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Ml day presentation

  1. 1. Magazine Luiza DayNovember, 2012 1
  2. 2. Agenda Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20 Break 10h20 – 10h30 Roundtable with the Directors of Magazine Luiza 10h30 – 12h00 Lunch 12h00 – 12h30 Store and Distribution Center Visits 12h30 – 16h30 2
  3. 3. • Opening Event Luiza Helena Trajano, President• Highlights of 2012 and Expectations for 2013 Marcelo Silva, CEO• E-commerce: Sustainable Growth and Future Outlook Frederico Trajano, Sales and Marketing Executive Director 3
  4. 4. • Opening Event Luiza Helena Trajano, President• Highlights of 2012 and Expectations for 2013 Marcelo Silva, CEO• E-commerce: Sustainable Growth and Future Outlook Frederico Trajano, Sales and Marketing Executive Director 4
  5. 5. Overview of the Main Indicators of Magazine Luiza Revenue Growth and Number of Stores Stores Channels Average Age of Stores Up to 1 year 117 1 to 2 years 629 Conventional stores 21 456 142 736 1 More than 2 to 3 728 Website 106 Virtual stores 3 years years 604 455 736 stores 444 7.6 351 346 391 6.4 253 5.7 Geographical Footprint 174 111 127 4.1 3.4 2.2 2.6 1.9 1.4 0.6 0.7 0.9 Cabedelo 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9M2012 Gross Revenues bi) billion) Receita Bruta¹ (R$ (Rs Nº Lojas Number of Stores Simões Filho Overview - Magazine Luiza Mix (% of Sales) Contagem Ribeirão Preto Over 22 thousand employees 7% 30% Ibiporã Louveira Others 31% South Over 30 million customers (30% active) 16% Furniture Household 48% Navegantes Southeast Caxias appliances 15 years: the best companies to work for 20% 23% Northeast Multi-channel under single brand Technoloy 23% Sound & Image 2% Competitive portfolio of financial products Mid-West 5
  6. 6. Corporate Governance Corporate Governance Considerations  New Market General Meeting  Controlling shareholders with more than 50 years in the industry  Board of Directors with independent members since 2005External Audit Firm Fiscal Council  Audit Committee conducted by an independent member Other Committee  Financial Statements audited for Audit Committee Board of Directors over 10 years by one of the (Finance) country’s biggest audit firms  Senior Management: retention plan (stock options)Risk Management  Fiscal Council in 2012 BoardInternal Audit and Standards and Ethics and Conduct Risk Control Procedures 6
  7. 7. Current Scenario (9M12) and Expectations for 2013 Financial Indicators for Channel – Sep, 2012 New VS 2012 Ilustrative New CS 2012 E-com 2012Total Growth (%) ML 2012 Mature CS 2012 Mature VS 2012 EBITDA Margin (%) Total Sales R$ CS: Conventional Stores VS: Virtual Stores 7
  8. 8. Current Scenario (9M12) and Expectations for 2013 Financial Indicators for Channel – Sep, 2012 New VS 2012 Ilustrative New CS 2012 E-com 2012Total Growth (%) ML 2012 ML 2013E Mature CS 2012 Mature VS 2012 EBITDA Margin (%) Total Sales R$ CS: Conventional Stores VS: Virtual Stores 8
  9. 9. Main Achievements in 2012• Integration of more than 250 stores in 12 months Baú Maia Project Beginning August, 2011 March, 2012 Time 7 months 8 months Scope (integration) 104 stores 150 stores, 2 DCs and 3 cross dockings National Footprint 2 states (SP and PR) 9 states (PI, CE, PB, PE, SE, MA, RN, AL and BA) Executive Meetings 20 18 IT Committe 32 32• Sustainable growth in online and offline channels• Delinquency under control 9
  10. 10. 2013 Strategic Planning1 Strategic  Development Management of  Career Plan Employees  Retention Customers2 Service, Delivery, Loyalty,  Inventory Management Brand Supply Chain  Price Management Management  Business Processes  Logistics3 Results Rationalization  Project “More with Less” SSS, Margin, of Expenses  Dilution of fixed costs EBITDA and Net Income 10
  11. 11. • Opening Event Luiza Helena Trajano, President• Highlights of 2012 and Expectations for 2013 Marcelo Silva, CEO• E-commerce: Sustainable Growth and Future Outlook Frederico Trajano, Sales and Marketing Executive Director 11
  12. 12. Multi-Channel Strategy Multi-channel Strategy Conventional To be where, when and how Stores customers want Consistency of multichannel customer loyalty (spends 97%more than one that buys only in the store and 98% more than one that buys only on the website) Virtual Stores Expansion of the product portfolio (the integration ofchannels allows sharing of product mix for all points of sale)Cross marketing and cross selling opportunities (using CRM tools to leverage the customer base across all channels) E-commerce / Dilution of fixed costs Mobile (operating leverage) 12
  13. 13. Customers who buy at the two channels have higher frequency, which is equivalent an annual spend of ~2x higher Decomposition of annual expenditure per customer, 2010-12 Customers from 2012 AVERAGE VALUE OF # ITEMS PER AVERAGE TICKET ANNUAL FREQUENCY ANNUAL SPENDING THE ITEM x SALE = x OF PURCHASE = PER CLIENT Only Only Only Only Only stores stores stores stores stores +97%Purchase Channel Only e- Only e- Only e- Only e- Only e- com com com com com +98% Both Both Both Both Both Note: Consider a universe of 2.9 million customers who made the first purchase with ML in 2010 Data: Magazine Luiza, Market Data, Bain analysis 13
  14. 14. Virtual StoresSize 150m²15% less investment than a conventional storePotential to leverage 50% of revenues from sales of a conventional storeAccount for 5% of company’s revenues 14
  15. 15. E-commerce Magazine Luiza The biggest store: representing 13% of all revenues Unique visitors: 9 million Page views: 83 million/month Customers: 1.3 million 15
  16. 16. Examples of multi-channel actions To sell products from website The virtual saleswoman at the stores Lu “humanizes” the website and gives relevant information to our customers Physical Stores 7,000 SKUs Website 31,000 SKUs Gifts list 100% integrated Currently 80% of the lists are created and registered on the website, but 60% of the revenue is done at the store 16
  17. 17. Main Indicators of E-commerce Gross Revenue Unique Visitors RS Million Average Monthly (Million) 8.0 9.0 51% 35% 821 781 6.0 569 4.8 3.8 325 2.4 240 158 2007 2008 2009 2010 2011 9M12 2007 2008 2009 2010 2011 20121 Page Views Distints Clients Million / Month Thousands 1,149 1,302 37% 53% 80 83 708 56 47 365 38 276 23 212 2007 2008 2009 2010 2011 20121 2007 2008 2009 2010 2011 20121 CAGR 2007-20111) Realized until 18th November, 2012 17
  18. 18. Economics of the ChannelFinancial Indicator Drivers of value Comparative versus physical storeGross Revenue Multichannel platform that serves Interactivity between e-commerce and nationwide and search for customer loyalty physical store is a differentiator for the customerGross Margin The focus is not "every day low price" but Gross margin below physical stores due to the competitive prices and quality of service channel characteristics that support profitability with lower pricesEBITDA Margin High productivity combined with shared EBITDA higher than physical stores because of expenses lower operating expensesNet Income Profitability partially offset by higher working Net performance over physical stores capitalWorking Capital Efficient inventory and payment management Higher third card sales versus physical stores, so e-commerce is more intensive in working capitalInvestiments Focus on innovation Low investment requirements compared to physical storesROIC High level of return on invested capital Well above physical stores 18
  19. 19. Opportunities for 2013 Multi-channel Delivery Project Magazine Você (Magazine You) Chip Luiza (Luiza Simcard) 19
  20. 20. Project Objective To enable the delivery of e-commerce and telesales orders by the DC located closest to the customer’ region (i) reduction of delivery costs, (ii) reduction of delivery and collection times and (iii) increased customer satisfaction and revenues 20
  21. 21. General Concept Current Situation Proposed Model Cabedelo Cabedelo Simões Filho Simões Filho Contagem Contagem Ribeirão Preto Ribeirão Preto Ibiporã Louveira Ibiporã Louveira Navegantes Navegantes Caxias Caxias From Louveira DC to Brasil From any DC to Brasil 21
  22. 22. Benefits Reduction of • Reduction of delivery time by 56% Delivery and • Reduction of collection time by 56%Collection Times • Faster delivery time than the competition Reduction of • Reduction of delivery price by 60 % Delivery Price • More competitive delivery price, lower than the market • Quicker deliveryIncreasing Sales • More competitive prices • Customer Satisfaction Customer • Reduction in complaints and PROCON Satisfaction • Award: Diamond in E-Commerce (E-Bit) 22
  23. 23. Benefits 1 Reduction of Delivery and Collection Times Delivery Time Collection TimeDays Northeast Northeast Current Proposed % Reduction Current Proposed % Reduction Faster delivery time than the competition 23
  24. 24. Benefits1 Reduction of Delivery Time Competitors Delivery Time (Proposed) Days Northeast Faster delivery time than the competition 24
  25. 25. Benefits 2 Reduction of Delivery Price Price Northeast Current Proposed % Reduction Reduction of delivery price by 60% More competitive delivery price1) Análise sem Courrier e Setor 20. 25
  26. 26. Opportunities for 2013 Multi-Channel Delivery Project Magazine Você (Magazine You) Chip Luiza (Luiza Simcard) 26
  27. 27. In a world of fragmentation and change,we took our multichannel strategy to a new level 27
  28. 28. Personalized service increases business Global direct sales industry in 2010: US$ 132 billion Brazil is the fourth largest market for direct sales: R$ 26 billion in 2010 Number of resellers in Brazil: 2.74 million 28
  29. 29. 70 Millioninternet users85%have social networks30 MillionFacebook users29 MillionOrkut users 29
  30. 30. The insightNo one knows better than you what yourfriends wantThe ideaA new direct sales channel on the webstrengthened by social networks 30
  31. 31. Your store to your friends 31
  32. 32. FastCreate your own store selecting up to 60 products ofMagazine Luiza website and share with your friends inFacebook and OrkutEasyGain from 2.5 to 4.5% bonus for each product sold throughMagazineVocêFreeNo investment is required. Magazine Luiza is responsiblefor the all the operation 32
  33. 33. Anyone can get a store 55,000 stores 12,100,000 friends Conversion rate 40% higher the website blogs 33
  34. 34. Opportunities for 2013 Multi-Channel Delivery Project Magazine Você (Magazine You) Chip Luiza (Luiza Simcard) 34
  35. 35. What is it?• Chip co-branded: partnership between Magazine Luiza and Claro• First co-branded chip in Brazilian retail• Magazine Luiza is not an operator – Claro gives benefits of voice and data – Magazine Luiza gives content and exclusive promotions 35
  36. 36. What are the benefits?• Double recharge for calls from Claro to Claro• Free access to social networks• Free acces to email + Magazine Luiza and Claro websites• Special promotions and news 36
  37. 37. Strategy• New communication channel: enhanced multichannel strategy• Prepaid: focus on low-income customers• We hope: – To be closer with our consumers – Differentiation in the mobile category 37
  38. 38. My Chip Luiza • Luiza Promotions: especial and segmented promotions • Recharge: benefit in a practical and fast way • My Magazine: news, store locator, target messages • Luiza Internet: free access to social networks, email and Magazine Luiza website • Luiza Card: card request and quick access to call center 38
  39. 39. Q&A Section 39
  40. 40. Agenda Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20 Break 10h20 – 10h30 Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00 Lunch 12h00 – 12h30 Store and Distribution Center Visits 12h30 – 16h30 40
  41. 41. Agenda Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20 Break 10h20 – 10h30 Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00 Lunch 12h00 – 12h30 Store and Distribution Center Visits 12h30 – 16h30 41
  42. 42. • Roundtable with the Directors of Magazine Luiza: • Fabrício Garcia, Commercial Executive Director • André Monlevade, Supply Chain Director • Decio Sonohara, IT Director (CIO) • Marcelo Barp, Luizacred Director• Moderator: Tatiana Santos, M&A, New Business and IR Manager 42
  43. 43. Topics of discussion Management of Commercial Process Commercial, Planning and LogisticCustomer Focus Ensuring excellence in service, availability of Supply Chain Management product mix, delivery assertiveness, competitive Category Management prices and payment terms consistent with client needs Supply and Logistics Pricing Management Ensuring sustainable gross Inventory and Working Capital ManagementProfitability margins, excellence in operations, efficient costs structure that result in IT Infrastructure and System Integration IT profitability and operational cash flow Luiza Consumer Finance Cred 43
  44. 44. Topics of discussion roundtable Management of Commercial Process Commercial, Planning and LogisticCustomer Focus Ensuring excellence in service, availability of Supply Chain Management product mix, delivery assertiveness, competitive Category Management prices and payment terms consistent with client needs Supply and Logistics Pricing Management Ensuring sustainable gross Inventory and Working Capital ManagementProfitability margins, excellence in operations, efficient costs structure that result in IT Infrastructure and System Integration IT profitability and operational cash flow Luiza Consumer Finance Cred 44
  45. 45. General view of the main initiatives in 2012 ContinuousImprovement of  Continuous improvement of processes Commercial Processes Gain of market share in all categories Supply Chain  Assortment xx Demand Planning Stores supply Lifecycle Manage- Price Manage- Maintenance Management ment ment of profitability Improvement of “unhealthy” stock  Focus on authority categories (appliances, furniture and Categories technology) Management  Strengthening of “light” categories  Intensity promotional activities 45
  46. 46. Significant gains of market share in all categories Evolution of Market Share of ML by Product Category +290bps Personal Care +260bps House ware +240bps TV and Sound +270bps White Goods +180bps Technoloy Gains of market share +190bps while maintaining Mobile profitability 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 10,0% Market Share (%) Sep.11 ML Sep.12 ML Sep.12 ML + MaiaData: GFK 46
  47. 47. Main Opportunities for 2013 Opportunity with increased penetration of products and upgrade of consumptionGain of market Mobitec Project - Technology share, maintainingprofitability and Furniture Project improving operational efficiency Price Management Capturing Synergies in the NE 47
  48. 48. Growth Opportunities for 2013 1 Increased penetration... Penetration (% Brazil’s households) Smartphone 10% Flat screen TV 17% Laptop/Notebook 22% Refrigerador frost free1 45% Digital Camera 49% Washing machine 53%1) Northeast: 21%Data: TGI Ibope 2011; Nilsen – Estudo Especial de Duráveis 2012 48
  49. 49. Growth Opportunities for 2013 1 ... and upgrade of consumption at Magazine Luiza Television Cell phone ComputersFinancial Volume (%) Financial Volume (%) Financial Volume (%) 3% 5% 0% 10% 19% 37% 36% 20% 97% 95% 81% 64% 70% 63% 2010 2012 2010 2012 2010 2012 Tube TV Flatscreen TV Smartphone Cell phone Tablet Desktop Notebook 49
  50. 50. Growth Opportunities for 20132 Mobitec Project - Technology Before... After... Implemented in 72 stores, potential for sales growth of 15% - 20% of the categories revenues 50
  51. 51. Growth Opportunities for 20133 Furniture Project Objectives:  Increased revenues  Opportunity to increase cross selling  Market share gain  Improved profitability Initiatives  Ambiance Design - Furniture  Investment in design - partnership with Marcelo Rosembaum 51
  52. 52. Growth Opportunities for 20133 Furniture Project Before... After... Tested in 11 stores, potential for increased profitability (greater participation of furniture and cross selling) given the ambiance 52
  53. 53. Growth Opportunities for 20135 Price Management  Strategy of pricing by category/ region  Quick reaction to competition6 Capturing gains in the NE  Integration of management systems (price, margin and inventory)  Implementation of the entire commercial strategy in the NE  Increased profitability (gross margin) – potential increase of 400bps 53
  54. 54. Overview – Supply ChainAssortment Demand Stores Lifecycle Price Planning Supply Management Management 54
  55. 55. Overview – Supply Chain Main Achievements 2012 Main Opportunities for 2013• Reduced unhealthy stock • Improving unhealthy stock indicators• Reduced shortage of products AA • Systematization of tools and processes, gaining agility and productivity• Better consistency in the operations • Implementation of the Price Management• Better availability of correct products per Project stores • Improving the operations of the Northeast to the levels achieved in the Southeast • Commercial support for objectives as a whole 55
  56. 56. Topics of discussion roundtable Management of Commercial Process Commercial, Planning and LogisticCustomer Focus Ensuring excellence in service, availability of Supply Chain Management product mix, delivery assertiveness, competitive Category Management prices and payment terms consistent with client needs Supply and Logistics Pricing Management Ensuring sustainable gross Inventory and Working Capital ManagementProfitability margins, excellence in operations, efficient costs structure that result in IT Infrastructure and System Integration IT profitability and operational cash flow Luiza Consumer Finance Cred 56
  57. 57. IT: Integration and Multichannel Pillar1 2 3 Short, Medium and Network Integration Multichannel Long Term Planning  Strategic Plan for Information  Integration of two chains  Developing tecnology platform Technology (PETI) finalized in acquired (Maia and Baú), for deployment of 2011 with participation of one finalized between Aug-11 and multichannel: Consulting Technology Firm: Oct-12  Sales multichannel  IT Governance (Process and  Delivery multichannel Organization)  Customer relations  Infrastructure(Migration of  Processes and systems unified (integrated view of the the Data Center to SP) in all stores and distribution various channels)  Systems (revision of the centers architecture of applications,  Zero impact to customers, preparation of systems for suppliers and partners growth)  Creating a pole with technically skilled resources in the Northeast 57
  58. 58. Conventional stores Virtual stores E-commerce Telesales Mobile SalesRelationshipChannels with the integrated multi Delivery Store and distribution centerview of the customers channel closest to the customer’s home• Customer Service • Delivery time reduced• Social media • Delivery price reduced• Promotions 58
  59. 59. Topics of discussion roundtable Management of Commercial Process Commercial, Planning and LogisticCustomer Focus Ensuring excellence in service, availability of Supply Chain Management product mix, delivery assertiveness, competitive Category Management prices and payment terms consistent with client needs Supply and Logistics Pricing Management Ensuring sustainable gross Inventory and Working Capital ManagementProfitability margins, excellence in operations, efficient costs structure that result in IT Infrastructure and System Integration IT profitability and operational cash flow Luiza Consumer Finance cred 59
  60. 60. Luizacred Highlights Financed Sales Mix (% of total sales) Revenues Luiza Card (R$ million) +46.8%26% 23% 25% 27% 2,112 2,085 32% 28% 28% 51 2,049 45 39 223 1,911 1,830 59 293 1,716 54 316 171 237 71 30% 30% 15032% 29% 1,395 30% 32% 34% 68 127 1,217 11% 1,028 1,297 1,290 11% 923 1,14110% 13% 14% 715 18% 19%33% 37% 34% 31% 24% 22% 572 578 622 19% 486 475 450 4041Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Cash sales/ Down payment CDC Loan Luiza Card – Outside stores Third party cards Luiza Card CDC Luiza Card – Inside stores 60
  61. 61. Luizacred Highlights Overdue Indicators (% of portfolio) Credit Approval Rate (Luiza Card) 31 28 26 22 22.0 20 18 19.2 17.7 17.4 16.8 15.9 13.6 14.4 13.0 12.5 12.4 12.7 Jun-11 Sep-11 Dec-11 Mar-11 Jun-12 Sep-12 11.6 10.4 9.1 6.7 Efficiency Ratio 4.1 4.4 4.7 4.3 4.0 53,7Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 48,7 48,3 48,3106% 112% 111% 114% 111% 117% 129% 45,7 43,6 42,4 Overdue 15-90 days Overdue above 90 days Total overdure Coverage Ratio (%) 1Q11 2TQ1 3Q11 4Q11 1Q12 2Q12 3Q12 61
  62. 62. Q&A Section 62
  63. 63. Agenda Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20 Break 10h20 – 10h30 Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00 Lunch 12h00 – 12h30 Store and Distribution Center Visits 12h30 – 16h30 63
  64. 64. Agenda Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20 Break 10h20 – 10h30 Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00 Lunch 12h00 – 12h30 Store and Distribution Center Visits 12h30 – 16h30 64
  65. 65. Magazine Luiza DayNovember, 2012 65

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