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Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
Junho 2012 - apresentação institucional - agosto de 2012 (english version)
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Junho 2012 - apresentação institucional - agosto de 2012 (english version)

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  • 1. | Apresentação do Roadshow As of June 31, 2012 Aug, 2012 1
  • 2. DisclaimerStatements regarding the Company’s future business perspectives and projections of operational andfinancial results are merely estimates and projections, and as such they are subject to different risks anduncertainties, including, but not limited to, market conditions, domestic and foreign performance in generaland in the Company’s line of business.These risks and uncertainties cannot be controlled or sufficiently predicted by the Company managementand may significantly affect its perspectives, estimates, and projections. Statements on futureperspectives, estimates, and projections do not represent and should not be construed as a guarantee ofperformance. The operational information contained herein, as well as information not directly derived fromthe financial statements, have not been subject to a special review by the Company’s independentauditors and may involve premises and estimates adopted by the management. 2
  • 3. | Company overview
  • 4. 1 .1 Platform of brands of reference Arezzo&Co is the leading Company in the footwear and accessories sector through its platform of Top of Mind brands 4
  • 5. 1 .2 Company overview Arezzo&Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generation Leading company in Controlling Development of Asset light: high Strong cash the footwear and shareholders are the collections with operational efficiency generation and high accessories sector reference in the sector efficient supply chain growth with presence in all Brazilian states 8.2 million pairs of shoes(1) Net revenues CAGR: ~11,500 models created 31,0% (2007- 2Q12) 85% outsourced production 39 years of experience in per year 521 thousand handbags(1) the sector ROIC of 35.8% in 2Q12 Net income CAGR: 38.8% Lead time of 40 days (2007- 2Q12) 2,575 points of sale Wide recognition 2,041 employees 7 to 9 launches per year Increased operating 11.1% market share(2) leverage Notes: 1. LTM as of June, 2012. 2. Refers to the Brazilian women footwear market (source: Euromonitor, IBGE and Company estimates) . Estimated for 2010. 5
  • 6. 1 .3 Successful track record of entrepreneurship The right changes at the right time accelerated the Companys developmentFoundation and structuring Industrial Era Retail Era Corporate Era Industry Reference 70’s 80’s 90’s 00’s 2012  Founded in 1972  Consolidation of  Focus on retail  Specific brands for each  Focused on brand and industrial business model  R&D and production segment product located in Minas Gerais outsourcing on Vale dos Sinos -  Expansion of distribution  1.5 mm pairs per year RS channels and 2,000 employees  Franchises expansion  Efficient supply chain Launch of new brands ConsolidateOpening of the first Opening of the flagship leadershipshoe factory store at Oscar Freire position + Merger First store Schutz launch Strategic Partnership (November 2007) Launch of the first Commercial operations design with centralized in São Paulo national success Fast Fashion concept Initial Public Offering (February 2011)
  • 7. .4 Shareholder structure11 Float SOP² 47.1% 0.1% Post-offering Birman family Management Others 52.6% 0.2% 47.2%Notes:1. Arezzo&Co capital stock is composed of 88,587,469 common shares, all nominative, book-entry shares with no par value.2. Stock Option Plan – Arezzo&Co’s executivesShareholder structure as of August, 2012. 7
  • 8. 1 .5 Culture & Management: Arezzo towards 2154 Meritocratic culture based on best practices makes Arezzo a company prepared to reach 2154 Code of Ethics  “Our behavior is a positive example for all activities and internal or external interactions; and we treat everyone with respect, equality and cooperation”  “We properly protect the confidentiality of our information, documents, trademarks, intellectual property and cherish the proper use of our assets”  “The Arezzo Group’s interests prevail over personal or third party interests and guide any decision-making in the company”  “We act with fairness in our relationships with suppliers, franchisees and customers, eliminating any situation that may generate expectations of bias in the context of receipt of gifts and invitations”  “Our suppliers are evaluated and contracted based on clear criteria and in line with our ethical standards and conduct”  “We are committed to ensure a responsible environmental stewardship by ensuring and establishing high standards for the purposes of protecting the environment and conserving its resources”  “We have a socially responsible conduct and do not use any resources for unethical or illegal purposes, or that violates local or international laws”  “It is our duty to report any breach of the Code of Ethics irrespective of the public involved” 2010 2154 8
  • 9. 1 .6 Strong platform of brands Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segmentsFoundation 1972 1995 2008 2009 Trendy Fashion Pop Design Brands New Up to date Flat shoes Exclusivity profile Easy to wear Bold Affordable Identity Eclectic Provocative Colorful Seduction Female target 16 - 60 years old 18 - 40 years old 12 - 60 years old 20 - 45 years old market O F MB EX O F MB EX O MB O MB EXDistribution POS 1 channel1 19 295 878 30 22 6 1,551 119 8 767 1 16 55 % gross 14% 73% 12% 1% 26% 1% 65% 8% 41% 59% 14% 7% 79% rev.2 Retail price R$ 180.00/pair R$ 285.00/pair R$ 99.00/pair R$ 960.00/pair point Sales R$ 25.9 million R$ 619.1 million R$ 282.6 million R$ 7.1 million Volume3 % Gross 2.7% 64,4% 29.4% 0.7% Revenues4Notes:1. Points of sales (2Q12 LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports – # multibrand stores2. % of each brand gross revenues (2011 LTM)3. (2Q12 LTM) gross revenues, does not include other revenues (not generated by the 4 brands)4. % total (2Q12 LTM) gross revenues 9
  • 10. 1 .7 Multiple distribution channels Flexible platform through three distribution channels with differentiated strategies, maximizing the Companys profitability Gross Revenues per Channel Reach about 301 franchises in 50 owned stores Broad distribution 1.200 cities and more than 160 being 7 Flagship in every Brazilian 2,500 multi- cities stores state brands Gross Revenue Breakdown – (R$ mn)¹ 47% 27% 21% 6% 100% 58² 198 256 962 450 Franchises Multi-brands Owned stores Others Total Notes: 1. (2Q12 LTM) gross revenues 2. Considers external market and other revenues in the domestic market 10
  • 11. | Business model
  • 12. 2 Unique business model in Brazil Customer focus: we are at the forefront of Brazilian women fashion and design1ABILITY TO 2 SOLID MARKETING 3 EFFICIENT 4 NATIONWIDE 5 SEASONED DISTRIBUTION MANAGEMENTINNOVATE AND SUPPLY CHAIN TEAM WITH STRATEGY COMMUNICATION PERFORMANCE PROGRAM BASED INCENTIVES Communication & R&D Sourcing & Logistics Multi-channel Management Marketing BRANDS OF REFERENCE 12
  • 13. 2 .1 Ability to Innovate We produce 7 to 9 collections per yearI. Research II. Development III. Sourcing IV. Delivery Creation: 11,500 SKUs / year Available for selection: 63% of SKUs created / year Stores: 52% of SKUs created / year Activities JAN FEV MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Creation Launch Orders Production Delivery Normal sale Discount sale Winter I Winter II Winter III Summer I Summer II Summer III Summer IVArezzo&Co fulfills the various aspirations of women, delivering on average 5 newmodels per day, allowing for consistent desire-driven purchases 13
  • 14. 2 .2 Broad media plan The brand has an integrated and expressive communication strategy, from the creation of campaigns to the point of sales Presence in eletronic media and television Strong presence in printed media+1000 exhibition on TV e 620 exhibition in cinema in 2011 150 inserts in printed media in 300 pages in 2011 (45 million readers)+ 40 million impact 78 exhibition in fashion editorials in 1Q12Digital communication Celebrity Endorsement Marketing Events549k accesses to site/month 115 k Facebook fans: leader in Demi Moore Gisele Bündchen Blake Lively CRM – VIP salesAverage navigation time: 8 minutes interactions Seasonal showroom in Los Angeles near the In-store events – PA51 k Twitter followers : category leader 30 k monthly access to Schutz‟s Blog Red Carpet Stylists Fashion Advisors Season 14
  • 15. 2 .2 Communication & marketing program reflected in every aspect of the stores Stores constantly modified to incorporate the concept of each new collection, creating desire-driven purchasesPOS materials (catalogs, packaging, among others)Store layout & visual merchandising Flagship stores All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection 15
  • 16. 2 .2 Atmosphere of stores: differentiated concepts for each brand Niches and lighting Summer – Flagship Oscar Freire Wall display Each theme is disposed in different nichesChameleon project: constantmodification to incorporate the newcollection’s concept Closet Essential Sophisticated lighting Combos Winter – Flagship Oscar Freire Video Wall Acessories Storage Distinguished storefront Special collectionsVisual merchandising: Updates at low cost investment  Jaquets and accessories  Exposure of a large variety of  Atmosphere of a jewelry store Brings relevant information from  Campaigns and marketing actions products  Private shop experience each collection to stores’ level  Preeminence for products  Selling area inventory: lower  Focus on exclusivity, design and 3 main updates per year  Differentiated products necessity of area for storage highly selected materials 16
  • 17. .3 Flexible production process…2 Production speed, flexibility and scalability to ensure Arezzo&Co‟s expected growth based on asset light model Sourcing Model Gains of scale Owned factory with capacity to produce 1.2 million pairs annually and strong relationship with Vale dos Sinos Arezzo’s size allows for large scale purchases from each production cluster as the outsourcing represents 85% of total supplier production Certification and auditing of suppliers Joint purchases In-house certification and auditing ensure quality and Negotiation of raw material jointly with local suppliers punctuality (ISO 9001 certification in 2008) New Distribution Center Consolidation and improvement of distribution in national scale 1 Reception: 100,000 units / day 2 Storage: 100,000 units / day 3 Picking: 150,000 units / day 4 Distribution: 200,000 units / day 5 Replacement of milky run strategy 17
  • 18. .4 ...leveraged by owned stores…2 Capturing value from the chain while developing retail know how and brands‟ visibilityFlagship Stores Greater brand awareness coupled with operational efficiencies  Clustering higher productivity stores in main areas (mainly SP and RJ) improving operational efficiency and profitability: Franchise Owned R$ 3,292 M Annual Average Sales per Store 2011 R$ 5,249 M  Direct costumers interaction develops retail competences which are also reflected Arezzo – Ipanema / RJ at franchised stores Arezzo – Cid. Jardim / SP  Flagship stores ensure greater visibility and reinforce brand image Total sales area and # of stores (sq m) 50 45 29 4,754 4,686 Flagship 21 20% Standard Store 20% 10 # stores 2,967 6 2,067 23% 1,044 1,369 19% 80% 80% 9% 77% Schutz – Iguatemi / SP 12% 81% 88% 91% Schutz – Oscar Freire / SP 2007 2008 2009 2010 2011 2Q12 18
  • 19. .4 …with efficient management of the2 franchise network... Model allows rapid expansion with little invested capital by Arezzo&Co and high profitability to franchisees Successful Partnership: “Win – Win” Franchise Concentration per Operator  Intense retail training (# of Franchisees by # of Franchises)  Ongoing support: average of 6 stores/ consultant and average of 22 visits per store/ year 4 or more franchises  Strong relationship with and ongoing support to franchisee  IT integration with our franchises amount to more than 80%  As mono-brand stores, franchises reinforce the branding in 10% 3 franchises each city they are located 16% 1 franchise 46% Best Franchise in Brazil (2005) and in the sector for 7 28% years since 2004 Excellency in Franchising Award in the last 8 years (ABF) 2 franchises 96% satisfaction of franchises1 Notes: FY2011 data 100% of on-time payments 1. 96% of the current franchisees indicated they would be interested in opening a franchise if they did not already have one Average payback of 39 months2 2. Annual sales of R$ 2,330 thousand + average initial investment of R$ 600 thousand + working capital of R$ 414 thousand 19
  • 20. 2 .4 ...and of the multi-brand stores Multi-brand stores widen the distribution capillarity and the brands‟ visibility, resulting in a strong retail footprint Multi-brand stores‟ Gross Revenue¹ (R$ mn) Improved distribution and brand visibility 2,224  Greater brand capillarity 1,612  Presence in over 1,200 cities # Store  Rapid expansion at low investment and risk Gross Revenue1 (R$ mn)  Main Focus: share of wallet 188 234  Owner’s loyalty 74  Important sales channel for smaller cities 60  Sales team optimization: internal team and commissioned 2010 2011 2Q11 2Q12 sales representatives Multi-brand storesNotes:1. Domestic market only 20
  • 21. 2 .4 Large capillarity and scale of store chain Mono-brand store chain with high capillarity, reaching more than 160 cities and well-positioned among the retail companies Points of sale (1Q12)Size and average sales per mono-brand stores - 2011 295 franchises + Brand Average size Net Revenue/ m2 Total GDP³: 5% 19 owned stores(i) + (m2) (R$ 000s) Stores 1,2 A&C¹: 4% 878 multi-brand clients 5 61 354 328 (i) 4 outlets 133 244 432 GDP³: 18% A&C¹: 17% 1,904 9 167 6 franchises + 1,031 7 336 22 owned stores(ii) + 2.513 8 145 1,551 multi-brand clients 263 17 104 (ii)1 outletPoints of sale – average size : new stores are increasing GDP³: 7% 8 owned storesnetwork average size A&C¹: 7% GDP³: 55% A&C¹: 57% 767 multi-brand clients 85 80 GDP³: 15% 1 owned store + 57 sq m sq m A&C¹: 15% 16 multi-brand clients sq m TOTAL 2010 2011 new stores 2012 new stores 301 franchises +Source: IBGE, Companies’ Reports; number of stores according to latest data provided by the Companies 50 owned stores +Notes:1. Considers only monobrand stores of Arezzo and Schutz; 2.224 multi-brand clients2. For Hering, considers only Hering Store chain stores;3. 2008 data; = 2,575 points of sales4. Net Revenue (assuming that sales taxes and deduction = 30% of gross revenues);5. Considers Arezzo + Schutz, except for outlets, handbags’ stores and Schutz franchise; 21
  • 22. 2 .5 Seasoned and professional management team Anderson Birman Internal Auditing Marco Coelho Schutz and AlexandreArezzo and Ana Capri Industrial Supply Chain Strategy and IT Financial HR Birman Anderson Birman Alexandre Birman Cisso Klaus Marcio Jung Kurt Richter Thiago Borges Raquel Carneiro Claudia NarcisoHighly qualified management teamName Years of YearsTitle experience at ArezzoAnderson Birman 39 39  Stock option plan for key executivesCEOAlexandre BirmanCOO 16 16  Performance based compensation package for allThiago Borges employees 12 4CFO and Investor Relations OfficerCisso Klaus 46 8  Independent business units for each brand but unifiedDirector – Industrial officers (Industrial, Logistics, Financial and HR) for theClaudia Narciso 23 13 whole companyDirector – R&DKurt Ritchter 31 10Director – Strategy and ITMarcio Jung 27 7Director – Supply ChainMarco Coelho 40 29Director – Internal AuditingRaquel Carneiro 12 2Director – HR 22
  • 23. 2 .6 Corporate governance Board is composed by 8 members being 4 appointed by controlling shareholders Board of directorsName Experience Name ExperienceTitle Title Tarpon’s partner since 2003, member of the Board of Directors ofAnderson Birman Arezzo’s CEO since its foundation, with over 39 years of Pedro Faria Direcional Engenharia, Omega Energia Renovável, Cremer andChairman of the Board experience in the industry Board Member ComgásAlexandre Birman Arezzo’s COO and founder of Schutz, with 16 years of Eduardo Mufarej Tarpon’s partner since 2004, member of the Board of Directors ofVice-Chairman of the Board experience in the industry Board Member Tarpon, Omega Energia Renovável and Coteminas Founder and CEO of “Ethos Desenvolvimento Humano eJosé Murilo Carvalho President of the Attorney’s Association of Minas Gerais, José Bolonha Organizacional“; Board member of the Inter-American EconomicBoard Member Board Member of the Brazilian Bar Association Board Member and Social Council (UN, WHO) CEO of Bahema Participações, board member of Pão de CEO of Grupo Boticário (largest franchise company in Brazil) andGuilherme A. Ferreira Açúcar, Banco Signatura Lazard, Eternit, Tavex and Rio Artur N. Grynbaum Vice-President at Abihpec (Brazilian Association of Industries in theIndependent Board Member Bravo Investimentos Independent Board Member field of Personal Hygiene, Perfumes, and Cosmetics ) CommitteesAudit Committee Strategy Committee People CommitteeAna Luiza Franco* (Coordinator) Pedro Faria (Coordinator) José Bolonha (Coordinator) Members: Members:Members: Anderson Birman, Alexandre Birman, Guilherme A. Pedro Faria and Alexandre BirmanJose Murilo and Guilherme A. Ferreira Ferreira and Arthur N. Grynbaum*Mrs Franco is former partner at Machado Meyer Law firm in Braziland currently acts as member for corporate risk and auditcommittees in various relevant companies in the country. 23
  • 24. | Market Overview
  • 25. 3 .1 Social upward mobility driving internal consumption Income growth and job creation lead to rapid social upward mobility and increasing internal consumptionBrazil experiences an accelerated process of social upward migration...(Millions of people) Class A/B 13 (8%) 20 (11%) 31 (16%) +18 mi (2003-14E) Class C 66 (37%) 95(50%) +47 mi 113 (56%) (2003-14E) Class D 47 (27%) 44 (24%) 40 (20%) Class E 49 (28%) 29 (15%) 16 (8%) 2003 2009 2014E Classes A/B: monthly income above R$4,808 | Class C: monthly income between R$1,115 and R$4,408 | Class D: monthly income between R$768 and R$1,115 | Class E: monthly income below R$768...Resulting in a significant rise of consumer goods consumption, including Footwear and Apparel(Consumption growth as a result of the upward mobility in social classes; indexed 100 = class D/E) Food, Drinks and 1.0x 1.7x 3.3x 5.4x Cigarettes Electronics 1.0x Class 1.9x Class 4.4x Class 10.1x Class and Furniture Footwear and D/E C B A apparel have Footwear and 1.0x 2.3x 5.4x 12.6x the largest Apparel growth Prescription/OTC drugs 1.0x 1.9x 4.3x 9.3x potential Hygiene and 1.0x 2.3x 5.3x 11.2x Personal Care 25Source: IBGE, FGV, LCA, Bain & Co., BCG, Roland Berger
  • 26. 3 .2 Brazilian footwear market overview Arezzo&Co has a significant stake of the the women footwear market and has consistently increased its market share Footwear consumption (2009) Arezzo&Co‟s market share1 Others 11.1% Kids 4% 13% 8.6% 8.1% 37% Sports Men 17% 4.7% 2007 2008 2009 2010 Women 29% Footwear market (R$ bn) footwear +8% +4% +6% Income Class Class A Class D/E 17% 6% 35.4 32.9 29.7 31.0 33% 44% 9.0 9.5 10.3 8.6 Class B Class C 2007 2008 2009 2010 Total footwear Women footwearSource: IBOPE Inteligência (Pyxis), Satra, World Bank, ABICALÇADOS, IEMI, MTE, MDIC, / SECEX, IBGENote: 1. Based on Euromonitor research and IBOPE Inteligência (Pyxis). Estimated market share, which includes both Arezzo and Schutz 26
  • 27. 3 .3 Global IndustryBrazil is a major shoe producer with a competitive cost of women leathershoes for the domestic market CHINA Lead time: 120 to 150 days Production (pairs): 10.000 mi ITALY Cost (FOB): US$ 16/pair Lead time: 70 days Cost (DDP): US$ 40/pair Production (pairs): 202 mi Cost (FOB): US$ 26/pair Cost (DDP): US$ 38/pair INDIA Lead time: 160 days Production (pairs): 2.000 mi Cost (FOB): US$ 15/pair Cost (DDP): US$ 23/pair VIETNA Lead time: 120 to 150 days Production (pairs): 682 mi Cost (FOB): US$ 15/pair Cost (DDP): US$ 23/pair BRAZIL Lead time: 40 days Production (pairs): 894 mi Cost (without taxes ): US$ 19/pair Cost (w/ taxes ): US$ 29/pair Note: DDP: delivered duty paidSource: Abilcalçados, Assintecal, Arezzo&Co FOB: free on board 27
  • 28. 3 .4 Brazilian footwear industry OverviewArezzo&Co mainly sources its products in the South of Brazil, the world‟slargest footwear manufacturer cluster, specialized in women leather shoes Brazilian Shoes Production (2010) Vale dos South 894 South Region Region Sinos (RS) million Production - # pairs (million) 302 ~187 pairs Export - # pairs (million) 32 ~20 Export - (million USD) 733 ~455 Jobs (thousand) 130 ~81 Other Main producer Companies 3.400 ~2.000 66 States 7% Sports  Expertise in the production of women leather shoes 88 10% Other producer regions: Rubber 487 Southeast Northeast Southeast Region Northeast Region 55% Region Region Leather 253 Production - # pairs (million) 189 Production - # pairs (million) 399 28% Export - # pairs (million) 9 Export - # pairs (million) 102 Export - (million USD) 152 Export - (million USD) 595 Jobs (thousand) 90 Jobs (thousand) 126 Companies 4.000 Companies 627Source: Abilcalçados, Assintecal, Arezzo&Co  Expertise in the production of men leather shoes  Expertise in the production of sports shoes 28
  • 29. | Value Drivers Update
  • 30. .1 Solid growth fundamentals4Key drivers of growth  Store openings in 2011 – 38 out of 38Expand distribution footprint  Store openings in 2012E – increase from 40 to 58  Same store expansion in 2011 and 2012 – 817 out of 1000 sq m already expanded  Store remodeling: Schutz new store format significantly improving sales productivityStore productivity increase  Same store sales of 11.2% (sell out - owned stores) and 14.5% (sell in – franchises)and additional upsides  IT integration between our franchises: about 80% of our stores network in the same platform  Gross margin expansion: 100bps in 2011Increase operational  Ebitda margin expansion: 60bps in 2011efficiencies and margins  Net income CAGR reached 47% (2005-2011) and net margin rose by 7p.p. in the same period Revenue growth post-expansion SG&A as % of Net Revenue and Gross Margin 40.5% 40.5% 41.5% 107%¹ AFTER 37.7% BEFORE 27.0% 70m2 26.2% 24.3% 24.7% 34m2 Store area ¹ Comparison between the sales of Schutz store at Higienópolis Shopping: 2008 2009 2010 2011 Results from August/10 to June/11 and August/11 to June/12 Gross margin SG&A (% of net revenue) 30
  • 31. .2 What‟s new for 20124Key drivers of growth  Opening of 58 stores in 2012: • 11 owned storesExpanding Footprint • 47 franchises  Webcommerce: Schutz and Anacapri started marketing a wide range of models to Brazil  Brand assessment:GTM Arezzo • Reevaluation of Arezzo’s current distribution and supply model in Brazil • Solid planning of brand growth for the next years Anacapri Gross  Consistent sales growth since 2010 RevenueAnacapri (R$ million)  Focus on new store format 21.6Consolidation 8.4  Widening distribution platform for franchises 2.6 1.9 2010 2011 1Q11 1Q12Alexandre Birman  Concentration on brand’s strengtheningInternationalization  Structuring brand’s internationalization out of NY 31
  • 32. 05 | 1Q12 Financial Highlights
  • 33. 5 .1 Operational and financial highlightsGross Revenues per Channel (R$ mn) – Domestic Market 29.2% 450.3 6.5 348.6 35.3% 78.4% 104.7 249.0 2.8 58.7 20.4% 184.0 3.0 129.8 89.3% 107.8 16.7% 60.2 1.0 31.8 22.6% 74.0 60.4 209.3 23.1% 179.4 90.8 111.8 2Q11 2Q12 1H11 1H12 Franchise Multi-brand Owned Stores Others¹ SSS Sell-out (owned stores) 19.2% 11.2% 15.6% 11.6% SSS Sell-in (franchises) 24.2% 14.5% 19.1% 10.4%Notes:1. ¹ Other: Growth of 211.1% in 2Q12 and of 136.9% in 1H12. 33
  • 34. 5 .2 Operational and financial highlights Key highlights 2Q12 Net Revenue increased by 31.0% year-over-year 2Q12 ended with 351 store chain and Sales area expansion of 26% year-over-year Strong Gross Revenue growth, especially in the Schutz brand that increased by 62.7% in 2Q12 comparing to 2Q11 Net Revenues (R$ mn) Number of Stores (R$ mn) and Total Area (sq m - „000)CAGR 07-12 (2Q12 LTM) : 31.0% Area CAGR 07- 12 (2Q12): 14.0% 678.9 571.5 23.9% 21.9% 22.6 21.4 17.7% 412.1 18,0 12.5% 13.2% 17.6 367.1 18.8% 38.7% 13.3 14.9 338 11.7 334 31.1% 296 296 +42 263 +38 193.8 12.3% 50 237 +33 45 31 214 29 199,5 10 +26 21152,2 6 +23 89.4% 269 301 267 289 208 227 2422Q11 2Q12 2007 2008 2009 2010 2011 2Q11 2Q12 2007 2008 2009 2010 2011 Owned Stores Franchises Total Area 34
  • 35. 5 .3 Operational and financial highlightsGross Profit (R$ mn) and Gross Margin (%) EBITDA (R$ mn) and EBITDA Margin (%) 45.1% 43.5% 18.6%43.2% 42.0% 17.4% 16.9% 28.6% 13.7% 157.1 36.9% 122.2 0.6% 22.4% 89.9 49.0 49.3 65.7 34.6 28.3 2Q11 2Q12 1H11 1H12 2Q11 2Q12 1H11 1H12 EBITDA EBITDA Margin Adjusted¹ NetProfit Gross Income (R$ mn) and Net Margin (%) Gross Margin15.8% 12.9% 13.3% 10.1% 7.2% -5.6 38.8 36.6 24.0 25.8 2Q11 2Q12 1H11 1H12 Net Income Net Margin 35
  • 36. 5 .4 Operational and financial highlightsCash Conversion Cycle (R$ thousand) Capex (R$ million) 2Q11 2Q12 Change Growth or Growth orCash Conversion Cycle Sumary of investments 2Q11 2Q12 1H11 1H12 #days (R$000) #days (R$000) (in days) spread (%) spread (%) 93 139,003 92 173,077 -1 Total Capex 3,578 14,462 304.2% 7,316 31,799 334.7%Inventory¹ 67 67,699 55 65,718 -11 Stores - expansion and reforming 2,133 7,415 247.6% 4,339 20,993 383.8%Accounts Receivable² 63 108,576 73 150,687 10 Corporate 1,213 6,775 458.5% 2,526 10,328 308.9%(-) Accounts Payable¹ 37 37,272 37 43,328 0 Others 232 272 17.2% 451 478 6.0%¹ Days of COGs² Days of Net RevenuesCash Flows From Operating Activities (R$ thousand) Growth or Growth or Cash flows from operating activies 2Q11 2Q12 1H11 1H12 spread spread Income before income taxes 30,345 33,695 3,350 51,666 49,331 (2,335) Depreciation and amortization 961 1,749 788 1,840 3,166 1,326 Others (4,395) (1,518) 2,877 (6,263) (5,647) 616 Decrease (increase) in current assets / liabilities 22,815 16,544 (6,271) 10,747 26,519 15,772 Trade accounts reveivable 42,262 22,801 (19,461) 23,896 28,795 4,899 Inventories (3,114) (108) 3,006 (18,837) (8,687) 10,150 Suppliers (13,629) (12,798) 831 8,528 6,042 (2,486) Change in other current assets and liabilities (2,704) 6,649 9,353 (2,840) 369 3,209 Change in other non current assets and liabilities (908) (928) (21) (1,171) (1,628) (457) Tax and contributions (5,974) (11,652) (5,678) (8,340) (11,652) (3,312) Net cash generated by operating activities 42,844 37,890 (4,955) 48,479 60,089 11,610 36
  • 37. 5 .4 Operational and financial highlights Indebtedness (R$ thousand) Indebtedness 2Q11 1Q12 2Q12Indebtedness totaled R$51.1 million in 2Q12 versusR$30.8 million in 1Q12 Cash 199,339 166,741 205,819 - Total indebtedness 32,276 30,844 51,117 Short term 12,547 14,059 25,548Long-term debt relevance stood at 50.0% in 2Q12 versus As % of total debt 38.9% 45.6% 50.0%54.4% in 1Q12 Long term 19,729 16,785 25,569 As % of total debt 61.1% 54.4% 50.0% - Net debt (167,063) (135,897) (154,702) -Indebtedness policy remained conservative, with lowweighted-average cost of Companys total debt EBITDA LTM 104,201 111,662 118,007 Net debt /EBITDA LTM -1.6x -1.2x -1.3x 37
  • 38. Appendix 38
  • 39. A .1 Key performance indicators Growth or Growth or Main financial Indicators 2Q11 2Q12 1H11 1H12 spread (%) spread (%) Net revenue 152,240 199,468 31.0% 290,835 360,829 24.1% ] ] (-) COGS (86,532) (109,533) 26.6% (168,682) (203,721) 20.8% Gross profit 65,708 89,935 36.9% 122,153 157,108 28.6% Gross margin 43.2% 45.1% 1.9 p.p. 42.0% 43.5% 1.5 p.p. (-) SG&A (38,380) (57,050) 48.6% (74,969) (110,972) 48.0% % of Revenues 25.2% 28.6% 3.4 p.p. 25.8% 30.8% 5.0 p.p. (-) Selling expenses (26,085) (40,895) 56.8% (51,250) (75,152) 46.6% (-) Owned stores (10,163) (18,543) 82.5% (19,647) (34,042) 73.3% (-) Sales, logistics and supply (15,922) (22,352) 40.4% (31,603) (41,110) 30.1% (-) General and administrative expenses (11,397) (14,209) 24.7% (22,300) (25,808) 15.7% (-) Other operating revenues (expenses)¹ 63 (197) n/a 421 (6,846) n/a (-) Depreciation and amortization (961) (1,749) 82.0% (1,840) (3,166) 72.1% EBITDA 28,289 34,634 22.4% 49,024 49,302 0.6% Ebitda Margin 18.6% 17.4% -1.2 p.p. 16.9% 13.7% -3.2 p.p. Net income 24,039 25,763 7.2% 38,767 36,615 -5.6% Net margin 15.8% 12.9% -2.9 p.p. 13.3% 10.1% -3.2 p.p. Working capital² - % of revenues 20.9% 21.8% 0.9 p.p. 20.9% 21.8% 0.9 p.p. Invested capital³ - % of revenues 24.5% 29.4% 4.9 p.p. 24.5% 29.4% 4.9 p.p. Total debt 32,276 51,117 58.4% 32,276 51,117 n/a 4 Net debt (167,063) (154,702) -7.4% (167,063) (154,702) n/a Net debt/EBITDA LTM -1.6 X -1.3 X n/a -1.6 X -1.3 X n/a 39
  • 40. A .2 Balance Sheet - IFRSAssets 2Q11 1Q12 2Q12 Liabilities 2Q11 1Q12 2Q12Current assets 389,423 426,413 441,382 Current liabilities 79,068 103,212 107,458 Cash and cash equivalents 3,261 6,213 4,799 Loans and financing 12,547 14,059 25,548 Short-term investments 196,078 160,528 201,020 Trade accounts payable 37,272 56,126 43,328 Trade accounts receivables 108,576 173,595 150,687 Dividends and interest on equity capital payable 7,177 6,117 9,701 Inventories 67,699 66,099 65,718 Other liabilities 22,072 26,910 28,881 Taxes recoverable 6,196 9,734 7,393 Other receivables 7,613 10,244 11,765 Non-current liabilities 26,365 23,138 29,984 Loans and financing 19,729 16,785 25,569Non current assets 63,117 94,836 105,507 Related parties 762 879 975 Long-term assets 21,785 17,896 16,135 Other liabilities 5,874 5,474 3,440 Financial investments 66 88 98 Taxes recoverable 3,170 350 360 Equity 347,107 394,899 409,447 Deferred income and social contribution taxes 13,432 10,473 8,705 Capital 40,917 105,917 105,917 Other receivables 5,117 6,985 6,972 Capital reserve 238,086 172,723 172,830Property, plant and equipment 22,904 37,627 47,693 Income reserves 37,779 105,407 105,407Intangible assets 18,428 39,313 41,679 Retained Earnings 30,325 10,852 25,293Total assets 452,540 521,249 546,889 Total liabilities and shareholders‟ equity 452,540 521,249 546,889 40
  • 41. A .3 Income Statement - IFRS Growth or Growth orIncome statement - IFRS 2Q11 2Q12 1H11 1H12 spread (% ) spread (% )Net operating revenue 152,240 199,468 31.0% 290,835 360,829 24.1%Cost of sales and services (86,532) (109,533) 26.6% (168,682) (203,721) 20.8%Gross profit 65,708 89,935 36.9% 122,153 157,108 28.6%Operating income (expenses): (38,380) (57,050) 48.6% (74,969) (110,972) 48.0% Selling (26,476) (41,811) 57.9% (52,000) (76,818) 47.7% Administrative and general (11,967) (15,042) 25.7% (23,390) (27,308) 16.8% Other operating income, net 63 (197) n/a 421 (6,846) n/aIncome before financial results 27,328 32,885 20.3% 47,184 46,136 -2.2%Financial income (expenses) 3,017 810 -73.2% 4,482 3,195 -28.7%Income before income taxes 30,345 33,695 11.0% 51,666 49,331 -4.5%Income and social contribution taxes (6,306) (7,932) 25.8% (12,899) (12,716) -1.4% Current (5,298) (6,164) 16.3% (7,265) (11,409) 57.0% Deferred (1,008) (1,768) 75.4% (5,634) (1,307) -76.8%Net income for the year 24,039 25,763 7.2% 38,767 36,615 -5.6%Income per share 0.2715 0.2910 7.2% 0.4473 0.4135 -7.5% 41
  • 42. A .4 Cash Flow Statement - IFRSCash Flow Statement - IFRS 2Q11 2Q12 1H11 1H12Cash flows from operating activities Income before income and social contribution taxes 30,345 33,695 51,666 49,331Adjustments to reconcile to net cash generated by operating activities (3,434) 231 (4,423) (2,481) Depreciation and amortization 961 1,749 1,840 3,166 Financial Investments (3,794) (2,743) (6,885) (6,604) Interest and FX variation 398 1,336 987 814 Other (999) (111) (365) 143Decrease (increase) in assets 41,744 23,523 5,095 22,198 Trade accounts receivable 42,262 22,801 23,896 28,795 Inventories (3,114) (108) (18,837) (8,687) Taxes recoverable 3,297 2,331 2,426 2,796 Variation in other current assets 701 (1,378) (658) (65) Judicial deposits (1,402) (123) (1,732) (641)(Decrease) increase in liabilities (19,837) (7,907) 4,481 2,693 Trade accounts payable (13,629) (12,798) 8,528 6,042 Labor liabilities (3,670) 4,100 (2,613) 1,269 Tax and social liabilities (2,165) 1,268 (1,960) (4,347) Change in other liabilities (373) (477) 526 (271)Paid incomes and social contribution taxes (5,974) (11,652) (8,340) (11,652)Net cash generated by operating activities 42,844 37,890 48,479 60,089Net cash used in investing activities (15,346) (52,221) (191,477) (68,207)Net cash used in financing activities with third parties (1,707) 18,937 (15,479) 11,644Net cash used in financing activities with shareholders (29,339) (6,020) 153,734 (14,255)Increase (decrease) in cash and cash equivalents (3,548) (1,414) (4,743) (10,729)Increase (decrease) in cash and cash equivalents (3,548) (1,414) (4,743) (10,729) 42
  • 43. IR ContactsCFO and IR Officer Thiago Borges IR Manager Daniel Maia Phone: +55 11 2132-4300 ri@arezzoco.com.br www.arezzoco.com.br 43

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