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Institutional presentation 2 q13 v3

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Institutional presentation 2 q13 v3

  1. 1. | Apresentação do Roadshow 1 As of June, 2013 August, 2013
  2. 2. Statements regarding the Company’s future business perspectives and projections of operational and financial results are merely estimates and projections, and as such they are subject to different risks and uncertainties, including, but not limited to, market conditions, domestic and foreign performance in general and in the Company’s line of business. These risks and uncertainties cannot be controlled or sufficiently predicted by the Company management and may significantly affect its perspectives, estimates, and projections. Statements on future perspectives, estimates, and projections do not represent and should not be construed as a guarantee of performance. The operational information contained herein, as well as information not directly derived from the financial statements, have not been subject to a special review by the Company’s independent auditors and may involve premises and estimates adopted by the management. 2 Disclaimer
  3. 3. | Company overview
  4. 4. .1 Platform of brands of reference Arezzo&Co is the leading Company in the footwear and accessories sector through its platform of Top of Mind brands 1 4
  5. 5. .2 Company overview Arezzo&Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generation 1 5 Notes: 1. LTM as of June, 2013. 2. Refers to the Brazilian women footwear market (source: Euromonitor, IBGE and Company estimates) . Estimated for 2011. Leading company in the footwear and accessories sector with presence in all Brazilian states Controlling shareholders are the reference in the sector Development of collections with efficient supply chain Asset light: high operational efficiency Strong cash generation and high growth 9.8 million pairs of shoes (1) 591 thousand handbags (1) 2,842 points of sale 12% market share (2) More than 40 years of experience in the sector Wide recognition ~11,500 models created per year Lead time of 40 days 7 to 9 launches per year 90% outsourced production ROIC of 32.7% in 2Q13 2,014 employees Net revenues CAGR: 33.2% (2007- 2Q13¹) Net Profit CAGR: 39.6% (2007- 2Q13¹) Increased operating leverage
  6. 6.  Founded in 1972  Focused on brand and product  Consolidation of industrial business model located in Minas Gerais  1.5 mm pairs per year and 2,000 employees  Focus on retail  R&D and production outsourcing on Vale dos Sinos - RS  Franchises expansion  Specific brands for each segment  Expansion of distribution channels  Efficient supply chain First store Fast Fashion concept Launch of the first design with national success + Schutz launch Launch of new brands Merger Commercial operations centralized in São Paulo Strategic Partnership (November 2007) Industry ReferenceFoundation and structuring Industrial Era Corporate EraRetail Era 2012 and 201370‟s 80‟s 90‟s 00‟s Opening of the first shoe factory Opening of the flagship store at Oscar Freire .3 Successful track record of entrepreneurship The right changes at the right time accelerated the Company's development 1 Consolidate leadership position Initial Public Offering (February 2011) 6
  7. 7. Post-offering .4 Shareholder structure 1 Notes: 1. Arezzo&Co capital stock is composed of 88,637,034 common shares, all nominative, book-entry shares with no par value. 2. Including Stock Option Plan – Arezzo&Co’s executives Shareholder structure as of September, 2013. 7 52.4% 47.6% Birman family Others 1 Management ² 0.9% Float 46.7%
  8. 8. 8 .5 Culture & Management 1 01 That which is not transparent should not be done. 02 Always be true, so that at some point you are not false in your job. Always be authentic. 03 Clearly negotiate your goals and responsibilities, and consider compliance as a requirement for continuity. 04 Do not uncover problems only. Blaming others will never be the solution. Take risks, propose solutions. If you disagree with something, act! 05 Formalize everything, even in an informal way. 06 Always be flexible. Always be willing and ready for changes. 07 Goals met are, at least, the basis for the next goal. 08 Unite we stand! Divergences are constructive, conflicts are destructive. 09 A humble stance: the key to our success. 10 Enjoy. Like. Get involved. And always be happy! Principles of success at Arezzo&Co: 2154
  9. 9. .6 Strong platform of brands Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segments 1 9 Notes: 1. Points of sales (2Q13); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports 2. % of each brand gross revenues (FY 2012) 3. 2Q13 (LTM) gross revenues, internal market only: does not include other revenues (not generated by the 4 brands) 4. % total (2Q13 LTM) gross revenues Trendy New Easy to wear Eclectic Fashion Up to date Bold Provocative 16 - 60 years old 18 - 40 years old R$ 305.00/pair R$ 705.9 million R$ 422.9 million Pop Flat shoes Affordable Colorful 12 - 60 years old R$ 99.00/pair R$ 36.9 million Design Exclusivity Identity Seduction R$ 960.00/pair R$ 4.7 million 20 - 45 years old 60.3% 36.1% 3.2% 0.4% Brands profile Female target market Sales Volume 3 % Gross Revenues 4 Retail price point Foundation 1972 1995 2008 2009 MB 7 O 2 O 17 F 332 MB 994 R$ 189.00/pair O 28 F 29 MB 1,509 Distribution channel1 POS 1 % gross rev.2 72% 15%12% 7% 49%36% EX 14 1% EX 132 8% EX 45 49% 9% 42% MB 858 O 9 EX 5 46% 53% 1%
  10. 10. .7 Multiple distribution channels 1 10 Flexible platform through three distribution channels with differentiated strategies, maximizing the Company's profitability Gross Revenues per Channel 56 owned stores being 7 Flagship stores Reach about 1,161 cities and 2,425 multi-brands 361 franchises in more than 160 cities Broad distribution in every Brazilian state Gross Revenue Breakdown – (R$ mm)¹ Franchises Multi-brands Owned stores Exports ² Total Notes: 1. 2Q13 (LTM) gross revenues 2. Also includes other revenues in the domestic market 46% 25% 23% 6% 100% 554 304 283 63 2 1,204
  11. 11. | Business model
  12. 12. Management BRANDS OF REFERENCE Customer focus: we are at the forefront of Brazilian women fashion and design Multi-channelSourcing & Logistics Communication & Marketing SEASONED MANAGEMENT TEAM WITH PERFORMANCE BASED INCENTIVES NATIONWIDE DISTRIBUTION STRATEGY EFFICIENT SUPPLY CHAIN SOLID MARKETING AND COMMUNICATION PROGRAM ABILITY TO INNOVATE R&D 1 2 3 4 5 12 Unique business model in Brazil 2
  13. 13. .1 Ability to Innovate We produce 7 to 9 collections per year 2I. Research Creation: 11,500 SKUs / year II. Development III. Sourcing IV. Delivery Arezzo&Co fulfills the various aspirations of women, delivering on average 5 new models per day, allowing for consistent desire-driven purchases Available for selection: 63% of SKUs created / year 13 Stores: 52% of SKUs created / year Creation Launch Orders Production Delivery Normal sale Discount sale Winter I Winter II Winter III Summer I Summer II Summer III Summer IV Activities JAN FEV MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
  14. 14. CRM – VIP sales In-store events – PA Stylists Fashion Advisors .2 Broad media plan 2 14 The brand has an integrated and expressive communication strategy, from the creation of campaigns to the point of sales Strong presence in printed media 85 inserts in printed media in 170 pages in 2012 (32 million readers) Over 300 exhibition in fashion editorials in 1S13 Digital communication Presence in electronic media and television Demi Moore Seasonal showroom in Los Angeles near the Red Carpet Season Celebrity Endorsement Marketing Events 830k accesses to site/month (120k monthly access to Schutz‟s Blog) Average navigation time: 8 minutes Gisele Bündchen Blake Lively +750 exhibition on TV e 150 exhibition in cinema in 2012 + 80 million impact * Source: Indexsocial/ Agência Espalhe, 2013 Over 3 mm followers/ fans: Facebook, Instagram and Twitter (all 4 Brands) Arezzo is leader in interactions*
  15. 15. .2 Communication & marketing program reflected in every aspect of the stores Stores constantly modified to incorporate the concept of each new collection, creating desire-driven purchases 2 15 All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection Flagship storesStore layout & visual merchandising POS materials (catalogs, packaging, among others)
  16. 16. Distinguished storefront .2 Atmosphere of stores: differentiated concepts for each brand 2 16 Verão – Flagship Oscar Freire Inverno – Flagship Oscar Freire Visual merchandising:  Updates at low cost investment  Brings relevant information from each collection to stores’ level  3 main updates per year Chameleon project: constant modification to incorporate the new collection’s concept Vídeo Wall Closet Essentials Niches and lighting  Jackets and accessories  Campaigns and marketing actions  Preeminence for products  Differentiated products  Exposure of a large variety of products  Selling area inventory: lower necessity of area for storage  Atmosphere of a jewelry store  Private shop experience  Focus on exclusivity, design and highly selected materials Wall display Combos Each theme is disposed in different niches Accessories Sophisticated lightingStorage
  17. 17. Reception: 100,000 units/ day Storage: 100,000 units/ day Picking: 150,000 units/ day Distribution: 200,000 units/ day .3 Flexible production process… 2 17 Production speed, flexibility and scalability to ensure Arezzo&Co‟s expected growth based on asset light model Arezzo’s scale and structure gives flexibility to source a large number of SKU’s from various factories on a short time frame at competitive prices Owned factory with capacity to produce 1.1 million pairs annually and strong relationship with Vale dos Sinos production cluster as the main outsourcing region Sourcing Model Gains of scale Joint purchasesCertification and auditing of suppliers In-house certification and auditing ensure quality and punctuality (ISO 9001 certification in 2008) Coordination of material purchase jointly with shoe, handbag and accessories’ suppliers New Distribution Center Sourcing model – 90% of production outsourced Consolidation and improvement of distribution in national scale 1 2 3 4 10,2% 89,8% AREZZO&CO OWNED FACTORY OTHERS
  18. 18. .4 Large capillarity and scale of store chain 2 18 Brand Average size (m2) Net Revenue/ m2 (R$ 000s) Total Stores 1,2 67 324 399 111 214 638 1,650 10 214 1,030 6 368 234 13 206 Mono-brand store chain with high capillarity, reaching more than 160 cities and well-positioned among the retail companies Size and average sales per mono-brand stores - 2012 5 332 franchises + 17 owned stores(i) + 994 multi-brand clients (i) 4 discount outlet 29 franchises + 28 owned stores(ii) + 1,509 multi-brand clients (ii)1 discount outlet Points of sale (2Q13) TOTAL 9 owned stores 858 multi-brand clients 2 owned store + 7 multi-brand clients 361 franchises6 + 56 owned stores6 + 2,425 multi-brand clients =2,842 points of sales Source: IBGE, Companies’ Reports; number of stores according to latest data provided by the Companies Notes: 1. Considers only mono-brand stores of Arezzo and Schutz; 2. For Hering, considers only Hering Store chain stores; 3. 2008 data; 4. Net Revenue (assuming that sales taxes and deduction = 30% of gross revenues); 5. Considers Arezzo + Schutz, except for outlets, handbags’ stores and Schutz franchise; 6. Including export market GDP³: 18% A&C¹: 17% GDP³: 55% A&C¹: 57% GDP³: 15% A&C¹: 15% GDP³: 7% A&C¹: 7% GDP³: 5% A&C¹: 4% 57 sq m 85 sq m 80 sq m Points of sale – average size: new stores are increasing network average size 2010 2011 new stores 2012 new stores 2013 new stores 80 sq m
  19. 19. .4 ...through owned stores… Capturing value from the chain while developing retail know how and brands‟ visibility 2 Flagship Stores 19 Arezzo – Iguatemi / SP Schutz – Oscar Freire/ SP Anacapri – Eldorado/ SP Greater brand awareness coupled with operational efficiencies  Clustering higher productivity stores in main areas (mainly SP and RJ) improving operational efficiency and profitability:  Direct costumers interaction develops retail competences which are also reflected at franchised stores  Flagship stores ensure greater visibility and reinforce brand image R$ 3,289M R$ 5,119M Owned Franchise Annual Average Sales per Store 2012 Total sales area and # of owned stores (sq. m) # owned Stores Arezzo – Oscar Freire/ SP Schutz – Morumbi/ SP 88% 91% 81% 77% 80% 78% 80% 12% 9% 19% 23% 20% 22% 20% 2007 2008 2009 2010 2011 2012 2Q13 Flagship Standard store 1,044 1,369 2,067 2,967 4,686 5,897 5,842 6 10 21 29 45 57 56
  20. 20. Structure applied to retail in order to achieve better sales and margin results as well as integrating and connecting all monobrand stores‟ back office 2 20 .4 … based on a retail oriented structure... Strong focus on Franchise & Owned Store performance • All sales team (4000+) get connected through national internet broadcast for 3 Sales Conferences per year, creating an aligned sales pitch and great sense of motivation before each season • Large service program to assist franchisees on sales and profitability goals • Recurring training programs in products, fashion trends, sales techniques, store management, IT, among others • Strong visual merchandising, trade marketing and ambiance investments and training
  21. 21.  Intense retail training  Ongoing support: average of 6 stores/ consultant and average of 22 visits per store/ year  Strong relationship with and ongoing support to franchisee  IT integration with our franchises amount 100%  As mono-brand stores, franchises reinforce the branding in each city they are located 2 4 or more franchises 1 franchise 2 franchises 3 franchises 49% 10% 27% 15% .4 …with efficient management of the franchise network... Model allows rapid expansion with little invested capital by Arezzo&Co and high profitability to franchisees Successful Partnership: “Win – Win” Franchise Concentration per Operator 100% of on-time payments 96% satisfaction of franchises1 Excellency in Franchising Award in the last 8 years (ABF) Best Franchise in Brazil (2005 and 2012) and in the sector for 7 years since 2004 (# of Franchisees by # of Franchises) Notes: 1H13 data 1. 96% of the current franchisees indicated they would be interested in opening a franchise if they did not already have one 2. Annual sales of R$ 3,3 million + average initial investment of R$ 900 thousand + working capital of R$ 600 thousand 21 5-year contract and average payback of 40 months2
  22. 22. .4 ...and of the multi-brand stores 2 Multi-brand stores 22 Multi-brand stores‟ Gross Revenue¹ LTM Improved distribution and brand visibility  Greater brand capillarity  Presence in over 1,161 cities  Rapid expansion at low investment and risk  Main Focus: share of wallet  Owner’s loyalty  Schutz Club – Relationship program that gives advantages to the 50 Top Multi-brand stores, such as better products display, training and awards to the best sales teams.  Important sales channel for smaller cities  Sales team optimization: internal team and commissioned sales representatives Multi-brand stores widen the distribution capillarity and the brands‟ visibility, resulting in a strong retail footprint Notes: 1. Domestic market only LTM 255.9 303.6 2,224 2,425 2000 2050 2100 2150 2200 2250 2300 2350 2400 2450 2500 210.000 220.000 230.000 240.000 250.000 260.000 270.000 280.000 290.000 300.000 2Q12 LTM 2Q13 LTM Gross Revenue (R$ mn) # Stores Multi-brand stores
  23. 23. Years at Arezzo Years of experience .5 Seasoned and professional management team 2 Years at Arezzo Years of experience Name Title Highly qualified management team  Stock option plan for key executives  Performance based compensation package for all employees  Independent business units leveraged on a single shared service structure: Industrial, Logistics, Financial and HR Alexandre Birman CEO Claudia Narciso Arezzo David Python Schutz Yumi Chibusa Anacapri Milena Penteado Alexandre Birman Thiago Borges CFO and Investor Relations Officer18 14 2 18 24 10 510 515 513 Schutz David Python Supply Chain/ Sourcing Cisso Klaus CFO Thiago Borges CTO Kurt Richter HR Raquel Carneiro Marco Coelho Internal Auditing Arezzo Claudia Narciso Alexandre Birman Anacapri Yumi Chibusa Alexandre Birman Milena Penteado 23 Name Title Kurt Ritchter Director – CTO Cisso Klaus Director – Supply Chain/ Sourcing Marco Coelho Director – Internal Auditing Raquel Carneiro Director – HR 11 9 30 3 32 47 41 13 Maicon Americo Director – Commercial 120 Commercial Maicon Americo Independent business units
  24. 24. .6 Corporate governance 2 24 Welerson Cavalieri Risk, Audit and Finance Committee Juliana Rozenbaum (Coordinator) José Bolonha (Coordinator) Committees Strategy Committee People Committee Members: Guilherme A. Ferreira and Thiago Borges (CFO) Members: Fabio Hering, Carolina Faria and Arthur N. Grynbaum¹ Members: Claudia Soares and Raquel Carneiro (HR Director) The new Board is comprised of 10 members, of which 4 are independent, and has a very large engagement on the strategic planning of Arezzo&Co Name Experience Name Experience Title Title Board of Directors Anderson Birman Chairman of the Board Founder and Chairman of the Board, with over 40 years of experience in the industry Carolina Faria Member Marketing consultant at True Brand & Business – Soul Brand Services from 2010 to 2012. Previously, worked as an executive at Ambev. Fabio Hering Independent member CEO and board member of Cia. Hering, where he has been working for over 28 years. Rodrigo C. Galindo Independent member CEO of Kroton Educacional S/A, one of the biggest education companies in the world, with over 500 thousand students in colleges. Welerson Cavalieri Member Partner at INDG/FALCONI Consultores de Resultados, where he works for more than 19 years. Previously, was an executive in big mining companies. Juliana Rozenbaum Member Over 13 years of experience as sell side equity research analyst, focused mainly in retail and consumer companies. Claudia Soares Independent Member Former CFO and IR Officer at Via Varejo S.A. and Executive Vice-President of Market Strategy at Companhia Brasileira de Distribuição – GPA. José Murilo Carvalho Member President of the Attorney’s Association of Minas Gerais, Board Member of the Brazilian Bar Association Guilherme A. Ferreira Independent Member CEO of Bahema Participações, board member of Pão de Açúcar, Banco Signatura Lazard, Eternit, Tavex and Rio Bravo Investimentos José Bolonha Vice Chairman of the Board Founder and CEO of “Ethos Desenvolvimento Humano e Organizacional“; Board member of the Inter-American Economic and Social Council (UN, WHO 1- CEO of Grupo Boticário (largest franchise company in Brazil) and Vice-President at Abihpec (Brazilian Association Personal Hygiene, Perfumes & cosmetics Industries)
  25. 25. | Market Overview and | Sourcing and Industry Characteristics
  26. 26. .1 Social upward mobility driving internal consumption 3 26 Income growth and job creation lead to rapid social upward mobility and increasing internal consumption 2003 70 (36%) 54 (27%)96 (55%) +14 mi (2003-14E) +49 mi (2003-14E) 2014E2011 27 (14%)22 (11%)13 (8%) 66 (38%) 100 (52%) 115 (59%) (Consumption growth as a result of the upward mobility in social classes; indexed 100 = class D/E) Source: IBGE, FGV, LCA, Bain & Co., BCG, Roland Berger, IPC Maps Classes A/B: monthly income above R$6,977 | Class C: monthly income between R$1,618 and R$6,977 | Class D: monthly income between R$1,013 and R$1,618 | Class E: monthly income below R$1,013 Class D/E Class C Class B Class A Out-of Home Food Furniture Apparel and Footwear Prescription/OTC drugs Hygiene and Personal Care Footwear and apparel have the largest growth potential Class C Class A/B Class D/E Brazil experiences an accelerated process of social upward migration... (Millions of people) 1.0x 1.0x 1.0x 1.0x 4.2x 3.2x 3.4x 3.4x 7.0x 5.6x 5.3x 5.6x 9.4x 7.9x 7.3x 7.6x Classes A/B: monthly income above R$4,808 | Class C: monthly income between R$1,115 and R$4,408 | Class D: monthly income between R$768 and R$1,115 | Class E: monthly income below R$768 ...Resulting in a significant rise of consumer goods consumption, including Footwear and Apparel 1,0x 3,7x 6,6x 9,2x
  27. 27. 30% 40% 15% 15% Footwear Consumption 2013 10% 40%42% 8% Income Class 27 .2 Brazilian footwear market overview 3Arezzo&Co has a significant stake of the women footwear market and has consistently increased its market share Sports Men Kids Women Footwear Class AClass D/E Class C Class B Arezzo&Co‟s market share1 Source: IBOPE Inteligência (Pyxis), Satra, World Bank, ABICALÇADOS, IEMI, MTE, MDIC, / SECEX, IBGE Note: 1. Based on Euromonitor research and IBOPE Inteligência (Pyxis). Estimated Arezzo&Co market share considering women footwear market Total footwear market (R$ bn) Women footwear Total footwear 2013E CAGR (03-13E): + 9.2% 15.9 40.3 4% 7% 8% 9% 10% 11% 2007 2008 2009 2010 2011 2012
  28. 28. .3 Brazilian handbags market overview 3Arezzo&Co also has a relevant position within the fast growing handbag market in Brazil Source: IBOPE Inteligência (Pyxis), Satra, World Bank, ABICALÇADOS, IEMI, MTE, MDIC, / SECEX, IBGE Arezzo&Co current sell out breakdown 2Q13 LTM (R$ mn) Breakdown based on owned stores  Consolidated (including handbags and shoes) market share: 9,3%  Opportunity to consolidate handbag leading position 86% 11% Footwear Handbags 303.6 Note: 3% accessories Total handbags market (R$ bn) Women handbags Total handbags 2013E CAGR (03-13E): + 10.7% 4.0 5.1 Total addressable market (R$ bn) 80% 20% Footwear Handbags 19.9 28
  29. 29. Pairs (millions) Production World share China 12,597 62.4% Índia 2,060 10.2% Brazil 894 4.4% Vietnam 760 3,8% Indonesia 658 3.3% Pakistan 292 1.4% Brazil is the third biggest footwear producer, with production mostly destined to supply the domestic market. Competitive costs, flexibility on minimum production and short lead time are the pillars to serve the fast fashion market .4 Footwear Industry - Global Overview and competitive advantages Pairs (millions) Consumption World share China 2,700 15.2% USA 2,335 13.4% India 2,034 11.7% Brazil 780 4,5% Japan 693 4.0% Indonesia 627 3.6% BRAZIL Lead time: 40 days Minimum/model: 800 pairs Minimum/construction: 4,000 pairs Production cap. (pairs) 894 million Cost (w/o tax): USD 21/pair Cost (w/tax): USD 27/pair CHINA (different clusters) Lead time: 120 to 150 days Minimum/model: 5,000 pairs Minimum/construction: 20,000 pairs Production cap. (pairs): 12,000 million Cost (FOB): USD 16-18/pair Cost (DDP): USD 42-45/pair INDIA Lead time: 160 days Minimum/model: 5,000 pairs Minimum/construction: 20,000 pairs Production cap. (pairs): 2,060 million Cost (FOB): USD 15/pair Cost (DDP): USD 23/pair ITALY Lead time: 70 days Minimum/model: 800 pairs Minimum/construction: 4,000 pairs Production cap. (pairs): 202 million Cost (FOB): USD 35/pair Cost (DDP): USD 49/pair VIETNAM Lead time: 120 to 150 days Minimum/model: 2,000 pairs Minimum/construction: 8,000 pairs Production cap. (pairs): 760million Cost (FOB): USD 18/pair Cost (DDP): USD 26/pair 3 Source: Abicalçados, Footwear News, Company estimates 29
  30. 30. Brazil is recognized by the quality and high specialization within different and complex categories of shoes. The industry has been qualitatively developed in order to add value to products and thus increase its competitive advantages over Asian suppliers .5 Footwear Industry - Global footwear offering Global Footwear Offering: the higher and more centralized the country is in the pyramid, the more focused it is in fashion, creation, design, luxury market , marketing and distribution management, with smaller production scale Equipment assembly Manufacturing operation Manufacturer with own design and mostly local brand Manufacturer with own design and global brand Global Brands  Receive product and process specifications, as well as components and raw material  Assembly activities only  Usually don’t produce;  Creation + own brand management  Design and product specification  Mostly internationally outsourced  Supply chain management  Totally decide over marketing and commercialization Valueadded + - France Italy Spain Taiwan Brazil Mexico China India Thailand Vietnam Other global suppliers Indonesia B A C D E Industry segmentation vs. value creation: 3 Source: BNDES, Company estimates 30
  31. 31. .6 Arezzo&Co sourcing: Brazilian competitive advantages Vale dos Sinos region offer strong competitive advantages, a combination of production capacity, production flexibility, skilled labor and strong structure to support incentives for innovation and strengthening of industry‟s competitiveness Source: Abicalçados, 2012 / ASSINTECAL / FAO / AICSUL.  Brazil is the world’s third largest footwear producer  The world’s largest cattle: 13% of the market  RS: 1 third (R$ 1 billion) of Brazilian revenue in leather industry  Vale dos Sinos: one of the world’s largest footwear manufacturing hubs  1,700 companies and entities: components, footwear, machinery, tanneries, trade entities, research and teaching institutions  Abundant skilled and specialized labor  Production flexibility: volume X variety X speed Production (million pairs) Jobs (thousands) 819 338 Production (million pairs) Jobs (thousands) 270 138 Production (million pairs) Jobs (thousands) 216 110 BRAZIL SOUTHERN REGION VALE DOS SINOS Vale dos Sinos: 26% of Brazilian footwear production 3 31
  32. 32. Trends and style Design Technical Design Engineering Samples Showroom Logistics and distribution Store Raw material price negotiations Scheduling + Manufacturer negotiation 1 2 3 4 5 6 7 .8 Arezzo&Co Sourcing Process and supply chain management Sourcing process and supply chain management focused on ensuring flexibility, speed and cost control in the creation of new products Arezzo&Co sourcing process: Coordinated management of production chain associated with Investments in product engineering: specific know how Arezzo&Co Raw materials Finished products Cost control Engineering folder Cost management efficiency Quality standard guarantee Efficient lead time Flexibility Chemicals and textile Components 3 32 SKU MODEL CONSTRUCTION 10% 35% 70% Reuse from collection to collection:
  33. 33. | Value Drivers Update
  34. 34. .1 Solid growth fundamentals 4 34 The Company has ongoing initiatives to unlock value to shareholders 193.8 367.1 412.1 571.5 678.9 860.3 2007 2008 2009 2010 2011 2012 89.4% 12.3% 38.7% 18.8% 26.7% Net revenues CAGR 2007-2012 28.2%  Store openings guidance for 2013 reaffirmed  Strong Schutz’s sales encourages launch of webcommerce channel for other brands  Multibrand strategy brings capillarity DISTRIBUTION NETWORK AND SALES AREA EXPANSION  GTM Arezzo project enhancing sell-out performance  New store layout for Arezzo and Anacapri increased sales per m²  Repositioning of handbags in Schutz presented very positive results STORE PRODUCTIVITY 2  Continuous focus on diluting operating expenses PROFITABILITY 3  Constant analysis towards improvements in logistics and distribution PROCESS EFFICIENCY 4 1
  35. 35. .1 2013 Expansion Plan Since IPO, for 2 consecutive years, store opening guidance was achieved; 2013 expansion is committed to 53 new stores with 14% growth in sales area 4 1) Includes international store operation 33 58 53  In addition to the store openings, the company is committed to expand existing stores by a total of 1,000 sqm in 2013 and 2014  90% of the contracts already signed  17 stores opened in 1H13 274 296 342 389 29 45 57 63 303 341 399 452 2010 2011 2012 2013 # Owned Stores # Franchises 35
  36. 36. 36 .1 Web commerce 4With a strong growth in the last twelve months, web commerce represents 5% of Schutz brands revenues  Best store in terms of sales in the whole chain  80 thousand pairs sold in the last 12 months  Vast and rich product mix assortment  5%+ of Schutz brand revenues in the 1H13  Roll-out to other brands expected in 2014
  37. 37. 37 .2 GTM Arezzo 4Under GTM Arezzo the Company expects to increase the product accuracy with new collection calendar a shorter lead time Life cycle  More fashion content; largest collections presented to the franchisees Collection Continuables Classic Showroom Fashion complement Fast fashion Continuables Classic Supply model  Fashion complement using information from the sell out  Capturing quick trends, not only from Arezzo’s stores, but also from market research  Products automatically replaced in the stores with some season colors  Open size run replacement  Products also automatically replaced in the stores; only two colors. Full mark-up sell-through
  38. 38. .2 Store productivity increase 4 38 Niches and lighting Vídeo Wall Iguatemi São Paulo Mall Wall display Combos Accessories Floor Storage  New Arezzo store layout reinforces the brand identity  More productive store: 60% more products per m²  Allows a better display of non-shoe categories, especially handbags and accessories;  New pilot became the brand’s most productive store  Very replicable store format for different locations: from street to malls and from small to very large cities  First pilot franchise inaugurated on August, 8th New store layouts increase productivity while reinforcing brand identity
  39. 39. 39 .2 Schutz handbags 4  New positioning of handbags in Schutz brand resulted in strong growth  Focus on product development fostering supply chain  Target strategy designed for each channel  Subdivision of categories by potential use  Reduction in the number of models  Different product mix by channel Recent repositioning of Schutz handbags delivering positive results 5% 9% 2Q12 2Q13 Handbags as % of Schutz revenues
  40. 40. Key takeaways 40 Undisputable category leader 1 Significant growth potential 2 Reference brands 3 Scalable platform with operating leverage 5 Efficient and market oriented supply chain 4 High return on invested capital 6 4
  41. 41. | 2Q13 Financial Highlights 05
  42. 42. .1 Operational and financial highlights 5 42 111.8 134.5 209.3 251.474.0 87.6 129.8 147.6 60.2 69.8 104.7 131.3 3.0 1.9 6.5 5.2 2Q12 2Q13 1H12 1H13 20.3% 16.0% 450.3 18.0% 535.4 18.3% 20.1% 25.4% 18.9% 13.7%249.0 293.9 The Company’s main sales channels presented growth in 2Q13. In special, Franchises increased 20.3%, leveraged by 52 stores openings and expansion of 10 stores in the last twelve months. Gross Revenue by channel – Domestic Market (R$ million) Franchise Multi-brand Owned Stores Others¹ SSS Sell-out (owned stores + franchise ) SSS Sell-in (franchises) 1) Other: decreasing of 35.0% in 2Q13 and 20,3% in 1H13 1.2% 5.5% 3.7% 6.7% n/a 10.4% n/a 14.5%
  43. 43. 255 276 309 361 25 31 50 5616.3 18.4 23.1 28.0 2Q10 2Q11 2Q12 2Q13 +58 359 417 280 307 +52 +27 21.1% 13.3% 25.6% Franchises Owned Stores Total sq m 5 43 .2 Operational and financial highlights Key highlights Strong Gross Revenue growth, especially in the Schutz brand that increased by 35.0% in 2Q13 compared to 2Q12 2Q13 ended with 417 store chain and Sales area expansion of 21.1% year-over-year 2Q13 Net Revenue increased by 19.1% year-over-year Number of Stores (R$ mn) and Total Area (sq m - „000) CAGR 07-13 (2Q13 LTM): 33.2% Net Revenues (R$ mn) Area CAGR 07- 13 (1Q13LTM): 17.0% 199.5 237.6 193.8 367.1 412.1 571.5 678.9 860,3 2Q12 2Q13 2007 2008 2009 2010 2011 2012 19.1% 89.4% 12.3% 38.7% 26.7% 18.8%
  44. 44. 8.0 57.316.9% 20.6% 34.6 40.5 49.3 69.1 17.4% 17.0% 15.9% 15.8% 2Q12 2Q13 1H12 1H13 EBITDA EBITDA margin 5 44 .3 Operational and financial highlights Gross Profit (R$ million) 89.9 106.1 157.1 195.5 45.1% 44.6% 43.5% 44.6% 2Q12 2Q13 1H12 1H13 Gross profit Gross margin 17.9% 24.4% EBITDA (R$ million) 15.6% 12.8% 25.8 29.1 36.6 48.4 12.9% 12.2% 11.6% 11.0% 2Q12 2Q13 1H12 1H13 Net income Net Margin 5.3 41.9 Net Income (R$ million)
  45. 45. 45 5 .4 Operational and financial highlights Cash Conversion Cycle (R$ thousand) Cash Flows From Operating Activities (R$ thousand) Capex (R$ million) ¹ Days of COGS ² Days of Net Revenues Operational Indicators , , , , Total capex 14,462 8,942 -38.2% 31,799 20,169 -36.6% Stores - expansion and refurbishing 7,415 4,151 -44.0% 20,993 6,539 -68.9% Corporate 6,775 3,974 -41.3% 10,328 12,006 16.2% Other 272 817 200.4% 478 1,624 239.7% Summary of investments Var. (%)1H132Q12 1H122Q13 Var. (%) 1H12 1H13 Growth ou spread (%) # of pairs sold ('000) 3,620 4,407 21.7% # of handbags sold ('000) 230 269 17.0% 0.2% # of employees 2,041 2,014 -1.3% # of stores * 359 417 58 Owned Stores 50 56 6 Franchises 309 361 52 Outsorcing (as % os total production) 85.7% 89.9% 4.2 p.p SSS 2 Sell-in (franchises) 10.4% 6.7% -3.7 p.p. SSS 2 Sell-out (owned stores + franchises) n/a 3.7% n/a Operating Indicators Income before income tax and social contribution 49,331 66,850 35.5% Depreciation and amortization 3,166 4,970 57.0% Other (5,647) 3,936 n/a Decrease (increase) in current assets / liabilities 24,891 (11,285) n/a Trade accounts receivables 28,795 9,097 -68.4% Inventories (8,687) (14,190) 63.3% Suppliers 6,042 8,049 33.2% (1,259) (14,241) 1031.1% Payment of income tax and social contribution (11,652) (17,598) 51.0% Net cash flow generated by operational activities 60,089 46,873 -22.0% Change in other noncurrent assets and liabilities 1H13 Var. (%)Operating Cash Flow 1H12 #days (R$'000) #days (R$'000) 92 173,077 110 246,493 18 Inventories¹ 55 65,718 63 89,821 8 Accounts Receivable² 73 150,687 78 200,229 5 (-) Accounts Payable¹ 37 43,328 30 43,557 -7 Cash Conversion Cycle 2Q12 2Q13 Change (in days)
  46. 46. 46 5 .5 Operational and financial highlights Indebtedness (R$ thousand) Indebtedness totaled R$ 107.9 million in 2Q13 versus R$ 87.9 million in 1Q12 Long-term debt relevance stood at 43.7% in 2Q13 versus 53.1% in 1Q12 Indebtedness policy remained conservative, with low weighted-average cost of Company's total debt 2Q12 1Q13 2Q13 Cash 205,819 213,306 214,411 Total debt 51,117 87,880 107,862 Short term 25,548 41,226 60,763 % total debt 50.0% 46.9% 56.3% Long-term 25,569 46,654 47,099 % total debt 50.0% 53.1% 43.7% Net debt (154,702) (125,426) (106,549) Cash position and Indebtedness EBITDA LTM 118.007 149.731 155.575 Net debt/EBITDA LTM -1,3x -0,8x -0,7x
  47. 47. 47 Appendix
  48. 48. 48 .4 Key financial indicators A 1 - Includes non-recurring expense in 1Q12 in Other Operating Revenues and Expenses: Arezzo&Co terminated its contract with Star Export Assessoria e Exportação Ltda. (“Star”), which had been providing technical support and advice services for procurement and inspection of independent factories and workshops contracted to make products. As part of the termination, a payment of R$ 8 million was made and Star signed a five-year non-compete agreement. On the same date, a contract was signed with another company that has the same technical capability, providing the same type of services on special commercial terms to reduce costs while maintaining the same quality of services. 2 - Working Capital: current assets minus cash, cash equivalents and marketable securities less current liabilities minus loans and financing and dividends payable. 3 - Invested capital: working capital plus fixed assets and other long-term assets less income tax and deferred social contribution. 4 - Net debt is equal to total interest-bearing debt position at the end of a period less cash and cash equivalents and short-term financial investments. 2Q12 2Q13 Growth or spread% 1H12 1H13 Growth or spread% Net revenues 199,468 237,639 19.1% 360,829 438,678 21.6% COGS (109,533) (131,581) 20.1% (203,721) (243,187) 19.4% Gross profit 89,935 106,058 17.9% 157,108 195,491 24.4% Gross margin 45.1% 44.6% -0.5 p.p. 43.5% 44.6% 1.1 p.p. - SG&A (57,050) (67,965) 19.1% (110,972) (131,347) 18.4% - 10,915.00 % of Revenues 28.6% 28.6% 0.0 p.p 30.8% 29.9% -0.9 p.p Selling expenses (40,895) (48,582) 18.8% (75,152) (92,445) 23.0% - 7,687.00 Ow ned stores (18,543) (22,020) 18.8% (34,042) (44,357) 30.3% - 3,477.00 Selling, logistics and supply (22,352) (26,562) 18.8% (41,110) (48,088) 17.0% - 4,210.00 General and administrative expenses (14,209) (17,891) 25.9% (25,808) (35,220) 36.5% - 3,682.00 Other operating revenues (expenses)1 (197) 893 n/a (6,846) 1,288 n/a 1,090.00 Depreciation and amortization (1,749) (2,385) 36.4% (3,166) (4,970) 57.0% - 636.00 Ebitda 34,634 40,478 16.9% 49,302 69,114 40.2% Ebitda margin 17.4% 17.0% -0.4 p.p. 13.7% 15.8% 2.1 p.p. Net income 25,763 29,057 12.8% 36,615 48,423 32.2% Net margin 12.9% 12.2% -0.7 p.p. 10.1% 11.0% 0.9 p.p. Working capital2 - as % of revenues 21.8% 26.1% 4.3 p.p 21.8% 26.1% 4.3 p.p Invested capital3 - as % of revenues 29.4% 33.9% 4.5 p.p. 29.4% 33.9% 4.5 p.p. Total debt 51,117 107,862 111.0% 51,117 107,862 111.0% Net debt4 (154,702) (106,549) n/a (154,702) (106,549) n/a Net debt/EBITDA LTM -1.3 X -0.7 X n/a -1.3 X -0.7 X n/a Key financial indicators
  49. 49. 49 .5 History – Franchises and Owned Stores A 1. Includes areas in square meters of 9 international stores 2. Includes 5 outlet-type stores with a total area of 1,227 m2 3. Includes areas in square meters of stores expansion 2Q12 3Q12 4Q12 1Q13 2Q13 Sales area 1,3 - Total (m²) 23,112 24,531 26,543 26,659 27,996 Sales area - franchises (m²) 18,005 19,125 20,646 20,731 22,154 Sales area - Ow ned stores2 (m²) 5,107 5,406 5,897 5,928 5,842 Total number of domestic stores 351 368 390 391 408 # of franchises 301 316 334 335 353 Arezzo 295 300 311 312 324 Schutz 6 16 23 23 29 # of owned stores 50 52 56 56 55 Arezzo 19 19 19 19 17 Schutz 22 24 27 27 27 Alexandre Birman 1 2 2 2 2 Anacapri 8 7 8 8 9 Total number of international stores 8 9 9 9 9 # of franchises 8 8 8 8 8 # of owned stores 0 1 1 1 1 History - Franchises and Owned Stores1
  50. 50. 50 .6 Balance Sheet - IFRS AAssets 2Q12 1Q13 2Q13 Current assets 441,382 539,360 537,059 Cash and cash equivalents 4,799 8,427 7,515 Financial Investments 201,020 204,879 206,896 Trade accounts receivables 150,687 211,251 200,229 Inventory 65,718 87,481 89,821 Taxes recoverable 7,393 15,797 18,460 Other credits 11,765 11,525 14,138 Non-current assets 105,507 132,558 137,303 Long-term receivables 16,135 15,657 15,530 Financial Investments 98 178 21 Taxes recoverable 360 377 377 Deferred income and social contribution 8,705 8,007 6,898 Other credits 6,972 7,095 8,234 Property, plant and equipment 47,693 63,338 65,014 Intangible assets 41,679 53,563 56,759 Total Assets 546,889 671,918 674,362 Liabilities 2Q12 1Q13 2Q13 Current liabilities 107,458 146,211 148,087 Loans and financing 25,548 41,226 60,763 Suppliers 43,328 69,021 43,556 Dividends and interest on equity capital payable 9,701 0 9,346 Other liabilities 28,881 35,964 34,422 Non-current liabilities 29,984 52,102 54,386 Loans and financing 25,569 46,654 47,099 Related parties 975 969 978 Other liabilities 3,440 4,479 6,309 Equity 409,447 473,605 471,889 Capital 105,917 106,857 156,000 Capital reserve 172,830 173,838 125,190 Income reserves 105,407 173,544 153,162 Profit 25,293 19,366 37,537 Total liabilities and shareholders' equity 546,889 671,918 674,362
  51. 51. 51 .7 Income Statement - IFRS A Income statement - IFRS 2Q12 2Q13 Var.% 1H12 1H13 Var.% Net operating revenue 199,468 237,639 19.1% 360,829 438,678 21.6% Cost of goods sold (109,533) (131,581) 20.1% (203,721) (243,187) 19.4% Gross profit 89,935 106,058 17.9% 157,108 195,491 24.4% Operating income (expenses): (57,050) (67,965) 19.1% (110,972) (131,347) 18.4% Selling (41,811) (49,709) 18.9% (76,818) (95,008) 23.7% Administrative and general expenses (15,042) (19,149) 27.3% (27,308) (37,627) 37.8% Other operating income net (197) 893 n/a (6,846) 1,288 n/a Income before financial result 32,885 38,093 15.8% 46,136 64,144 39.0% Financial income 810 666 -17.8% 3,195 2,706 -15.3% Income before income taxes 33,695 38,759 15.0% 49,331 66,850 35.5% Income tax and social contribution (7,932) (9,702) 22.3% (12,716) (18,427) 44.9% Current (6,164) (8,593) 39.4% (11,409) (19,061) 67.1% Deferred (1,768) (1,109) -37.3% (1,307) 634 -148.5% Net income for period 25,763 29,057 12.8% 36,615 48,423 32.2%
  52. 52. 52 .8 Cash Flow Statement - IFRS A Statement of cash flow 2Q12 2Q13 1H12 1H13 Operating activities Income before income tax and social contribution 33,695 38,759 49,331 66,850 1 231 7,139 (2,481) 8,906 Depreciation and amortization 1,749 2,385 3,166 4,970 Income from financial investments (2,743) (2,896) (6,604) (6,165) Interest and exchange rate 1,336 5,057 814 5,067 Other (111) 2,593 143 5,034 Decrease (increase) in assets Customer receivables 22,801 11,471 28,795 9,097 Inventory (108) (2,716) (8,687) (14,190) Recoverable taxes 2,331 (2,663) 2,796 (4,179) Variation other current assets (1,378) (3,394) (65) (3,223) Judicial deposits (123) (359) (641) 545 Decrease (increase) in liabilities Suppliers (12,798) (25,464) 6,042 8,049 Labor liabilities 4,100 4,338 1,269 (181) Fiscal and social liabilities 1,268 (2,467) (4,347) (8,771) Variation in other liabilities (477) 1,732 (271) 1,568 Payment of income tax and social contribution (11,652) (13,935) (11,652) (17,598) Net cash flow from operating activities 37,890 12,441 60,089 46,873 Net cash used in investing activities (52,221) (7,906) (68,207) (30,266) Net cash used in financing activities - third parties 18,937 14,926 11,644 8,712 Net cash used in financing activities (6,020) (20,373) (14,255) (29,322) Increase (decrease) in cash and cash equivalents (1,414) (912) (10,729) (4,003) Increase (decrease) in cash and cash equivalents (1,414) (912) (10,729) (4,003) Adjustments to reconcile net income with cash from operational activities
  53. 53. IR Contacts  Thiago Borges  Leonardo Pontes dos Reis, CFA Phone: +55 11 2132-4300 ri@arezzoco.com.br www.arezzoco.com.br CFO and IR Officer IR Manager

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