ri@heringnet.com.br mail: Website: Website: www.ciahering.com.br/ir Investor Relations Consulting Firm FIRB – Financial Investor Relations Brasil Ligia Montagnani – IR Consultant Tel: +55 (11) 3897-6857 E-mail: ligia.montagnani@firb.com