7th annual lat am ceo conference ny

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7th annual lat am ceo conference ny

  1. 1. 7th Annual LatAm CEO Conference – Magazine LuizaMay, 16th and 17th
  2. 2.  Overview of the Brazilian market Magazine Luiza 2
  3. 3. Brazilian GDP has grown 13% annual rate over the last 8 years GDP (R$ Trillion) 4.143 +13% 3.250 3.032 3.022 2.883 2.614 2.718 1.769 1.556 2003 2004 2005 2006 2007 2008 2009 2010E 2011E GDP CAGRSource: LCA, IBGE 2009 – Estimativas 2010 e 2011 LCA 3
  4. 4. The country has reached full employment recently% working-age N° of jobs population created (MM) 14 3 13 12,3 2,5 12 11,7 11,5 11 2 10,0 10 9,8 9,3 1,5 9 7,9 8,1 8 1 7 6,7 6,0 0,5 6 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Unemployment rate (% of working age population) N° of formal jobs createdSource: MTE (Ministério do Trabalho e Emprego), IBGE 4
  5. 5. Real income growth has helped to boost consumption in the internal market Minimum Wage (R$) 622 545 510 465 415 380 350 300 260 240 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Growth of 211% – 2012 over 2002Source: DIEESE (Depto. Intersindical de Estatísticas e Estudos Socioeconômicos), BACEN 5
  6. 6. Middle class corresponded to 49,3% of the total domicile in 2011 Social Class Distribution - % of total domiciles 4,5 Class A 4,1 17,5 Class B 30,7 30,9 Class C 49,3 33,8 Class D 15,1 13,2 Class E 0,8 1998 2011 New middle class represented 57 million domiciles in 2011Source: IPC TARGET 6
  7. 7. Retail segment is usually responsible for the entrance of class C in the financial service Account access Private Label cards (MM)1 CAGR: 16,9% annual rate 247,4 225,3 39% 196,5 63% 172,8 85% 146,7 118,3 97,5 86,0 61% 71,1 37% 15% Class AB Class C Class DE 2003 2004 2005 2006 2007 2008 2009 2010 2011 With access Without access1) Number of Private label cards – total populationSource: CETELEM (PesquisaObservador 2012, Dezembro 2011 – IPSOS) , ABECS (Associação Brasileira das Empresas de Cartão de Crédito e Serviços) 7
  8. 8. Consumer credit has been considered the turbine of growth with stable compromised montly income with debt services Compromised montly income Credit operations (R$ bn) with debt services 28% 31% 35% 40% 44% 45% 49% 22,2 2.030 19,6 18,6 19,4 18,5 1.706 17,6 17,6 1.414 1.227 936 733 607 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 1 Total Operations %GDP % debt services1) Total credit operations over GDPSource: BACEN 8
  9. 9. Healthier consumer credit when compared with other countries due to a combination of longer duration and lower rates Housing credit – Caixa Econômica Federal1 (R$ Bn) 80 76 70 56 47 33 21 23 18 14 12 9 11 6 7 4 4 4 2003 2004 2005 2006 2007 2008 2009 2010 2011 Disbursed Contracted1) Federal bankSource: CAIXA ECONÔMICA FEDERAL 9
  10. 10. More houses and credit availability are an opportunity to increase sales of durable goods Households appliances (MM units)1 Electronics (MM units)2 25,6 22,8 22,0 22,0 21,0 19,8 19,9 19,8 16,3 13,3 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Computers (MM units) Mobiles (MM units) 9,6 57,2 47,8 42,9 41,4 7,1 6,2 6,3 30,8 5,4 2007 2008 2009 2010 2011 2007 2008 2009 2010 20111) Include: refrigerator, freezer, washing machine, tanquinho, stove, microwave, ar conditionar; 2) LCD, LED, Plasma, 3D, DVD, Home Theather, Mini systemSource: GFK Retail 10
  11. 11. Despite the growth, middle class penetration is still low Percentage (%) Total Population Class C Refrigerator (with freezer) 93 37 Computer 50 39 Washing Machine 68 61 Smartphone 1 35 19 Flat TV 13 7 Air conditioner 12 6Source: PNAD 2009 (Pesquisa Nacional por amostra de domicílios), IBGE,1)Nielsen - Consumidor Móvel 2011 11
  12. 12.  Overview of the Brazilian market Magazine Luiza 12
  13. 13. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 13
  14. 14. Corporate structure100% 40.55% 50% 100% 100% 3 1 2 3(1) JV with Itaú Unibanco(2) JV with Cardif(3) Corporate integration of both companies concluded 14
  15. 15. Ownership structure Pre – IPO Post – IPO 12,4% 6,7% 29,7% 5,6% 2,5% 60,6% 2,7% 75,4% 4,5% 150,000,000 shares 186,494,467 shares LTD Administração e Part. S.A.LTD Administração e Part. S.A. Wagner Garcia Part. S.A.Wagner Garcia Part. S.A. Founding Family MembersFounding Family Members Capital Int’l Inc. (Private Equity Fund)Capital Int’l Inc. (Private Equity Fund) Free Float 15
  16. 16. Experienced executives with strong corporate governance Executives with ample experience in the Brazilian retail industry Established corporate governance Years with the Experience Name / Post Company (years)  Controlling shareholders with more than 50 years in the industry Luiza Helena Trajano President >40 >40  Board of Directors with independent members since 2005  Audit Committee led by an independent member Marcelo Silva 3 34  Financial statements audited for the past 10 years by a CEO “Big Four” firm  Senior Management: retention plan (stock options) Roberto Bellissimo >10 >10 CFO Fabrício Garcia >10 >10 Chief Commercial Officer Shareholding by CIPEF - private equity fund of the Capital Group Frederico Trajano Chief Sales and Marketing Officer >10 >10  CIPEF − Five private equity funds with more than US$2.5 Isabel Bonfim billion invested since 1997 Chief Management and Control Officer >30 >30  A successful history of investments in Brazil and in other emerging economies Marcelo Barp (1) − Abril S.A., Arcos Dorados, Constellation Overseas 4 9 Luizacred and Grupo IBMEC Luis Felipe (1) 6 >20 LuizasegNote 1. Years of experience in the financial services industry 16
  17. 17. Proven history of strong organic growth and successful aquisition even throughout adverse economic scenarios18 90016 728 70014 604 Madol, Killar12 444 455 500 391 Baú:10 Lojas Líder 351 346 + 104 stores Rede Wanel 253 Nordeste: 300 8 174 +136 stores 7,1 111 127 São Paulo (Capital): 6 96 +46 stores 5,3 100 Rio Grande SulSanta Catarina: +51 stores +100 stores 3,8 4 Upstate SP: Campinas: 3,2 +5 stores +20 stores 2,2 2,6 -100 1,4 1,9 2 0,9 0,5 0,6 0,7 0 -300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Currency crisis – Lehman Beginning of September, 11th President Lula’s Brothers’ PIGS’ crisis Sub-prime crisis election bankruptcy Gross Revenue – Retail Operation (R$ Billion) Number of Stores 17
  18. 18. Broad geographic footprint including in the Northeast of Brazil Geographic footprint Gross Revenue evolution – Northeast R$ MM 728 stores 992,1 52% Cabedelo Simões Filho 651,8 Ribeirão Preto Contagem 31% Ibiporã Loureira Navegantes % of stores per region (2011) Caxias South 30% 24% Southeast 48% 20% 2% Northeast Mid-West 2010 2011States with Stores Distribution Center (8) 18
  19. 19. Ranked the 23th most valuable brand in Brazil Ranking published on Istoé Dinheiro Magazine – May 2012 1. Petrobras 2. Bradesco First 5 3. Itaú most 4. SKOL valuable 5. Banco do Brasil 6. Natura 11. Vivo 16. OI 7. Brahma 12. Perdigão 17. Casas Bahia 6 – 20 most valuable 8. Vale 13. Lojas Americanas 18. Totvs 9. Sadia 14. Bohemia 19. TAM 10. Antartica 15. Ipiranga 20. Cielo 21. Multiplus 26. Net 31. Iguatemi 22. Porto Seguro 27. Extra 32. Odontoprev 21 – 35 most valuable 23. Magazine Luiza 28. BM&F 33. Pão de Açúcar 24. GOL 29. Banrisul 34. União 25. Redecard 30. Hering 35. Embratel 36. Anhanguera 41. Durafloor 46. Havaianas 37. Amil 42. Arezzo 47. Deca 38. Lojas Renner 48. PDG 36 – 50 most valuable brands 39. MRV 43. Gerdau 44. Drogasil 49. Localiza 40. Marisa 45. Swift 50. Riachuelo Magazine Luiza brand values USD 479 MM1) Source: Ranking Istoé Dinheiro, Milward Brown/Brandanalytics 19
  20. 20. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 20
  21. 21. Strong corporate culture assisted by a sales model that is supported by enthusiastic teams High influence of service and credit on 13 years among the Best Places to Work purchasing decision Others Offered brandsPunctuality of Delivery 7,1% 4,5% 3,2% Product Variety 8,4% Price 39,8%  Communication: Luiza TV, Radio Luiza, Town Halls  Transparency: Availability of management information and frequently alingment – Monthly store P&L avaliable on the internet 37,0%  Empowerment: Sales staff and managers have flexibility Service/ to negotiate sales conditions within a range Credit  Compensation: based on gross profit, financial margin and sales 21
  22. 22. Exceptional relationship management drives customer loyalty CRM Tool Golden Clients 30 million customers registered Only program in the sector More than 10 years of purchase and sales data More than 1 million clients  CRM tool available to all stores - Boomerang Golden Day: stores opened exclusively for program clients  Telemarketing during sales staff downtime (7,3 million calls on 20112) Golden clients usually spend 55% more than regular clients Statistical models of purchasing behavior and price1) Only Magazine Luiza stores 22
  23. 23. Client database mainly composed by clients from classes CDE Million of clients – South, Southeast and Mid-West1 22,2 10% +20% 18,9 10% 16,0 14% 13,2 10,8 14% 86% 90% 90% 14% 86% 86% 2007 2008 2009 2010 2011 Class AB Class CDE1) Do not include Lojas do Baú’s client database 23
  24. 24. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 24
  25. 25. Unique retail chain truly multi-channel in Brazil Multi-channel strategy meets customer demands  Free-standing stores or in  Small or mid-sized cities malls  Direct delivery  Physical showroom and in-  No physical showroom or store stock stock  Size: 700-1.000 m2  Size: 130 m2  Sales per m2 is double conventional store624 stores in 16 states 103 stores in 4 states  Same product mix as the  27.000 total SKU s Internet  More than 10 million  Dedicates sales team unique visitors  75% growth in 2010 More than 70MM page views 25
  26. 26. Gross revenue growth for Conventional and Virtual stores...Gross Revenue (R$ Bn) 6,3 0,3 +29% 4,8 0,2 3,5 3,0 0,2 0,2 6,0 4,5 3,3 2,8 2008 2009 2010 2011 Virtual Stores Conventional Stores CAGR 26
  27. 27. ... and e-commerce above the market averageGross Revenue (R$ MM) 821,1 +51% 568,7 324,9 239,5 2008 2009 2010 2011 CAGR 27
  28. 28. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 28
  29. 29. Pioneer in the financial services through Luizacred...50% of sales are made through Luizacred Comments 25% 27% 22% 22% 24% • JV with Itaú-Unibanco (50%/50%) since October 2001 25% 27% 26% 28% • Important tool to enhance 24% customer loyalty 1% 19% • Itaú Unibanco: credit and funding 34% 39% management 35% 49% • Magazine Luiza: sales force 30% management and customer 17% 13% 13% acquisition process 2007 2008 2009 2010 2011 CDC Luiza Card Third-party Cards Cash Sales/Down Payment 29
  30. 30. …and Luizaseg Joint Ventures Products Comments • JV (50%/50%) with Cardif, established in 2006:  Extended warranty Broker for life, home, health, dental and card insurance Guaranteed exchange Luizaseg: significant growth in insurance product sales 30
  31. 31. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 31
  32. 32. Focus on the best product mix...Mix% of sales, 2011 Others 10% Household Furniture & Kitchen Appliances Appliance 31% 15% 20% Technology 24% Sound & Image 32
  33. 33. ... to support changes in consumer behavior (1/4) Television Television South, Southeast and Mid-west Northeast Units sold (%) Units sold (%) 7% 5% 67% 91% 93% 95% 33% 9% 2007 2011 2007 2011 R$ 783 R$ 1.406 R$ 636 R$ 1.007 Flat TV 1 CRT Weighed average ticket1) LCD, Plasma, LED, 3D 33
  34. 34. ... to support changes in consumer behavior (2/4) Computer Computer South, Southeast and Mid-west NortheastUnits sold (%) Units sold (%) 30% 47% 84% 88% 70% 53% 16% 12% 2007 2011 2007 2011 R$ 1.364 R$ 1.124 R$ 909 R$ 818 Desktop Notebook Weighed average ticket 34
  35. 35. ... to support changes in consumer behavior (3/4) Washing Machine Washing Machine South, Southeast and Mid-west NortheastUnits sold (%) Units sold (%) 43% 48% 52% 73% 57% 52% 48% 27% 2007 2011 2007 2011 R$ 701 R$ 884 R$ 581 R$ 586 Washing Machine “Tanquinho” Weighed average ticket 35
  36. 36. ... to support changes in consumer behavior (4/4) Refrigerator Refrigerator South, Southeast and Mid-west NortheastUnits sold (%) Units sold (%) 20% 40% 35% 64% 80% 60% 65% 36% 2007 2011 2007 2011 R$ 1.323 R$ 1.501 R$ 1.139 R$ 1.142 Without freezer With freezer Weighed average ticket 36
  37. 37. Evolution of plans and interest rates also supported those changes 2007 2011 Interest Rate 5,50% 2,99% Main changes • Interest rates became more attractive Form 0+15 through Luiza Card financing Minimum Wage (R$) 380,00 545,00 • Purchase power increased while risk decreased Class C Minimum Wage (R$) 1.140 1.635 TV LCD 32" Notebook Washing Machine Year 2007 2011 2007 2011 2007 2011 Price (R$) 2.947 1.187 2.002 1.246 1.159 1.046 Installments (R$) 293,00 99,36 199,45 104,30 115,47 87,56 Installment/Class C 25,7% 6,1% 17,5% 6,4% 10,1% 5,4% Minimum Wage1) Analysis: March to June 2007; April 2011Source: Flyer Magazine Luiza 37
  38. 38. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 38
  39. 39. Magazine Você: leading our multi-channel strategy to the highest degree Direct Sales E-commerce in Brazil Social Networks•Brazil: fourth-largest market • 23 million buyers • 85% claim to be in a social – Revenue (2010): R$ 26 bn • 46,5% from Class C network•2,74 million direct sellers • Revenue (2011): R$ 20 bn – Facebook: 30 MM users –Orkut : 29MM users•The user creates its own store with up to 60 products from Magazine Luiza website (magazineluiza.com.br) andshare the products with its friendsthrough Facebook and Orkut• Comission goes from 2,5% to 4,5% per product sold in the store• No initial investment is required•Magazine Luiza is responsible for logistics and paymentSource: Ibope, Ebit, Forrester research, Magazine Luiza 39
  40. 40. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 40
  41. 41. Excellent organic growth potential… North 30  Multi-channel model and large geographic footprint gives Magazine Luiza an Northeast advantage in identifying new stores opportunities 56  240 priority cities for new Magazine Luiza stores Mid-West  Together, priority cities 18 would support more than 400 new stores − 30% will be opened Southeast with the Virtual Store Concept 109 South 28Source: IBGE, Company 41
  42. 42. … and multiple growth opportunities throughout Brazil Relevant Growth of Virtual Channels • Amount of virtual store and internet sales above market Increase Share of Financial growth Products • Only 4.3 million of current 30 million customers have a Luiza credit card – significant growth potential Industry Consolidation • Penetration of LuizacredOrganic Growth • M&A potential with high in Lojas Maia sales• Increase presence where industry fragmentation – currently operating, more than 50% of the especially the northeast industry is in the hands of and Greater São Paulo small companies• 39% of the stores have not reached their maturity• Remodel to increase same store sales 42
  43. 43. Growing for more than 50 years in the Brazilian Retail Market Financial Information – 1Q12 Multiple growth Company opportunities Strong corporate culture,First social e-commerce in Brazil Magazine Luiza focus on valuing people and customers Focus on the best Multi-channel model product mix under the same brand Pioneer in the retail financial service 43
  44. 44.  Highlights of 1Q12 and Expectations for the Next Quarters Financial Performance Operational Performance 44
  45. 45. Highlights of 1Q12 Initiatives and Achievements Impacts on Financial Results Significant sales growth versus 1Q11  Extraordinary expenses: R$33.5 million • Sales growth of 25.7% • Magazine Luiza and Baú’ store: R$20.3 million • Same store sales growth of 15.9% • Maia’ stores: R$13.2 million • E-commerce growth of 42.8%  Investments in infrastructure and expansion Sustainable growth • 7 new stores inaugurated • Gross margin in line with projected level • 5 Baú’ store were closed • Financial discipline (sales with no interest) • Total investments: R$43.2 million • Results were in line with the projection for 1Q12 o Logistics: R$12.5 million (Louveira’s DC expansion concluded) Conclusion of Lojas do Baú integration • System integration concluded  Luizacred results • Stores’ maturation process has just started • Maintenance of conservative approach in the 1Q12 • Capture of synergies initiated • Reduction of credit approval rate • Participation in the rationalization of costs and Continuation of Lojas Maia integration process expenses project • Corporate integration – April 30th • System integration scheduled for 2Q12  Magazine Luiza results • The majority of non-recurring expenses planned for Rationalization of costs and expenses 2012 were incurred in January and February • Rationalization of costs and expenses throughout • March 2012: operational expenses were the company – most initiatives were already significantly lower and below projection. generating implemented in January and February 2012, positive results for the Company benefits for upcoming quarters 45
  46. 46. Expectations for the next quarters1 3 Significant Sales Growth Results – Luizacred Sustainable growth:  Stability of credit approval rate • Maturation of new stores  Increase in its profitability during the 2S12 • Internet  Portfolio’s maturation and expenses’ dilution • Positive outlook of the Brazilian market  Dilution of operating expenses and (noteworthy reduction in the basic interest rate proportional reduction of provisions. thanks to to its lowest level ever) the improved quality of the overdue loan portfolio2 4 Lojas Maia Integration Process Results – Magazine Luiza System integration – expected to 3Q12  Continuing with the rationalization of costs and Fully integrated management – 4Q12 expenses project • Dilution of administrative and logistics  Improvements of profitability – quarter versus expenses quarter • Working capital and price management  Better productivity indicators and significantly contributing to the increase of Lojas Maia’s positive results in 2012. gross margin. 46
  47. 47.  Highlights of 1Q12 and Expectations for the Next Quarters Financial Performance Operational Performance 47
  48. 48. Gross Revenue (R$ billion) Retail Comments 25.0% • Gross revenue of the Retail segment increased 7.1 25.0% versus 1Q11 2.1 • Same store sales growth of 15.9% driven by: — Stores maturation 1.8 — “Fantastic Sales” 1.6 2.0 • Increase in the number of stores: from 604 in1.6 the end of 1Q11 to 730 stores in the end of 1Q121Q11 2Q11 3Q11 4Q11 2011 1Q12 • Consolidated gross revenue increased 25.7% Consolidated versus o 1Q11: 25.7% — Growth of the retail segment 7.6 — Growth of the consumer financial service revenue of 34.7% (influenced by service’s 2.3 revenues and personal loans – recorded under Luizacred) 1.9 1.7 2.11.71.11Q11 2Q11 3Q11 4Q11 2011 1Q12 % of growth over the same quarter of 2011 48
  49. 49. Gross Revenue – Internet (R$ million) Internet Comments 42.8% • 42.8% increase over 1Q11. boosted by: 821.1 — Multi-channel approach: infrastructure shared with other channels 250.9 — Increase in the number of SKUs (long tail) and improvements in product mix — Innovation in content — Investments in systems and logistics to 214.4 guarantee the best customer service (Magazine Luiza is considered diamond by e-bit) 181.7 248.5174.01Q11 2Q11 3Q11 4Q11 2011 1Q12 % of growth over the same quarter of 2011 49
  50. 50. Net Revenue and Gross Profit (R$ billion)Net Revenue - Consolidated Comments 27.5% • Strong growth due to the increase of the gross 6.4 revenues (retail segment and consumer financial 1.9 service) 1.6 • Net revenue growth outpaced gross revenue growth. basically due to the higher volume of 1.5 1.8 products subject to tax substitution. which is1.4 booked under COGS1Q11 2Q11 3Q11 4Q11 2011 1Q12 Gross Profit - Consolidated Comments 22.4% 2.1 • Retail: — Strong grow due to Fantastic Sales in January 0.7 — Increase in the Internet participation 0.5 — Integration of Baú stores 0.5 0.6 — Low gross margin at Lojas Maia:0.5 o Clearance • Consumer Financing:1Q11 2Q11 3Q11 4Q11 2011 1Q12 — Reduction of CDI rate33.2% 32.8% 32.7% 34.7% 33.4% 31.8%% of growth over the same quarter of 2011 Gross Margin (%) 50
  51. 51. Operating Expenses – Consolidated (R$ million) Operating Expenses (R$ MM) Comments • SG&A Expenses:26.2% 1.0% 27.2% 26.3% 5.0% 31.3% — Impact of the extraordinary expenses with new stores. integration of Baú. and review of 90.6 565.6 people cost expenditures 475.0 — Captures of synergies initiated as a result of office integration (Baú’ stores and expenses rationalization371.4 14.4 385.8 • Provisions: — Robust provisions (Luizacred conservatism) • Other operational expenses: — Impact of extraordinary expenses and personal loans • Extraordinary Expenses: — R$33.5 million. being R$20.3 millionSG&A Provisions & Total SG&A Provisions & Total at Magazine Luiza and Baú and other oper. other oper. R$13.2 million at Maia revenues Revenues 1Q11 1Q12 % Net Revenue 51
  52. 52. Financial Expenses – Consolidated (R$ million) Financial Expenses (R$ MM) Comments • Financial Results: 3.2% 2.2% — Financial expenses declined from 3.2% of net revenue in 1Q11 to 2.2% in 1Q12. impacted by the reduction 45.7 in net debt and loer CDI rate in the 39.2 period — Stable pre-paid Luiza card receivables: R$6.2 million at 1Q11 and 1Q12. (0.3% consolidated net revenue) — Minimaze interest-free sales on Luiza card. as well as limit the share of third-party credit cards in total sales. encouraging Luizacred sales 1Q11 1Q12 Financial Expenses % Net Revenue 52
  53. 53. EBITDA and Adjusted EBITDA (R$ million) EBITDA Comments • EBITDA impacted by: 300.6 — Gross margin reduction at Lojas Maia 52.5 — Extraordinary expenses including pre 92.2 operational expenses of new stores and 71.9 integration process84.0 9.3 — Increase in provisions for loan losses1Q11 2Q11 3Q11 4Q11 2011 1Q125.9% 4.9% 5.8% 2.7% 4.7% 0.5% Adjusted EBITDA 1Q11 1Q12 5.9% 5.6% 0.5% 2.4% 0.0 0.0 78.7 26.0 42.8 5.4 0.0 84.0 7.5 9.3 Current Extraord. Extraord. Deferred Adjusted Current Extraord. Extraord. Deferred Adjusted Revenues Expenses Revenues EBITDA Revenues Expenses Revenues EBITDA Margin EBITDA (%) 53
  54. 54. Net Income and Adjusted Net Income (R$ million) Net Income Comments • Net income impacted by: 11.7 — Gross margin reduction at Lojas Maia 4.6 11.7 16.912.3 — Extraordinary expenses including pre operational expenses of new stores and integration process -40.7 — Deferred taxes were not accountable due to Lojas Maia losses (R$8.3 million)1Q11 2Q11 3Q11 4Q11 2011 1Q120.9% 0.3% 0.7% -0.9% 0.2% -2.3% Adjusted Net Income 0.9% 1Q11 0.6% -2.3% 1Q12 -0.6% 5.4 8.7 1.8 0.0 -11.4 8.3 -10.3 12.3 -40.7 33.5 Net Income Extraordinary Taxes Tax credits Adjusted Net Income Extraordinary Taxes Tax credits Adjusted Result not recorded Income Result not recorded Income Net Margin (%) 54
  55. 55. Investiments (R$ million) Investiments Comments 97.6 • 7 new stores inaugurated (4 conventional stores in the Northeast and 3 virtual stores in Paraná) 25.1 • Other investments include the conclusion of the expansion of the Louveira distribution center and other 50.2 37.8 investments in logistics. which totaled 7.5 43.2 R$12.5 million in 1Q12. 40.0 6.5 7.5 19.3 5.8 11.0 22.5 15.1 6.0 7.3 11.8 10.0 28.9 15.4 18.4 2.3 11.5 4.2 1.91Q11 2Q11 3Q11 4Q11 1Q12New Stores Store Refit Infrastructure Others 55
  56. 56.  Highlights of 1Q12 and Expectations for the Next Quarters Financial Performance Operational Performance 56
  57. 57. Operational Performance – Stores Number of Stores (unit) Same Store Sales Growth (%) 54.7% + 126 stores 730 21.7% 25.6% 25.0% 728 12.6% 15.9% 684 1 1 1 103 106604 613 69 1 1 1Q11 1Q12 67 69 Same Stores Sale Growth - Physical Stores Same Store Sales Growth (includes e-commerce) Total Retail Growth 614 624 623536 543 Average Age – Stores Up to 1 year 122 150 1 to 2 years 4471Q11 2Q11 3Q11 4Q11 1Q12 More than 3 years 11Site Virtual Stores Conventional Stores 2 to 3 years 57
  58. 58. Operational Performance – Luizacred Financed Mix Sales (%) Luizacred’s Revenue (R$ MM) 100% 100% +37% 1,911 59 26% 237 32% 1,395 68 127 32% 30% 1,141 715 10% 14% 33% 24% 486 475 1Q11 1Q12 1Q11 1Q12Cash Sales / Down payment CDC Personal Loan Luiza Card - Outside Luiza StoresThird Party Credit Card Luiza Card CDC Luiza Card - Inside Luiza Stores 58
  59. 59. Operational Performance – Portfolio’s compositionLuiza Card – Total Credit Card Base (MM) Portfolio (R$ MM) +38% 3,334 141 4.4 4.3 4.2 537 4.0 3.5 2,424 371 2,656 2,0531Q11 2Q11 3Q11 4Q11 1Q12 1Q11 1Q12 Personal Loans CDC Credit card 59
  60. 60. Luizacred Portfolio (R$ million) Portfolio Overdue Mar 2012 Dec 2011 Sep 2011 Jun 2011 Mar 2011Total Portfolio (R$ MM) 3,334.1 100.0% 3,334.2 100.0% 3,011.7 100.0% 2,668.3 100.0% 2,424.2 100.0%000 to 014 days 2,754.4 82.6% 2,773.8 83.2% 2,478.2 82.3% 2,155.4 80.8% 1,890.1 78.0%015 a 030 days 52.9 1.6% 43.2 1.3% 34.2 1.1% 78.8 3.0% 96.6 4.0%031 a 060 days 47.8 1.4% 39.5 1.2% 36.2 1.2% 51.9 1.9% 59.7 2.5%061 a 090 days 56.8 1.7% 64.4 1.9% 52.7 1.8% 48.4 1.8% 63.7 2.6%091 a 120 days 46.5 1.4% 53.2 1.6% 54.0 1.8% 45.3 1.7% 66.2 2.7%121 a 150 days 44.3 1.3% 46.4 1.4% 48.8 1.6% 47.3 1.8% 51.6 2.1%151 a 180 days 54.4 1.6% 41.9 1.3% 51.8 1.7% 51.2 1.9% 33.5 1.4%180 a 360 days 277.1 8.3% 271.8 8.2% 255.7 8.5% 190.0 7.1% 162.8 6.7%Overdue from 15-90 days 157.5 4.7% 147.0 4.4% 123.2 4.1% 179.1 6.7% 219.9 9.1%Overdue above 90 days 422.2 12.7% 413.3 12.4% 410.3 13.6% 333.8 12.5% 314.2 13.0%Total Overdue 579.7 17.4% 560.4 16.8% 533.5 17.7% 512.9 19.2% 534.1 22.0%Allowance for doubtfulaccounts in IFRS 467.5 14.0% 469.5 14.1% 455.7 15.1% 372.9 14.0% 333.4 13.8%Coverage (%) 111% 114% 111% 112% 106% 60
  61. 61. Investor Relations ri@magazineluiza.com.br www.magazineluiza.com.br/irLegal DisclaimerAny statement made in this presentation referring to the Company’s business outlook. projections and financial and operating goals representbeliefs. expectations about the future of the business. as well as assumptions of Magazine Luiza’s management and are solely based oninformation currently available to the Company. Future considerations are not a guarantee of performance. These involve risks. uncertainties andassumptions since they refer to forward-looking events and. therefore depend on circumstances that may not occur. These forward-lookingstatements depend substantially on the approvals and other necessary procedures for the projects. market conditions. and performance of theBrazilian economy. the sector and international markets and hence are subject to change without prior notice. Thus. it is important to understandthat such changes in conditions. as well as other operating factors may affect the Company’s future results and lead to outcomes that may bematerially different from those expressed in such future considerations. This presentation also includes accounting data and non-accounting datasuch as operating. pro forma financial data and projections based on the Management’s expectations. Non-accounting data has not beenreviewed by the Company’s independent auditors. 61
  62. 62. 7th Annual LatAm CEO Conference – Magazine LuizaMay, 16th and 17th
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