J.p. morgan 6th annual – brazil retail & healthcare check up
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J.p. morgan 6th annual – brazil retail & healthcare check up J.p. morgan 6th annual – brazil retail & healthcare check up Presentation Transcript

  • J.P. Morgan 6th Annual – Brazil Retail & Healthcare Check UpAugust, 2012
  • Agenda Overview – Magazine Luiza Highlights of 2Q12 Financial Performance of 2Q12 Operational Performance of 2Q12 Expectations for the Next Quarters 2
  • Overview – Magazine LuizaMarket Leadership  One of Brazil’s largest durable goods retail chains with 731 stores nation-wide − Gross revenues of R$7.6 billion and EBITDA ajusted of R$346 million in 2011 − More than 20 thousand employees serving 30 million customersStrong corporate culture and focus on people and innovationUnique multi-channel model under a single brand Physical stores, virtual stores and e-commerceFocus on Brazil’s fastest growing socioeconomic segment The “C” (emerging middle class) represents 53% of Brazil’s population or more than 102 million peopleHistory of successful organic growth and acquisitions 8 acquisitions in the last 10 years and recent entry in the high growth northeast market  July 2011, conclusion of the acquisition of 121 stores of Baú da FelicidadePioneer in Financial Services for retail First retail chain to establish JVs with financial institutions focusing on consumer creditFinancial discipline focused on results 3
  • Proven history of strong organic growth and successful aquisition even throughout adverse economic scenarios18 90016 728 70014 604 Madol, Killar12 444 455 500 391 Baú:10 Lojas Líder 351 346 + 104 stores Rede Wanel 253 Nordeste: 300 8 174 +136 stores 7,1 111 127 São Paulo (Capital): 6 96 +46 stores 5,3 100 Rio Grande SulSanta Catarina: +51 stores +100 stores 3,8 4 Upstate SP: Campinas: 3,2 +5 stores +20 stores 2,2 2,6 -100 1,4 1,9 2 0,9 0,5 0,6 0,7 0 -300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gross Revenue – Retail Operation (R$ Billion) Number of Stores 4
  • Broad geographic footprint including in the Northeast of Brazil Geographic footprint Gross Revenue evolution – Northeast R$ MM 731 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) 5
  • Focus on the best product mix...Mix% of sales, 2011 Others 10% Household Furniture & Kitchen Appliances Appliance 31% 15% 20% Technology 24% Sound & Image 6
  • Unique Business ModelDifferentiated positioning to capitalize on industry growth 1 Strong corporate culture, focused on valuing people 2 Integrated sales platform with multiple sales channels Large customer base, with relationship management 3 targeting customer loyalty and retention 4 Broad, competitive portfolio of services and financial products 7
  • Corporate Structure 100% 40.55% 50% 100% 100% 3 1 3 2 9.45%(1) JV with Itaú Unibanco(2) JV with Cardif(3) Corporate integration of both companies concluded 8
  • Ownership Structure Pre – IPO Post – IPO 12.5% 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 9
  • Strong corporate culture assisted by a sales model that is supported by enthusiastic teams High influence of service and credit on 15 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 Service/ flexibility to negotiate sales conditions within a range Credit  Compensation: based on gross profit, financial margin and sales 10
  • 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 11
  • TOP 10 costumer service in Brazil Ranking published on Exame Magazine – Aug 20121) Source: Ranking Exame, Instituto Ibero-Brasileiro de Relacionamento com o Cliente (IBRC) 12
  • Agenda Overview – Magazine Luiza Highlights of 2Q12 Financial Performance of 2Q12 Operational Performance of 2Q12 Expectations for the Next Quarters 13
  • Highlights of 2Q12 Initiatives and Achievements Impacts on Financial Results Significant sales growth versus 2Q11  Investments in infrastructure and expansion • Total sales growth of 21.6% • Total investments: R$35.1 million • Same store sales growth of 13.0% o 1 new conventional store inaugurated in the o E-commerce growth of 45.0% Northeast o Physical stores sales growth of 9.0% o Stores remodeling o Investments in IT and Logistics (concluded the Sustainable growth expansion of Louveira distribution center) • Consolidated gross margin evolution – 33.5% over net revenues  Extraordinary expenses - integration: o Increased by 0.7pp over 2Q11 • Totaled only R$3.3 million (as expected) o Increased by 1.7pp over 1Q12  Luizacred results • Financial discipline ( limited sales with no interest) • Improved overdue indicators • Conservative credit approval rate • Maintenance of conservative approach Continuation of Lojas Maia integration process o Reduction of credit approval rate • Corporate merger – April, 30th o Substantial provisions for loan losses • Systems integration – began in 2Q12 • Participation in the rationalization of costs and expenses program Reduction and Rationalization of Costs and Expenses • Rationalization of costs and expenses program –  Magazine Luiza results Company’s main focus in 2012 • Results in line with budget, despite the slowdown in • 0.6pp reduction on SG&A expenses of retail segment the economy activity o 24.7% of net revenues versus 25.3% in 2Q11 o Sustainable growth o Program of rationalization of costs and expenses • Positive results – retail and consolidated business 14
  • Agenda Overview – Magazine Luiza Highlights of 2Q12 Financial Performance of 2Q12 Operational Performance of 2Q12 Expectations for the Next Quarters 15
  • Gross Revenues (R$ billion) Retail Comments 25.0% 19.7% 22.3% • 19.7% growth in the retail segment versus 2Q11 and 13.0% same store sales growth, driven by: — Stores maturation 2.0 — Increased productivity in renovated stores 1.6 — Accelerated growth in the Northeast 3.9 3.2 (R$301 million – 15.4% of total retail sales)1.6 2.0 • 22.3% growth in the retail segment versus 1H111Q11 2Q11 1H11 1Q12 2Q12 1H12 • 21.6% growth in the consolidated gross revenues versus 2Q11: Consolidated — 44.5% growth in revenues from the consumer financing segment (chiefly 25.7% 21.6% 23.6% influenced by the increase in service revenues, direct credit to consumer and 2.1 personal loans at Luizacred) 1.7 4.3 • Increase in store count – from 613 in the end of 3.4 2Q11 to 731 stores in the end of 2Q121.7 2.11,11Q11 2Q11 1H11 1Q12 2Q12 1H12% of growth over the same quarter of 2011 % of growth over the same half of 2011 16
  • Gross Revenues – Internet (R$ million) Internet Comments 42.8% 45.0% 43.9% • Internet sales climbed 45.0% in 2Q12 versus 2Q11 and 43.9% versus 1H11 influenced by: — Increase in product mix — Innovations in content 263.5 — Multi-channel approach: infrastructure shared with other channels 181.7 512.0 355.7 248.5174.01Q11 2Q11 1H11 1Q12 2Q12 1H12 % of growth over the same quarter of 2011 % of growth over the same half of 2011 17
  • Net Revenues and Gross Profit (R$ billion)Net Revenues - Consolidated Comments 27.5% 22.3% 24.9% • Strong growth due to advancement of gross revenues (retail segment and consumer finance) 1.8 1.5 • Net revenues growth outpaced gross revenues 3.6 2.9 growth – higher volume of products subject to 1.8 tax substitution (booked under COGS)1.41Q11 2Q11 1H11 1Q12 2Q12 1H12 Gross Profit - Consolidated Comments 22.4% 25.0% 23.7% • Improve of 0.7% of gross margin in 2Q12 versus 2Q11 and 1.7% versus 1Q12 due to: — Increase in gross margin from the consumer finance (Luizacred) 0.6 0.5 1.2 — Slight decrease in retail segment margin 1.0 (higher share of Internet sales, integration of0.5 0.6 Lojas Maia and AVP adjustments)1Q11 2Q11 1H11 1Q12 2Q12 1H12 • Gross margin in the Northeast: from 21.2% in33.2% 32.8% 33.0% 31.8% 33.5% 32.7% 1Q12 to 25.0% in 2Q12% of growth over the same quarter of 2011 % of growth over the same half of 2011 Gross Margin (%) 18
  • Operating Expenses – Consolidated (R$ million) Operating Expenses (R$ MM) Comments • Reduction of 0.5% on Sales, General and-26.0% -3.6% 1.7% -27.9% -25.5% -4.9% 0.9% -29.5% Administrative Expenses versus 2Q11: — Adjustments made to stores’ 88.4 16.1 531.3 expenses in order to increase productivity 459.0 — Result of the integration of the 52.7 24.3 offices of Baú stores and of 410.7382.4 rationalization of expenses • Provisions for Loan Losses: — Substantial provisions (Luizacred conservative approach) • Other Operating Expenses (Revenues): — See next slideSG&A Provisions Other Total SG&A Provisions Other Total Oper. Oper. Expenses Expenses (Revenues) (Revenues) 2Q11 2Q12 % Net Revenue 19
  • Other Operating Expenses (Revenues) – Consolidated Other Operating Expenses (Revenues) (R$ MM) Comments • Other Operating Expenses (Revenues) : — Deferred revenues: 5,5 24,3 17,5 o Reduction in the booking of 12,4 deferred revenues (straight-line method) o In 2Q12, other deferred revenues of R$18.0 million (R$10.5 millionBooking of Integration Personal Introduction Others Total from the retail segment and R$7.5 Deferred Expenses Loans of chips in million from Luizacred) – renewalRevenues Luiza Cards of the Agreement with Cardif — Non-recurring expenses with the 23,8 integration of the store chains of 3.3 4.1 5.4 R$3.3 million 3.2 16,1 — Change in the booking of personal loans, which are now recognized under financial intermediation result, thereby reducing revenues from profit sharing from R$17.5Booking of Integration Personal Introduction Others Total million to R$4.1 million Deferred Expenses Loans of chips inRevenues Luiza Cards — Expenses with the introduction of chips in Luiza cards totaled R$5.4 2Q11 2Q12 million in 2Q12 20
  • EBITDA and Adjusted EBITDA (R$ million) EBITDA Comments • EBITDA impacted by: 71.9 — Sales and gross profit growth 155.9 — Non-recurring costs, revenues and expenses84.0 71.9 81.2 — Higher provisions for loan losses 9.31Q11 2Q11 1H11 1Q12 2Q12 1H125.9% 4.9% 5.4% 0.5% 4.0% 2.3% Adjusted EBITDA 2Q11 2Q12 4.9% 4.5% 4.0% 4.1% 71,9 66,5 0.0 0.0 5.4 71,9 7.5 3.3 8.8 74,0Current Extraord. Extraord. Deferred Adjusted Current Extraord. Extraord. Deferred Adjusted Costs Expenses Revenues EBITDA Costs Expenses Revenues EBITDA Margin EBITDA (%) 21
  • Financial Expenses – Consolidated (R$ million) Financial Expenses (R$ MM) Comments • Financial Results: -2.9% -2.5% — Decline from 2.9% of net revenue in 2Q11 to 2.5% in 2Q12: 45.4 o Positively impacted by the 42.4 reduction in CDI rate o Partially offset by the increase in working capital requirements o Change in the estimated discount rate used in the adjustment to present value of extended warranty operations o Change in the appropriation of the costs of prepayment of receivables on third-party cards, which is now recognized on the date of the discount operation 2Q11 2Q12 Financial Expenses % Net Revenue 22
  • Net Income and Adjusted Net Income (R$ million) Net Income Comments 4.6 21.9 • Net Income impacted by: 12.3 16.9 — Non-recurring costs, revenues and 18.8 expenses — Change in the appropriation of the costs of 40.7 prepayment of receivables — Changes in accounting practices in the financial result 1Q11 2Q11 1H11 1Q12 2Q12 1H12 — Non-recurring tax credits 0.9% 0.3% 0.6% -2.3% 1.2% -0.5% Adjusted Net Income 0.3% 2Q11 0.1% 1.2% 2Q12 0.5% 4,6 4.3 20,7 2,1 10.6 21,9 5.4 1,0 0.0 9,5 0.0 1.8Net Income Extraord. Extraord. Extraord. Tax Credits Adjusted Net Extraord. Extraord. Extraord. Tax Credits Adjusted Ops. Fin. Taxes Income Income Ops. Fin. Taxes Income Results Results Results Results Net Margin (%) 23
  • Investments (R$ million) Investments Comments 97.6 • Stores remodeling • New stores (inaugurated and to be) – 1 25,1 new conventional store inaugurated in the Northeast • Other investments include the 50.2 37,8 conclusion of expansion of the Louveira 7,5 43.2 distribution center and other40.0 investments in logistics, which totaled 6,5 35.17,5 R$9.6 million in 2Q12 19,3 5.8 11,0 5,115,1 8,1 7.3 3,9 11.8 28,915.4 18,4 18,0 11,51.92Q11 3Q11 4Q11 1Q12 2Q12New Stores Store Refit Infrastructure Others 24
  •  Overview – Magazine Luiza Highlights of 2Q12 Financial Performance of 2Q12 Operational Performance of 2Q12 Expectations for the Next Quarters 25
  • Operational Performance – Stores Number of Stores (unit) Same Store Sales Growth (%) 39.4% + 118 stores 730 731 14.4% 19.7% 728 11.3% 684 1 1 1 9.0% 13.0% 1 103 106 106613 69 1 2Q11 2Q12 69 Same Stores Sale Growth - Physical Stores Same Store Sales Growth (includes e-commerce) Total Retail Growth 614 624 623 624543 Average Age – Stores Up to 1 year 114 158 1 to 2 years 4532Q11 3Q11 4Q11 1Q12 2Q12 More than 3 years 6Virtual Stores Conventional Stores 2 to 3 years 26
  • Operational Performance – Luizacred Financed Mix Sales (%) Luizacred’s Revenues (R$ MM) 21.5% 2,085 100% 100% 45 1,716 293 23% 28% 71 150 30% 32% 1.297 923 11% 18% 37% 22% 572 450 2Q11 2Q12 2Q11 2Q12Cash Sales/Down Payment CDC Personal Loan Luiza Card - Outside Luiza StoresThird Party Credit Card Luiza Card CDC Luiza Card - Inside Luiza Stores 27
  • Operational Performance – Portfolio’s compositionLuiza Card – Total Credit Card Base (MM) Portfolio (R$ MM) +29% 3,442 126 4,4 4,3 4,2 4,2 4,0 661 2,668 376 2,655 2,2922Q11 3Q11 4Q11 1Q12 2Q12 2Q11 2Q12 Personal Loans CDC Credit card 28
  • Luizacred Portfolio (% of portfolio) Portfolio Overdue Comments20% 19.2% • Differently from the market in general, 17.7% 17.4% the portfolio’s overdue indicators 16.8% 15.9% continue to improve both in relation to the previous year and the previous 13.6% quarter, due to: 12.5% 12.4% 12.7% 11.6% — Conservative approach in the10% credit approval rate — Constant control of delinquency 6.7% per store 4.4% 4.7% 4.3% 4.1% • Provisions should be proportionally lower in 2H12 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 112% 111% 114% 111% 117% Overdue 15-90 days Overdue above 90 days Total overdue Coverage Ratio(%) 29
  •  Overview – Magazine Luiza Highlights of 2Q12 Financial Performance of 2Q12 Operational Performance of 2Q12 Expectations for the Next Quarters 30
  • Expectations for the next quarters1 3 Sales Growth Investments Consistent sales growth:  Investments in technology, logistics and store • Maturation of new stores remodeling, which includes changing the Lojas Maia • Northeast stores brand to Magazine Luiza • Internet  The Company plans the organic opening of 17 more • Better performance by the Brazilian economy, stores in 2H12, 10 of them in the Northeast especially in 4Q122 4 Lojas Maia Integration Process Results Integration of Lojas Maia’s systems – conclusion:  Continuality of cost and expense reduction and oct/12 rationalization program Fully integrated management – 2013  Capture of synergies from the integration of Lojas do • Dilution of administrative and logistics Baú and Lojas Maia expenses  Better productivity indicators and positive results in • Benefits to working capital and price 2012 management – increasing the gross margin 31
  • 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 goalsrepresent beliefs. expectations about the future of the business. as well as assumptions of Magazine Luiza’s management and aresolely based on information currently available to the Company. Future considerations are not a guarantee of performance. Theseinvolve risks. uncertainties and assumptions since they refer to forward-looking events and. therefore depend on circumstances thatmay not occur. These forward-looking statements depend substantially on the approvals and other necessary procedures for theprojects. market conditions. and performance of the Brazilian economy. the sector and international markets and hence are subject tochange without prior notice. Thus. it is important to understand that such changes in conditions. as well as other operating factorsmay affect the Company’s future results and lead to outcomes that may be materially different from those expressed in such futureconsiderations. This presentation also includes accounting data and non-accounting data such as operating. pro forma financial dataand projections based on the Management’s expectations. Non-accounting data has not been reviewed by the Company’sindependent auditors. 32