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2Q10 Conference Call
July 30, 2010
DISCLAIMER


        This presentation contains     Company’s business plan.
       forward-looking statements      Such f...
AGENDA



         Highlights



 2Q10 Operational
    Performance


         Outlooks
2Q10 Highlights


  MAIN INDICATORS

  Gross Revenue grew 46,5% totaling R$ 306.7 million
  Sales increased over 35% for t...
AGENDA



         Highlights



 2Q10 Operational
    Performance


         Outlooks
Sales Performance

Gross Revenue (R$ million)




                                                           42.8%   540.4...
Sales Performance (cont.)

Domestic Market (R$ million)



         2Q09                       2Q10

                     ...
Distribution Chain – Hering Store and PUC

Store Chain Evolution



                                                      ...
Hering Store Chain Performance

 Hering Store Performance            2Q09           2Q10          Chg.         1H09       ...
Gross Profit and Gross Margin

Gross Profit (R$ million) and Gross Margin (%)
                                            ...
EBITDA and EBITDA Margin

EBITDA (R$ million) and EBITDA Margin (%)


                       27.4%   +8.3 p.p.            ...
EBITDA and EBITDA Margin (cont.)

EBITDA (R$ million) and EBITDA Margin (%) – Quarter Variation



                       ...
Net Profit

 Net Profit (R$ million) and Net Margin (%)

                                                                 ...
CapEx


By Activity (R$ million)                                          CapEx Revision for 2010


                      ...
Cash Flow

              thousand)
Cash Flow (R$ thousand )



 Cash Flow - Consolidated                    2Q09       2Q1...
Indebtedness

Net Debt (R$ million)                                                 Short Term x Long Term



 4.6        ...
Shareholder Remuneration



  Dividends



    Payment of R$ 19.7 million on May 3, 2010, of which R$ 0,36 per
    share.
...
AGENDA



         Highlights



 2Q10 Operational
    Performance



         Outlooks
Outlooks


 Hering
 •   Chain expansion: to end 2010 with 325 stores and open 80 more until 2012
 •   Total sales growth a...
INVESTOR RELATION TEAM

                   Fabio Hering - President
  Frederico Oldani – Finance and IR Director
         ...
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  1. 1. 2Q10 Conference Call July 30, 2010
  2. 2. DISCLAIMER This presentation contains Company’s business plan. forward-looking statements Such forward-looking regarding the prospects of statements depend, the business, estimates for substantially, on changes in operating and financial market conditions, results, and those regarding government regulations, Cia. Hering's growth competitive pressures, the prospects. These are merely performance of the Brazilian projections and, as such, are economy and the industry, based exclusively on the among other factors and expectations of Cia. Hering risks disclosed in Cia. management concerning Hering’s filed disclosure the future of the business documents and are, and its continued access to therefore, subject to change capital to fund the without prior notice.
  3. 3. AGENDA Highlights 2Q10 Operational Performance Outlooks
  4. 4. 2Q10 Highlights MAIN INDICATORS Gross Revenue grew 46,5% totaling R$ 306.7 million Sales increased over 35% for the three brands + 21.7% same-store sales in the Hering Store chain same- EBITDA Margin of 27.4% reaching an EBITDA of R$ 69.3 million (+113.2%) Net profit with 290.1% growth totaling R$ 42.6 million. . OTHER HIGHLIGHTS Opening of 14 Hering Stores and 2 PUC Stores Same store sales of 15.4% in the PUC store chain CapEx’s Review for 2010: from R$ 58.7 million to R$ 86.7 million Dividend Payment and Interest on Equity approval in the 2H10 amounting R$ 27.1 million 5
  5. 5. AGENDA Highlights 2Q10 Operational Performance Outlooks
  6. 6. Sales Performance Gross Revenue (R$ million) 42.8% 540.4 9.9 378.5 17.2% 46.5% 306.7 8.4 43.4% 209.3 30.7% 4.6 530.6 3.5 370.0 302.1 46.8% 205.8 2Q09 2Q10 1H09 1H10 Domestic Market Foreign Market Total In the 2Q10, the Gross Revenue grew 46.5% reaching R$ 306.7 46.5%, million and the domestic market was responsible for 98.5% for Cia. Hering sales. 7
  7. 7. Sales Performance (cont.) Domestic Market (R$ million) 2Q09 2Q10 +48.7% R$ 171.6 R$ 255.1 Hering 84% +36.3% PUC 7% R$ 16.9 R$ 23.0 dzarm. 6% Other 2% +42.9% R$ 12.6 + R$ 18.0 + Over 35% growth for the three brands: Hering (48.7%), PUC brands: (36.3%) and dzarm (42.9%), of which Hering accounted for 84% of the total sales. 8
  8. 8. Distribution Chain – Hering Store and PUC Store Chain Evolution 420 382 15 329 15 80 22 75 63 292 325 244 * estimated 2Q09 2Q10 2010* Total Hering Store Total PUC Foreign - Franchised 48 Hering Stores and 12 PUC Stores were opened compared to the 2Q09, and the Company maintains the forecast to end 2010 with 325 HS and 80 PUC. 9
  9. 9. Hering Store Chain Performance Hering Store Performance 2Q09 2Q10 Chg. 1H09 1H10 Chg. Number of Stores 244 292 19.7% 244 292 19.7% Franchise 205 251 22.4% 205 251 22.4% Owned 39 41 5.1% 39 41 5.1% Sales (R$ thousand) (1) 162,989 227,161 39.4% 259,352 364,524 40.6% Franchise 130,884 185,827 42.0% 207,208 294,797 42.3% Owned 32,105 41,334 28.7% 52,143 69,726 33.7% Same Store Sales growth (2) 29.3% 21.7% -7.6 p.p. 25.3% 23.5% -1.8 p.p. Sales Area (m²) 31,275 37,168 18.8% 31,275 37,168 18.8% Sales (R$ per m²) 5,301 6,186 16.7% 8,537 10,064 17.9% Check- Check-Outs 1,607,123 2,244,418 39.7% 2,880,353 4,030,106 39.9% Units 3,598,040 4,881,751 35.7% 6,494,812 8,867,474 36.5% Check- Units per Check-Out 2.24 2.18 -2.7% 2.25 2.20 -2.2% Average Sales Price (R$) 45.30 46.53 2.7% 39.93 41.11 3.0% Average Sales Ticket (R$) 101.42 101.21 -0.2% 90.04 90.45 0.5% (1) The amounts referred to the sales to final costumers. (sell out concept) (2) Compared to the same period of the previous year The SSS of the Hering Store chain reached +21.7% in the 2Q10, mainly boosted by the increase in the store traffic (+39.7%). 10
  10. 10. Gross Profit and Gross Margin Gross Profit (R$ million) and Gross Margin (%) 49.8% +4.8 p.p. 47.9% +4.5 p.p. 49.9% 45.0% 46.3% 48.2% 43.4% +3.6 p.p. 60.3% +3.3 p.p. 44.9% 59.3% 214.2 121.8 133.6 76.5 2Q09 2Q10 1H09 1H10 Gross Margin Gross Margin Cash The Gross Profit Cash (without depreciation) rose 3.6 p.p. compared to the 2Q09 and reached 49.9% in this quarter. 11
  11. 11. EBITDA and EBITDA Margin EBITDA (R$ million) and EBITDA Margin (%) 27.4% +8.3 p.p. 26.0% +8.7 p.p. 19.1% 17.3% 118.4% 113.2% 116.5 69.3 53.3 32.5 2Q09 2Q10 1H09 1H10 EBITDA Margin The EBITDA reached R$ 69.3 million, with 113.2% growth in the 2Q10 and million, an EBITDA Margin of 27.4% (+8.3 p.p.) p.p.) 12
  12. 12. EBITDA and EBITDA Margin (cont.) EBITDA (R$ million) and EBITDA Margin (%) – Quarter Variation 11.0 6.6 4.4% 1.3 5.3 2.6% 0.3% 1.7% 15.1 69.3 27.4% 19.1% 32.5 Mg EBITDA Deduction Tax Net Gross SG&A Mg EBITDA EBITDA Sales Deduction Tax Net Gross SG&A EBITDA 2Q09 Growth Incentives Margin (ex Dilution 1Q10 2Q09 Incentives Margin (ex Dilution 1Q10 TI and ded) TI and ded) The EBITDA and the EBITDA Margin increased were mainly due to the (i) sales growth; (ii) the dilution of fixed costs and operational growth; expenses; iii) cost of good sold optimization and; iv) tax incentives incentives. 13
  13. 13. Net Profit Net Profit (R$ million) and Net Margin (%) 16.2% 2.2 p.p. 16.8% 10.4 p.p. 14.0% 6.4% 67.9% 290.1% 72.5 42.6 43.2 10.9 2Q09 2Q10 1H09 1H10 Net Margin The Net Profit growth was positively affected by the negative impact of the exchange variation on deferred taxes in 2Q09 If this effect was not 2Q09. considered, the Net Profit growth in the 2Q10 would have been 62.8%. 14
  14. 14. CapEx By Activity (R$ million) CapEx Revision for 2010 From R$ 58.7 to R$ 86.7 million 208.1% 34.8 Capex Capex 2010 23.5 8.2 2010 reviewed 388.4% 0.9 Stores 20.0 27.4 3.5 7.5 11.3 Industry 28.1 48.2 4.8 0.7 IT/Others 10.6 11.1 2.8 22.1 Total 58.7 86.7 4.7 0.3 2.4 12.5 In R$ Million 0.1 2.0 1.3 4.3 1.1 2Q09 2Q10 1H09 1H10 Industry IT Other Stores In this quarter R$ 23.5 million was invested and due to the growth over the estimates Cia. Hering’s CapEx for 2010 was revised in order estimates, to meet the market demands. 15
  15. 15. Cash Flow thousand) Cash Flow (R$ thousand ) Cash Flow - Consolidated 2Q09 2Q10 Chg. 1H09 1H10 Chg. EBITDA 32.493 69.287 36.794 53.339 116.513 63.174 No cash items 159 251 92 315 537 222 Current IR&CS (7.944) (23.134) (15.190) (10.709) (31.709) (21.000) Cash Flow Capex (15.890) (9.610) 6.280 4.991 16.979 11.988 Increase in trade accounts receivable (24.069) (47.376) (23.307) (13.048) (17.760) (4.712) Decrease (increase) in inventories 1.716 896 (820) (15.475) (10.777) 4.698 Increase in accounts payable to suppliers 9.628 15.639 6.011 23.219 26.920 3.701 Increase (decrease) in taxes payable (6.293) 10.250 16.543 873 12.478 11.605 Others 3.128 10.981 7.853 9.422 6.118 (3.304) CapEx (4.810) (23.488) (18.678) (11.326) (33.581) (22.255) Free Cash Flow 4.008 13.306 9.298 36.610 68.739 32.129 The free cash flow reached R$ 13.3 million in the 2Q10 due to the EBITDA growth, as well as the less need of investments in working growth, capital. 16
  16. 16. Indebtedness Net Debt (R$ million) Short Term x Long Term 4.6 3.5 -0.7 0.1 -0.2 -0.3 Long Term, Short 80.7% 201.3 184.6 Term, 19.3% -33.4 11.0 -25.1 -72.4 2005 2006 2007 2008 2009 2Q10 Debt= Gross Debt= R$ 49.3 million Net Debt / EBITDA* * Last 12 months EBITDA Cia. Hering ended the 2Q10 with R$ 72.4 of Net Cash and the lower Cash, amount (compared to the R$ 77. 2 million in the 2Q09) was due to the May, payment of dividends amouting R$ 19.7 million on May, 2010. 17
  17. 17. Shareholder Remuneration Dividends Payment of R$ 19.7 million on May 3, 2010, of which R$ 0,36 per share. share The Company’s Board of Directors at a meeting held on July 28, 2010 approved the distribution of dividends in the amount of R$ 17.6 million (R$ 0.325 per share) and Payment of Interest on Equity in the amount of R$ 9.5 million (R$ 0,175 per share) totaling R$ 27.1 million (R$ share), 0.50 per share) to be paid in the 3Q10. share), 18
  18. 18. AGENDA Highlights 2Q10 Operational Performance Outlooks
  19. 19. Outlooks Hering • Chain expansion: to end 2010 with 325 stores and open 80 more until 2012 • Total sales growth as well as the SSS in the store chain • Campaign “I am / I wear Hering” with new approach • Actions with the Hering Store Card and Hering Webstore Webstore. Children Market with opportunities to be explored. • Launch of the flagship pilot store project for Hering Kids and Hering Kids + PUC • Growth in the multibrand retail sales as well as same clients sales sales. • brands: Assortment and Price Adjustment for the brands : Hering Kids (Value & Moderate) and PUC (Better & Premium). dzarm. dzarm . • Continuity of repositioning plan: casual jeans concept plan: • Marketing Campaign with celebrities . celebrities. 20
  20. 20. INVESTOR RELATION TEAM Fabio Hering - President Frederico Oldani – Finance and IR Director Karina Koerich – IR Manager Gracila Camargo Lopes – IR Analyst Admar A. Topazio Junior – IR Analyst Tel. +55 (47) 3321-3469 E-mail: ri@heringnet.com.br Website: www.ciahering.com.br/ir FIRB – Financial Investor Relations Brasil Tel. +55 (11) 3897-6857 E-mail: ligia.montagnani@firb.com
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