2Q14 Earnings presentation

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Cia. Hering´s 2Q14 results conference call presentation

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2Q14 Earnings presentation

  1. 1. 2Q14 Results Conference Call July 25, 2014
  2. 2. DISCLAIMER This presentation contains forward-looking statements regarding the prospects of the business, estimates for operating and financial results, and those regarding Cia. Hering's growth prospects. These are merely projections and, as such, are based exclusively on the expectations of Cia. Hering management concerning the future of the business and its continued access to capital to fund the Company’s business Plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in Cia. Hering’s filed disclosure documents and are, therefore, subject to change without prior notice.
  3. 3. AGENDA 2Q14 Results Outlook Q&A
  4. 4. 4 2Q14 OVERVIEW Gross Revenues (R$ million) Gross Revenues per Channel (R$ million) Gross revenues of R$ 501.1 million (-3.9%), mainly due to the macroeconomic scenario and the negative impact of the World Cup on the apparel retail, besides unfavorable climate in the South and Southeast regions. 2Q13 2Q14 R$ 380.3 R$ 41.7 R$ 29.4 R$ 356.7 R$ 44.1 R$ 29.6 -6.2% R$ 54.3 R$ 54.5 +0.3% +5.7% +0.9% International Market R$ 7.9 R$ 10.6+33.0% R$ 521.2 R$ 501.1-3.9% 257.2 258.1 187.6 161.1 6.7 7.4 54.3 58.3 2Q13 2Q14 Multibrand Retail Franchise Webstore Own Stores 2.6% +10.9% +7.3% 0.4% -14.1
  5. 5. 5 1Q14 OVERVIEW Hering Store network (Sell-out R$ million)  Temporary price reduction in the basics line, with consequently increase in its turnover  Preparation of the stores network for receiving the new basics  Punctual promotions in both Autumn and Winter collections’ items 3.1% sales retraction in the Hering Store network due to the drop in same-store sales, partially compensated by the expansion in the number of stores. 387.1 387.1 387.1 375.1 +67 Stores -9.9% 2Q13 Expansion SSS 2Q14 -3.1%
  6. 6. 6 GROSS PROFIT AND EBITDA EBITDA impacted by lower sales, higher promotional activity and increase in expenses as a consequence of the organizational structure changes of the Company. Gross Profit and Gross Margin EBITDA and EBITDA Margin 200.6 179.9 -10.3% 46.0% 42.9% 47.0% 44.1% 2Q13 2Q14 Gross Profit Gross Margin Cash Gross Margin 116.7 96.9 26.8% 23.1% -16.9% 2Q13 2Q14 EBITDA EBITDA Margin
  7. 7. 7 NET INCOME AND CAPEX 16.5% drop in net income in the quarter, in line with EBTIDA. Investments in IT and stores, in line with the annual plan. Net Income (R$ million) Capex (R$ million) 88.8 74.2 20.4% 17.7% -16.5% 2Q13 2Q14 Net Income Net Margin 2.2 8.15.7 9.3 0.2 1.5 8.5 2.9 16.6 21.8 31.3% 2Q13 2Q14 Stores IT Others Industry
  8. 8. 8 CASH FLOW Cash Flow - Consolidated 2Q13 2Q14 Chg. EBITDA 116,656 96,894 (19,762) Non-cash items 2,513 2,655 142 Current Income tax and Social Contribution (32,386) (20,942) 11,444 Working Capital Capex 13,280 32,802 19,522 (Increase) decrease in trade accounts receivable (30,396) (8,403) 21,993 (Increase) decrease in inventories 18,802 32,349 13,547 Increase (decrease) in accounts payable to suppliers (2,565) 11,632 14,197 Increase (decrease) in taxes payable 7,219 (8,881) (16,100) Others 20,220 6,105 (14,115) CapEx (16,643) (21,840) (5,197) Free Cash Flow 83,420 89,569 6,149 R$ 27.5 million Free Cash Flow: • Positive impact from the lower need of working capital, mainly due to adjustments in inventory levels. • Partially oposed by lower operational result and higher invesment level.
  9. 9. AGENDA 2Q14 Results Outlook Q&A
  10. 10. Hering  New collection planning, with improvements in product assortment  Relaunching of the basics (re-modeled and new products) 10 BUSINESS OUTLOOK  dzarm.’s new bussiness plan  Business plan finished with changes in fashion, price and target consumer, to be announced throughout the year.  Challenging scenario remains throughout the year  Operating results still under pressure  The actions expected for the upcoming quarters make us better prepared to handle adversities and get back on the growth track.
  11. 11. AGENDA 2Q14 Results Outlook Q&A
  12. 12. INVESTOR RELATIONS TEAM Fabio Hering – CEO Frederico Oldani – CFO and IRO Bruno Salem Brasil – IR Manager Daniel Popovich – IR Analyst Tel. +55 (11) 3371-4867 E-mail: ri@hering.com.br Website: www.ciahering.com.br/ir

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