J.P. Morgan 5th Annual Brazil Check Up
Magazine Luiza At-a-Glance          More than 50 years of growing the Brazilian retail marketLeadership in the Brazilian m...
Magazine Luiza At-a-Glance (cont.)             Broad geographic footprint with a balanced mix of sales Geographic footprin...
Proven History of Strong Organic Growth and Successful         Acquisitions       Continuous growth throughout adverse eco...
Our Strategic PositioningAdditional stores with the acquisition of Lojas do Baú da FelicidadeStrategic retail locations co...
Our Unique Business Model                            6
Unique Business ModelDifferentiated positioning to capitalize on industry growth                                          ...
Strong Corporate Culture: A Competitive Advantage        Assisted sales model supported by enthusiastic teams   Brazil’s o...
Strong Corporate Culture, Focused on Valuing People       Communication                     Transparency                Em...
Strong Corporate Culture: Best Places to Work14 years among the Best Places to Work              Among 100 largest Compani...
Strong Corporate Culture: A Competitive AdvantageMagazine Luiza’s Services               Magazine Luiza               was ...
Exceptional Relationship Management Drives Customer LoyaltyIndustry-leading marketing strategies   New market entry with a...
Multi-channel: Many Buying Possibilities   To be where, when and how customers want us                                Mult...
Our Corporate Governance                           14
Experienced Executives with Strong Corporate Governance            Industry expertise with proven growth and integration c...
Corporate Structure      100%                            40.55%                      50%                 100%             ...
Financial Information – 2Q11                               17
Ownership Structure                           Pre- IPO                                                             Post- I...
Consolidated Gross Revenue (R$ million)                               Retail                                            To...
Number of Stores (end of period)                                                               + 34.4%                    ...
Same Stores Sales Growth (%)        31,1%                                    31,9%                                        ...
Internet (R$ million)                                         + 48.3%   356                        + 39.9%           240  ...
Lojas Maia Growth – Gross Revenue (R$ million)                                                                            ...
Consolidated Net Revenue (R$ million)                                          + 43.4%                                    ...
Consolidated Gross Income (R$ million)                                          + 34.6%                                   ...
ConsolidatedOperating Expenses as % of Net Revenue   Selling: dilution explained by the increase in same stores sales and ...
Consolidated EBITDA (R$ million)                                                            + 19.0%         2Q11 Retail EB...
Consolidated Financial Expenses (R$ million)    Partially benefited by IPO resources                                      ...
Consolidated Net Income (R$ million)                                                25                                    ...
Financed Mix Sales (% total sales)                          Luizacred financed half of Magazine Luiza sales               ...
Cartão Luiza – Total Credit Card Base (‘000)                             + 75.0%                                          ...
Luiza Card Spending (R$ million)                                 + 56.2%                                                  ...
LuizacredRevenue (R$MM) & Provisions/Revenue (%)      Portfolio (R$MM) & Provisions/Portfolio (%) 250                     ...
Luizacred – Portfolio (R$ million)   PORTFOLIO (R$ m illion)    Jun/11            Mar/11            Dec/10            Jun/...
Investor Relations     ri@magazineluiza.com.br     www.magazineluiza.com.br/riLegal DisclaimerAny statement made in this p...
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J.p. morgan conference presentation

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J.p. morgan conference presentation

  1. 1. J.P. Morgan 5th Annual Brazil Check Up
  2. 2. Magazine Luiza At-a-Glance More than 50 years of growing the Brazilian retail marketLeadership in the Brazilian marketMarket Leadership One of Brazil’s largest durable goods retail chains with 613* stores nation-wide − Gross revenues of R$5.7 billion and EBITDA of R$320 million in 2010 − 21 thousand employees serving 23 million customersStrong corporate culture and focus on people and innovationUnique multi-channel model under a single brand Physical stores, virtual stores, e-commerce website and telephone salesFocus 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 Opened more than 150 stores in the last 5 years 8 acquisitions in the last 8 years and recent entry in the high growth northeast market (Lojas Maia – 136 stores) 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* Not considering Baú da Felicidade stores. 2
  3. 3. Magazine Luiza At-a-Glance (cont.) Broad geographic footprint with a balanced mix of sales Geographic footprint covering Brazil’s main regions (75% of GDP) Balanced sales mix (1)(% of stores by region) (% of sales, 2010) Toys, 613* stores furnitures, home Technology appliances and 23% Cabedelo other 24% Simões Filho Contagem Ribeirão Preto Ibiporã Loureira Navegantes Caxias South Northeast 25% 23% Sound & image 23% Central- west Household States with stores (604) appliances 2% Distribution centers (8) 30% Southeast 50% Note: 1 Does not include Lojas Maia * Not considering Baú da Felicidade stores. 3
  4. 4. Proven History of Strong Organic Growth and Successful Acquisitions Continuous growth throughout adverse economic scenarios 2011 121** stores 604* 455 444 Northeast: Madol, Killar +136 stores 391 351 346 253 5.3 São Paulo (Capital): Lojas Líder +46 stores 174 Rede 3.8 Santa Catarina: Wanel 127 +100 stores 3.2 111 96 Rio Grande do Sul: 2.6 +51 stores 2.2 Campinas: 1.9 Upstate São Paulo: +20 stores 1.4 +5 stores 0.9 0.6 0.7 0.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Forex during Lehman Brothers September 11 Start of sub-prime bankruptcy Stress in EU election of Lula Gross Revenues from Retail Operations (R$ billion) Total Stores* Not including 9 stores opened in 1H11. ** Number of acquired stores. 4
  5. 5. Our Strategic PositioningAdditional stores with the acquisition of Lojas do Baú da FelicidadeStrategic retail locations covering a large part of the states of São Paulo and Paraná, situated so as to attract the highest possible number of potential customers. Total of 121 stores São Paulo Paraná 40 stores 80 stores Total sales Area (ooo m²) 19.7 Total sales Area (ooo m²) 26.1 Gross Revenue (R$ million) 200.6 Gross Revenue (R$ million) 209.5 Gross Revenue per Sales Area (R$ 000/m²) 10.2 Gross Revenue per Sales Area (R$ 000/m²) 8.0 Number of Stores 40 Number of Stores 80 Average Sales Area (m²/store) 493.1 Average Sales Area (m²/store) 325.8 * Revenue of R$4.5 million from the Minas Gerais store, giving total gross revenue of R$415 million in 2010. •The above figures for 2010 are unaudited. * Out of 121 stores, 1 store is located in Minas Gerais. 5
  6. 6. Our Unique Business Model 6
  7. 7. Unique Business ModelDifferentiated positioning to capitalize on industry growth Strong corporate culture, focused on valuing people 1 2 Integrated sales platform with multiple sales channels Large customer base, with relationship management 3 targeting customer loyalty and retention Broad, competitive portfolio of services and financial 4 products 7
  8. 8. Strong Corporate Culture: A Competitive Advantage Assisted sales model supported by enthusiastic teams Brazil’s only retail company among the best places to work Service and credit highly influential on purchasing decisions Motivated and enthusiastic teams are essential to enable a good purchase, thus a good sale. Offered Other Brands 7.1% Punctuality 3.2% of Delivery 4.5% Price Product Variety 39.8% 8.4% Service / Credit 37.0%Source: ML Survey – 802 interviewees – Data Popular Feb. 2008 8
  9. 9. Strong Corporate Culture, Focused on Valuing People Communication Transparency Empowerment Compensation Values and beliefs, training, Availability of management Sales staff and managers All levels: variable sales promotions, information have flexibility to negotiate compenstaion based on motivation and recognition ̶ Monthly store P&L sales conditions within a targets and service quality through official channels available on the range ̶ Luiza Radio1 intranet Sales staff: commissions ̶ Luiza TV2 Local marketing budgets based on gross profit, ̶ Town Halls2 Constant monitoring by financial margin and sales ̶ Website / Intranet1 employees (morning meeting) Incentives for employee participation in the IPO Hotline to the President Non-financial recognition. Ex: Outdoor1. Daily event2. Weekly events 9
  10. 10. Strong Corporate Culture: Best Places to Work14 years among the Best Places to Work Among 100 largest Companies in BrazilBest Company for Women to Work in 2007 97% adhesion with the change of office toBest Company for Executives to Work in 2008 São PauloBest Company to Work for in 2003Best Company to “Speak” to the employees in 2010Best Company to “Listen” to the employees in 2011 Brazil’s only retail company among the best places to work 10
  11. 11. Strong Corporate Culture: A Competitive AdvantageMagazine Luiza’s Services Magazine Luiza was elected 5th best service in an Exame/IBRC study (May/2011) Source: Exame Magazine, May 4, 2011. 11
  12. 12. Exceptional Relationship Management Drives Customer LoyaltyIndustry-leading marketing strategies New market entry with a significant presence Fantastic Sale (Black Friday) – 50 stores opened in one day in São Paulo − Largest sale in Brazil – Acquisition of Lojas Arno: − Lines form 10 days before the event 51 stores in Rio Grande − 10 days of revenues in one do Sul day – Acquistion of Lojas Maia: Capacity to Enter 136 stores in the Northeast New Markets High Impact Campaigns 23 million clients Gold Clients More than 10 years of Loyalty purchase and sales data − Only program in the sector Programs CRM Tools Statistical models of − 949 thousand clients purchasing behavior and − Gold clients spend 55% more price CRM available at the stores − Gold Day: stores opened exclusively for (Boomerang) program clients − Telemarketing during downtime by sales staff (4.7mm calls) 85% of the credit cards issued by Luizacred are active 12
  13. 13. Multi-channel: Many Buying Possibilities To be where, when and how customers want us 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 store536 stores in 16 states 67 stores in 4 states Same product mix as the 27.000 total SKU´s Internet More than 10 million unique Dedicates sales team visitors 75% growth in 2010 Trained Teams 70.5 million page views 13
  14. 14. Our Corporate Governance 14
  15. 15. Experienced Executives with Strong Corporate Governance Industry expertise with proven growth and integration capacity Executives with ample experience in the Brazilian retail industry Established corporate governance Years with the Experience Name / Post Controlling shareholders with more than 50 years in the industry Company (years) Board of Directors with independent members since 2005 Luiza Helena Trajano 40 40 President Audit Committee led by an independent member Financial statements audited for the past 10 years by a “Big Four” Marcelo Silva firm 2 33 CEO Senior Management: retention plan (stock options) Roberto Bellissimo 10 10 CFO Fabrício Garcia 14 14 Chief Commercial Officer Shareholding by CIPEF - private equity fund of the Capital Group Frederico Trajano 11 13 CIPEF Chief Sales and Marketing Officer − Five private equity funds with more than US$2.5 billion Isabel Bonfim invested since 1997 29 29 Chief Management and Control Officer A successful history of investments in Brazil and in other emerging economies Marcelo Barp (1) Abril S.A., Arcos Dorados, Constellation Overseas and 3 8 − Luizacred Grupo IBMEC Luis Felipe (1) 5 20 LuizasegNote 1. Years of experience in the financial services industry 15
  16. 16. Corporate Structure 100% 40.55% 50% 100% 1 2 9.45% Conclusion of the acquisition in July 2011.(1) JV with Itaú Unibanco(2) JV with Cardif 16
  17. 17. Financial Information – 2Q11 17
  18. 18. Ownership Structure Pre- IPO Post- IPO Free Float 29.7% LTDCapital Intl. Inc. Administração e (Private Equity Capital Intl. Inc. Part. S.A. Fund) (Private Equity LTD 75.4% Fund) 12.4% Administração e 2.5% Part. S.A. Founding Family Founding Family 60.6% Members Members 6.7% 2.7% Wagner Garcia Wagner Garcia Part. S.A. Part. S.A. 5.6% 4.5% 150,000,000 shares 186,494,467 shares 18
  19. 19. Consolidated Gross Revenue (R$ million) Retail Total + 46.5% 3.227 + 44.5% 3.440 + 39.4% 2.202 2.381 + 38.2% 1.588 1.639 1.696 1.744 1.175 1.2621.027 1.119 1Q10 2Q10 1Q11 2Q11 1H10 1H11 1Q10 2Q10 1Q11 2Q11 1H10 1H11(*) Gross revenue growth year-on-year. 19
  20. 20. Number of Stores (end of period) + 34.4% +9 stores +121 stores • 35 virtual 604 613 • 04 extended • 70 conventional • 12 divested 456 456 1Q10 2Q10 1Q11 2Q11(*) On July 29 , 2011, Lojas do Baú acquision was concluded. 20
  21. 21. Same Stores Sales Growth (%) 31,1% 31,9% 27,0% 25,6% 19,7% 16,1% 14,4% 11,3% 2Q10 2Q11 1H10 1H11 Same Physical Stores Sales Growth Same Stores Sales Growth 21
  22. 22. Internet (R$ million) + 48.3% 356 + 39.9% 240 174 182 130 110 1Q10 2Q10 1Q11 2Q11 1H10 1H11 22
  23. 23. Lojas Maia Growth – Gross Revenue (R$ million) + 80.6% 491 + 63.9% 253 272 237 145 127 1Q10 2Q10 1Q11 2Q11 1H10 1H11Note: 2010 pro-forma figures, since Lojas Maia was acquired in Aug/10. 23
  24. 24. Consolidated Net Revenue (R$ million) + 43.4% 2.889 + 37.3% 2.014 1.416 1.473 1.073 941 1Q10 2Q10 1Q11 2Q11 1H10 1H11 24
  25. 25. Consolidated Gross Income (R$ million) + 34.6% 953 + 31.0% 708 470 483 368 339 1Q10 2Q10 1Q11 2Q11 1H10 1H11 25
  26. 26. ConsolidatedOperating Expenses as % of Net Revenue Selling: dilution explained by the increase in same stores sales and internet G&A: increase explained by São Paulo’s office and Lojas Maia integration -90bps -160bps 20,5% 21,4% 19,6% 19,8% +70bps +80bps 4,4% 5,1% 4,3% 5,1% 2Q10 2Q11 1H10 1H11 Selling G&A 26
  27. 27. Consolidated EBITDA (R$ million) + 19.0% 2Q11 Retail EBITDA: +12.0% | R$69 million 156 131 + 2.1% 72 71 2Q10 2Q11 1H10 1H11EBITDA 6.6% 4.9% 6.5% 5.4%Margin 27
  28. 28. Consolidated Financial Expenses (R$ million) Partially benefited by IPO resources + 58.2% 88 Includes Lojas Maia acquisition effects Includes increase in interest rates + 53.7% 56 42 28 2Q10 2Q11 1H10 1H11 28
  29. 29. Consolidated Net Income (R$ million) 25 17 16 5 2Q10 2Q11 1H10 1H11 NetMargin 1.5% 0.3% 1.3% 0.6% 29
  30. 30. Financed Mix Sales (% total sales) Luizacred financed half of Magazine Luiza sales Share of Luiza card at Lojas Maia to 28% in 2Q11 20% 21% 23% 31% 25% 28% 30% 13% 39% 12% 11% 2% 42% 38% 37% 28% ML 2Q10 ML 2Q11 Maia 2Q11 Total 2Q11 Luiza Card CDC Third Party Cards Cash Sales/Down PaymentCDC: Direct Consumer Credit. 30
  31. 31. Cartão Luiza – Total Credit Card Base (‘000) + 75.0% 3.975 3.463 2.146 2.271 1Q10 2Q10 1Q11 2Q11 31
  32. 32. Luiza Card Spending (R$ million) + 56.2% 1,495 957 923 493 237 219 244 336 2Q10 2Q11 Inside with interest Inside with no interest Outside 32
  33. 33. LuizacredRevenue (R$MM) & Provisions/Revenue (%) Portfolio (R$MM) & Provisions/Portfolio (%) 250 45% 3000 10,0% 232 2.668 9,0% 190 45% 2500 200 44% 8,0% 43% 7,0% 44% 44% 2000 1.874 150 43% 6,0% 43% 1500 4,5% 5,0% 100 42% 4.3% 4,0% 1000 Recurring Provisions 42% 3,7% 3,0% 50 41% 2,0% 500 41% 1,0% 0 40% 0 0,0% 2Q10 2Q11 2Q10 2Q11 Revenue Provisions/Revenue Portfolio Provisions/Portfolio 33
  34. 34. Luizacred – Portfolio (R$ million) PORTFOLIO (R$ m illion) Jun/11 Mar/11 Dec/10 Jun/10 Total Portfolio 2,668.3 100.0% 2,424.2 100.0% 2,359.7 100.0% 1,873.5 100.0% 000 to 014 days A 2,020.5 75.7% 1,771.8 73.1% 1,825.4 77.4% 1,392.5 74.3% 015 to 030 days B 119.6 4.5% 128.1 5.3% 130.8 5.5% 102.1 5.4% 031 to 060 days C 75.4 2.8% 76.6 3.2% 87.2 3.7% 59.4 3.2% 061 to 090 days D 65.3 2.4% 72.4 3.0% 44.5 1.9% 51.8 2.8% 091 to 120 days E 55.3 2.1% 83.2 3.4% 36.9 1.6% 41.6 2.2% 121 to 150 days F 51.8 1.9% 63.3 2.6% 31.8 1.3% 38.9 2.1% 151 to 180 days G 64.6 2.4% 44.8 1.8% 29.3 1.2% 37.6 2.0% 180 to 360 days H 215.9 8.1% 184.0 7.6% 173.7 7.4% 149.7 8.0% Overdue up to 90 da ys 260.2 9.8% 277.1 11.4% 262.6 11.1% 213.2 11.4% Overdue a bove 90 da ys 387.6 14.5% 375.3 15.5% 271.7 11.5% 267.8 14.3% Tota l Overdue 647.8 24.3% 652.4 26.9% 534.3 22.6% 481.0 25.7% -140bps Reduced Delinquency ratios 34
  35. 35. Investor Relations ri@magazineluiza.com.br www.magazineluiza.com.br/riLegal 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. 35

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