1 q11

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1 q11

  1. 1. 1Q11 Conference Call April 29, 2011
  2. 2. DISCLAIMER This presentation contains forward-looking statements regarding the prospects of the business, estimates for operating and financial results, and those regarding Cia. Herings 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.
  3. 3. AGENDA Highlights 1Q11 Operational Performance Outlooks3
  4. 4. 1Q11 HIGHLIGHTS Gross Sales: R$ 338.5 million in the quarter (+44.8%). Sales growth above 35% in all Company’s brands. Same Store Sales growth in the Hering Store Chain: (+23.4%). EBITDA : R$ 74.3 million (+58.0%), with EBITDA Margin of 26.8% (+2.6 p.p) Net Profit: R$ 51.0 million (+73.7%) Hering Store Chain: Opening of 72 stores since 1Q10, three during the 1Q11. Seven Hering Stores were remodelated in the quarter. Stores Opening - 418 by the end of 2011. 4
  5. 5. AGENDA Highlights 1Q11 Operational Performance Outlooks
  6. 6. SALES PERFORMANCEGross Revenue (R$ million) Domestic Market (R$ million) 338.5 1Q10 1Q11 44.8% 4.1 233.8 R$ 176.0 +44.7% R$ 254.6 5.3 22.9% R$ 15.7 R$ 24.2 +54.1% 46.4% 334.4 R$ 19.4 +38.5% R$ 26.9 228.5 R$ 12.7 +63.9% R$ 20.7 1Q10 1Q11 Domestic Market Foreign Market TotalIn the 1Q11, gross sales reached R$ 338.5 million (+44.8%) and all theCompany’s brands grew above 35%. 6
  7. 7. STORES CHAIN EVOLUTION 446 15 366 1 78 15 2 73 350 278 1Q10 1Q11 Hering Store Hering Kids PUC dzarm. Foreign - Franchised TotalIn the domestic market, we ended the 1Q11 with 350 Hering Stores, 78 PUC,2 Hering Kids and 1 dzarm. 7
  8. 8. HERING STORE CHAIN PERFORMANCE Hering Store Chain Performance 1Q10 1Q11 Chg. Number of Stores 278 350 25.9% Franchise 238 307 29.0% Owned 40 43 7.5% Sales (R$ thousand) (1) 137,363 202,409 47.4% Franchise 108,970 166,019 52.4% Owned 28,392 36,550 28.7% Same Store Sales growth (2) 26.6% 23.4% -3.2 p.p. Sales Area (m²) 35,478 45,439 28.1% Sales (R$ per m²) 3,878 4,495 15.9% Check-Outs 1,785,688 2,417,260 35.4% Units 3,985,723 5,237,956 31.4% Units per Check-Out 2.23 2.17 -2.9% Average Sales Price (R$) 34.46 38.64 12.1% Average Sales Ticket (R$) 76.92 83.74 8.9% (1) The amounts referred to the sales to final costumers. (sell out concept) (2) Compared to the same period of the previous yearSSS growth of 23.4% in the 1Q11 mainly driven by the increase in averagesales price, and also by stores traffic. 8
  9. 9. GROSS PROFIT AND EBITDAGross Profit and Gross Margin EBITDA and EBITDA Margin 49.5% -1.8 p.p. . 47.8% 48.3% -1.7 p.p. +2.6 p.p. 26.8% 24.2% . 46.7% 129.6 74.3 37.9% 94.0 58.0% 47.0 1Q10 1Q11 1Q10 1Q11 Gross Profit % Gross Margin % Cash Gross Margin EBITDA (R$ million) % EBITDA Margin (R$ million)Despite the pressure of raw material costs, the high operational leverage andthe strict expense management led to a 260-bp EBITDA margin expansion. 9
  10. 10. NET PROFIT +3.3 p.p. . 18.4% 15.1% 51.0 73.7% 29.4 1Q10 1Q11 Net Profit (R$ million) % Net MarginIn the 1Q11, expressive growth in Net Profit, mostly attributable to betteroperational performance and the establishment of investment grants. 10
  11. 11. CAPEXBy Activity (R$ million) 11.3 0.7 0.3 0.7 5.9 9.6 1.5 47.9% 0.2 0.3 4.0 1Q10 1Q11 Indutry IT Others Stores TotalIn the 1Q11, Cia. Hering’s investments totaled R$ 5.9 million, mainly focusedin the industry. 11
  12. 12. CASH FLOW Cash Flow - Consolidated (R$ thousand) 1Q10 1Q11 Chg. EBITDA 47,031 74,306 27,275 No cash items 335 365 30 Current Income tax and Social Contribution (8,575) (14,939) (6,364) Cash Flow Capex 26,735 (17,938) (44,673) Decrease (increase) in trade accounts receivable 29,616 17,559 (12,057) (Increase) in inventories (11,722) (27,481) (15,759) Increase in accounts payable to suppliers 11,281 882 (10,399) Increase (decrease) in taxes payable 2,228 2,512 284 Others (4,668) (11,410) (6,742) CapEx (10,093) (5,870) 4,223 Free Cash Flow 55,433 35,924 (19,509) Reconciliation from accouting Cash flow to adjusted Cash flow (R$ thousand) 1Q10 1Q11 Chg. DFC - Cash provided by operating activities 66,983 45,804 (21,179) Adjustment – Financial items allocated to operating cash (1,457) (4,010) (2,553) Unrealized exchange and monetary variation (1,808) (1,348) 460 Financial Result (2,328) (3,922) (1,594) Interest paid on loans 2,679 1,260 (1,419) DFC - Cash flows from investing activities (10,093) (5,870) 4,223 Free Cash Flow 55,433 35,924 (19,509)Decrease of R$ 19.5 million in free cash flow, mostly driven by the reduction inworking capital due to an increase in inventories. 12
  13. 13. INDEBTEDNESSNet Debt (R$ million ) Short Term x Long Term 4.6 3.5 0.1 Short (0.7) (0.2) (0.2) (0.2) Term 54.7% Long Term 201.3 184.6 45.3% 11.0 (33.4) (25.1) (61.9) (73.8) Gross Debt = R$ 51.0 million 2005 2006 2007 2008 2009 2010 1Q11 Net Debt/ EBITDA* * Last 12 months EBITDAIn line with the Company’s strategy to not renew bank loans with high interest,the debt reduction amounted R$ 2.9 million in the 1Q11. 13
  14. 14. AGENDA Highlights 1Q11 Operational Performance Outlooks14
  15. 15. OUTLOOKS Hering brand continues to be the company’s main leverage for growth: HS chain - increase in number of stores and growth in same store sales concept. Goal to reach at least 418 stores by the end of 2011. In the multibrand retail channel, strategy of continuing to qualify distribution, seeking increased market share in existing clients. Children’s market – launch of two more Hering Kids pilot stores. With dzarm. we will move forward with the strategic plan of launching collections in thecasual jeans concept, supported by marketing campaigns with celebrities. In the online channel, investments in technology infrastructure and webstoresremodeling. Cost pressures might persist throughout the coming quarters, however we should at leastmaintain EBITDA Margins at 2010 levels. 15
  16. 16. INVESTOR RELATIONS TEAM Fabio Hering – CEO Frederico Oldani – CFO and IRO Karina Koerich – IR Manager Admar A. Topazio Junior – IR Analyst Tel. +55 (47) 3321-3469 E-mail: ri@hering.com.br Website: www.ciahering.com.br/ir

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