Cia. Hering s gross revenue growth of 12.6% in 2013, with EBITDA of R$ MM and EBITDA margin of 26.1%

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1 Blumenau, February Cia. Hering (BM&FBOVESPA: HGTX3), one of the largest retail and apparel designers and manufacturers in Brazil, announces the results of the fourth quarter of 2013(4Q13). The Company information, unless otherwise indicated, is based on consolidated figures in thousands of reais, according to International Accounting Standards (IFRS). All comparisons refer to the same period of 2012 (4Q12), except when otherwise indicated. Data 12/31/2013 HGTX3: R$ 29.9 per share Market Capitalization R$ 4.9 billion US$ 2.1 billion Cia. Hering s gross revenue growth of 12.6% in 2013, with EBITDA of R$ MM and EBITDA margin of 26.1% Conference Call 02/21/2014 Portuguese and English: 11:00 am (Brasília) Tel.: (+55 11) (Brazil) Tel.: (+1) (USA) Tel.: (+44) (Europe) Conference audio will be broadcast live over the Internet, along with the slide show available at Investor Relations Fabio Hering CEO Frederico de Aguiar Oldani CFO and IRO Daniel Popovich Bastos IR Analyst Ph.: (11) ri@hering.com.br Highlights (4Q13) Gross Revenue: growth of 10.2% in 4Q13 and 12.6% in 2013; Same store sales growth of 1.1% in 4Q13 and -0.6% in the Hering Store network; Opening of 77 Hering Stores and 43 Hering Kids stores within the year, overcoming the guidance; EBITDA of R$137.7 million in 4Q13 (+3.5%) and R$ million in 2013 (+7.8%); Net Income of R$ million (+0.7%) in 4Q13 and R$ million in 2013 (+2.3%); We initiate the year of 2014 with a more cautious perspective relative to the business environment, at the same time in which we implement evolutions in our organizational structure which will be fundamental for implementing our business strategy and the construction of our long term vision. We intend to open 100 stores in 2014, consisting of 70 Hering Stores and 30 in the Hering Kids format. Besides that, the first Hering For You pilot store will be opened. Consolidated Highlights R$ Thousand 4Q12 4Q Q13 / 4Q / 2012 Gross Revenue 552, , % 1,793,661 2,019, % Domestic Market 545, , % 1,766,570 1,987, % Foreign Market 7,191 8, % 27,091 31, % Net Revenue 457, , % 1,491,316 1,679, % Gross Profit 212, , % 679, , % Gross Margin 46.3% 44.9% -1.4 p.p. 45.5% 45.2% -0.3 p.p. Cash Gross Profit (a) 216, , % 696, , % Cash Gross Margin (a) 47.3% 45.9% -1.4 p.p. 46.7% 46.2% -0.5 p.p. Net Income 101, , % 311, , % Net Margin 22.1% 20.2% -1.9 p.p. 20.9% 18.9% -2.0 p.p. EBITDA (b) 132, , % 407, , % EBITDA Margin 29.0% 27.4% -1.6 p.p. 27.3% 26.1% -1.2 p.p. ROIC (c) 47.4% 41.9% -5.5 p.p. 47.4% 41.9% -5.5 p.p. (a) Gross Profit and Gross Margin without Depreciation allocated to cost (b) Earnings before interest, taxes, depreciation, amortization and participations (c) Last 12 months

2 MESSAGE FROM THE BOARD The year of 2013 represented the beginning of a transition within the Company, it was a year of changes and initiatives. Our efforts were divided into the implementation of projects targeted at the construction of our view of the future, concurrently with dealing with short-term challenges deriving from a more challenging business environment. Despite the off-beats, the Company presented improvement on its results compared to 2012, with growth in Sales and Ebitda of 12.6% and 7.8%, accordingly, even though still short of our potential. As for management, we implemented important enhancements to our organizational model, with structures dedicated to each one of our brands and higher planning ability, which shall be fundamental for the deployment of our growth strategy. In the Hering brand, our main brand, we observed a revenue increase of 12%, with good performance in all channels. In the Hering Store network, our performance was boosted by the opening of 77 stores, since the performance in the same stores (SSS) concept remained practically stable in the year. Throughout the second semester, we carried out a deep performance diagnosis as from which we intend to perform an action plan to boost sales by the brand. As a part of this process, we held many surveys that reaffirmed the strength of the Hering brand, which is still Top of Mind in its category and with evolution in several indicators of brand health, such as ad-lib awareness, preference and low rejection. We also assessed the level of satisfaction of our franchisees, which demonstrated their high level of satisfaction regarding their Hering Store business and their continuous interest in opening stores. In the children s Market, we continue with our combined strategy for the Hering Kids and PUC brands, focusing on stores openings in the Hering Kids network. The Hering Kids brand had a sales growth of 25.5%, boosted by the franchises channel with the opening of 43 stores in the network, surpassing our guidance of 30 stores for the period. The PUC brand presented a growth of 10.9% in sales, as a function of good performance in the multi-brand retail channel and the same stores sales within the PUC network, especially. Dzarm. posted a growth of 5% in the year of Although the brand is already important in its segment, with revenues higher than R$100 million of sell-in the retail channel, we believe that the brand still has a greater potential to be explored, mainly through new distribution channels. We are confident that as from the new structure, with dedicated teams and resources, we will be able to develop a business plan and boost dzarm s growth. Throughout the year of 2013, we went through an important change in the brands management structure, which shall be fundamental for enhancing our management and development abilities for each of our brands, thus accelerating our path of growth. We migrated from a functional structure, in which all management areas were responsible for executing plans for all brands, to a brand-dedicated structure. Our main goal in that shift is to have an individual management structure per brand, in addition to improving the management ability for each of the brands. The new structure also makes it easier for the development of new growth fronts, both organic and inorganic. One example is the announcement of the Hering For You brand, concept developed along the previous years, and which is being implemented by the management team dedicated to the brand and will inaugurate its first pilot store in was also a year in which the Company continued evolving in the development of people and leaderships. We gave continuity to our evaluation process, which allows for more assertiveness in attracting, selecting, developing, acknowledging and moving collaborators according to organizational strategies. Such process stimulates the creation of a meritocratic working environment, targeted at keeping our talents always engaged in the Company s long-term strategy. Finally, we are confident that our business strategy, combined with the new management structure, will allow us to capture the entire potential of our brands, as well as to develop new growth fronts. The Board 2

3 1) SALES PERFORMANCE Cia. Hering s sales grossed R$ million in 4Q13 and R$ 2,019.4 million in 2013, with revenue growth in our four brands. Gross Revenues - R$ thous. 4Q12 4Q Q13 / 4Q / 2012 Gross Revenue 552, , % 1,793,661 2,019, % Domestic Market 545, , % 1,766,570 1,987, % Foreign Market 7,191 8, % 27,091 31, % Domestic Market Gross Revenue 545, , % 1,766,570 1,987, % Hering 425, , % 1,335,330 1,495, % Hering Kids 48,954 54, % 158, , % PUC 38,012 41, % 141, , % dzarm. 23,523 24, % 96, , % Other 9,144 9, % 34,222 34, % Domestic Market Share 4Q12 4Q Q13 / 4Q / 2012 Multibrand 227, , % 834, , % Franchise 220, , % 652, , % Webstore 5,648 5, % 19,455 22, % Owned Stores 83,751 89, % 226, , % Total 536, , % 1,732,348 1,953, % Multibrand 42.3% 41.2% -1.1% 48.2% 47.6% -0.5% Franchise 41.0% 42.9% 1.9% 37.6% 39.3% 1.6% Webstore 1.1% 0.9% -0.2% 1.1% 1.2% 0.0% Owned Stores 15.6% 15.1% -0.6% 13.1% 11.9% -1.2% Total 100.0% 100.0% 0.0% 100.0% 100.0% 0.0% Hering Brand Widely accepted by all socio-economic classes and age groups, Hering stands out as a democratic brand among consumers, with a good cost-benefit ratio, desired because it offers quality basic products, accessible fashion and constant innovation. In 4Q13, gross sales by the brand posted a total growth of 10.3%. Sales performance in the quarter in the SSS criteria posted a growth of 1.1%. In the year of 2013, sales by the brand Hering grew 12.0% and in the SSS criteria dropped 0.6%. In the sell-in concept (sales to franchises and multi-brand retailers), the Company commercialized in 4Q13 both the high-summer and vacation collections. The sales highlights were the jeans line and female shirts. In the chain of stores, the campaign Anticipate your Christmas was promoted, thus stimulating sales both before and after Christmas. Hering Kids Brand An extension of the Hering brand focused on the mini-adult concept, Hering Kids offers casual and basic products with excellent cost-benefit. Gross sales by Hering Kids posted a growth of 12.3% in 4Q13 and 25.5% in 2013, with highlights to the channels of franchises and own stores, mainly boosted by stores openings in the Hering Kids network. In 4Q13, collections were based on a tropical climate, with vivid colors and stripes. Sales highlights went to pants, both female and male, and the growth of the baby line. PUC Brand The positioning of the PUC brand is focused on the children s public from classes A and B, with the offering of products that are differentiated and that offer high quality, for use in special occasions. 3

4 Within 4Q13, gross sales by PUC grew 10.1% and in 2013, 10.9%. The high-summer collection was highlighted by the summer mood campaign, with the focus on light beachwear gear, outlining the baby line. dzarm. Brand dzarm. targets young adults, 18 to 28 years old from A/B classes, who express their authentic side through quality and cost-benefit products and are connected to the latest world trends. Gross sales by dzarm. posted a growth of 4.9% in 4Q13 and 5.0% in dzarm. is currently undergoing a process of rebuilding its business strategy, which shall be developed throughout Webstore The e-commerce operation by Cia. Hering covers all four brands (Hering, Hering Kids, PUC, and e dzarm.) and it has posted the most expressive growth among all distribution channels by the Company throughout the year, closing the year with a growth of 16.8% and a decrease of 8.2% in 4Q13. The online channel has been posting a robust growth in the previous years, and, due to the boosted growth, we reached our limit of simultaneous transactions within the channel. The Company has already initiated a new round of investments in a new platform which shall provide higher capacity to process orders, in addition to enabling the use of new tools, improving the purchase experience by consumers and the ability to convert accesses into sales. Foreign Market The acting strategy by Cia. Hering in the foreign market is focused on the selling of our brands to Latin America. The Company ended 2013 with 17 franchises abroad. Comprising 1.6% of the Company s total revenues in 2013, gross sales to the foreign market posted a growth of 18.1% in 4Q13 and of 17.3% in the Year. 2) DISTRIBUTION NETWORK Cia. Hering relies on a multi-channel distribution model, which enables its products to reach the consumer through several sales channels: i) Hering Stores network, PUC, and Hering Kids; ii) multi-brand retailers; and iii) webstores. In 4Q13, sales were distributed as follows: Composição da Receita Bruta - % Hering 78% Other 2% PUC 7% dzarm. 4% Hering Kids 9% Multibrand Retail 41.2% Franchised stores 42.9% Webstores 0.9% Owned stores 15.1% 4

5 Stores Network In the period between 4Q12 and 4Q13, 128 stores were opened in Brazil and one abroad, of which 80 Hering Stores, 5 PUC s, and 43 Hering Kids, in addition to one store in Uruguay. During that same period, 3 Hering Stores and 3 PUC s were closed in Brazil and in the foreign market, one store in Venezuela. The Company is planning to open 30 stores in the Hering Kids format and 70 Hering Stores throughout Number of Stores Hering - Owned Hering - Franchised Total Hering Store PUC - Owned PUC - Franchised Total PUC Hering Kids - Owned Hering Kids - Franchised Total Hering Kids dzarm. - owned Total dzarm Brazil Foreign - Franchised TOTAL Multi-brand Retail In the multi-brand retail channel, at the ending of 2013, Cia. Hering had 17,898 customers in multi-brand retail, of which, 13,726 only for the Hering brand. in 4Q13, the channel posted a revenues growth of 7.3% and 11.6% in ) HERING STORE CHAIN PERFORMANCE Total sales by Hering Store posted a growth of 10.1% in 4Q13 and of 10.1% in 2013 due to the network expansion of 77 stores since 4Q12. Sales in the same stores concept posted a growth of +1.1% in 4Q13 and of reduction of 0.6% in 2013, still short from the network s potential. Hering Store Chain Performance 4Q12 4Q13 Chg Chg. Number of Stores % % Franchise % % Owned % % Sales (R$ thousand) (1) 530, , % 1,428,149 1,572, % Franchise 452, , % 1,218,306 1,359, % Owned 77,958 81, % 209, , % Same Store Sales growth (2) -0.2% 1.1% 1.3 p.p -0.2% -0.6% -0.4 p.p Sales Area (m²) 70,899 82, % 70,899 82, % Sales (R$ per m²) 7,572 7, % 22,234 20, % Check-Outs 5,349,692 5,347, % 14,332,499 14,435, % Units 11,734,428 11,274, % 31,134,633 30,193, % Units per Check-Out % % Average Sales Price (R$) % % Average Sales Ticket (R$) % % (1) The amounts referred to the sales to final costumers. (sell out concept) (2) Compared to the same period of the previous year 5

6 4) ECONOMIC AND FINANCIAL PERFORMANCE R$ Thousand 4Q12 Part. (%) 4Q13 Part. (%) Chg. Chg Part. (%) 2013 Part. (%) 4Q13 / 4Q / 2012 Gross Revenue 552, % 608, % 10.2% 1,793, % 2,019, % 12.6% Sales Deduction (94,949) -20.7% (105,609) -21.0% 11.2% (302,345) -20.3% (339,654) -20.2% 12.3% Sales Deduction taxes and AVP (119,286) -26.1% (127,383) -25.3% 6.8% (382,457) -25.6% (416,038) -24.8% 8.8% AVP (Adjustment to Present Value) (10,337) -2.3% (11,295) -2.2% 9.3% (35,163) -2.4% (38,110) -2.3% 8.4% Sales Deduction Tax Incentives 34, % 33, % -4.6% 115, % 114, % -0.7% Net Revenue 457, % 503, % 9.9% 1,491, % 1,679, % 12.6% Total COGS - Excluding Depreciation and Amortization (241,174) -52.7% (272,309) -54.1% 12.9% (795,159) -53.3% (902,962) -53.8% 13.6% Cost of Goods Sold (250,541) -54.7% (280,393) -55.7% 11.9% (823,736) -55.2% (931,786) -55.5% 13.1% AVP (Adjustment to Present Value) 4, % 3, % -8.2% 13, % 17, % 24.3% Subvention for Expenditure 5, % 4, % -18.3% 14, % 11, % -21.1% Cash Gross Profit 216, % 230, % 6.6% 696, % 776, % 11.6% Depreciation and Amortization (4,587) -1.0% (5,066) -1.0% 10.4% (16,978) -1.1% (18,272) -1.1% 7.6% Gross Profit 212, % 225, % 6.5% 679, % 758, % 11.7% Operating Expenses (88,101) -19.2% (97,292) -19.3% 10.4% (306,049) -20.5% (353,542) -21.0% 15.5% Selling Expenses (73,175) -16.0% (74,692) -14.8% 2.1% (243,043) -16.3% (261,977) -15.6% 7.8% Company (48,449) -10.6% (50,386) -10.0% 4.0% (171,008) -11.5% (185,126) -11.0% 8.3% Fixed (20,013) -4.4% (21,809) -4.3% 9.0% (77,462) -5.2% (76,518) -4.6% -1.2% Variable (28,436) -6.2% (28,577) -5.7% 0.5% (93,546) -6.3% (108,608) -6.5% 16.1% Stores (24,726) -5.4% (24,306) -4.8% -1.7% (72,035) -4.8% (76,851) -4.6% 6.7% Administrative and General Exp. and Management Remuneration (10,890) -2.4% (16,650) -3.3% 52.9% (43,024) -2.9% (53,172) -3.2% 23.6% Depreciation and Amortization (4,433) -1.0% (3,974) -0.8% -10.4% (17,288) -1.2% (15,719) -0.9% -9.1% Profit Sharing - N.D % N.D (3,691) -0.2% (17,125) -1.0% 364.0% Other Operating Income (Expenses), net % (2,281) -0.5% N.D % (5,549) -0.3% N.D Operating Income Before Financial Results 123, % 128, % 3.8% 373, % 405, % 8.5% Financial Income 14, % 16, % 8.8% 66, % 59, % -10.2% Financial Expenses (7,257) -1.6% (8,064) -1.6% 11.1% (29,384) -2.0% (31,182) -1.9% 6.1% Total Financial Income (Expenses) 7, % 8, % 6.6% 37, % 28, % -23.0% Operating Income 131, % 136, % 3.9% 410, % 433, % 5.7% Income and Social Contribution Taxes - Current (33,340) -7.3% (34,752) -6.9% 4.2% (95,911) -6.4% (116,654) -6.9% 21.6% Income and Social Contribution Taxes - Deferred 2, % (419) -0.1% N.D (3,544) -0.2% 1, % N.D Net Income for the Period 101, % 101, % 0.7% 311, % 318, % 2.3% Attributable to shareholders 101, % 101, % 0.7% 311, % 318, % 2.3% EBITDA 132, % 137, % 3.5% 407, % 438, % 7.8% 6

7 EBITDA (R$ million) and EBITDA margin (%) 29.0% 27.4% 27.3% 26.1% % % Q12 4Q EBITDA EBITDA Margin EBITDA growth of 3.5% in 4Q13 and 7.8% in 2013, with margin losses of -1.6 p.p. and -1.2 p.p, respectively. The main factors associated with such results are: Growth of 10.2% in 4Q13 and 12.6% in 2013 in gross revenues. Decrease of -1.4 p.p. in gross margin in 4Q13 due to cost pressures related to devaluated exchange rate, labor and raw materials, lower level of fiscal incentive over imported products, in addition to a sales scenario that is still challenging closed with a decrease of 0.3 p.p., mainly due to the results of 4Q13. Growth in sales, general and administrative expenses of 8.7% in 4Q13 and 10.2% in 2013, as a function of the increase in the expenses with personnel related to the changes that took place during the Year. Normalization of expenses with the profit sharing program, of -R$ 17.1 million in 2013, despite the reversion of R$ 0.3 million in 4Q13. Weaker performance in the line of other revenues and operational (expenses) of -R$ 2.7 million in 4Q13 and of -R$ 6.5 million in the Year. EBITDA Reconciliation Reconciliation of EBITDA - R$ thousand 4Q12 4Q13 Chg Chg. Net Income 101, , % 311, , % (+) Income and Social Contribution Tax 30,679 35, % 99, , % (-) Net Financial Income (7,727) (8,240) 6.6% (37,339) (28,759) -23.0% (+) Depreciation and Amortization 9,020 9, % 34,266 33, % (=) EBITDA 132, , % 407, , % EBITDA Margin 29.0% 27.4% -1.6 p.p. 27.3% 26.1% -1.2 p.p. 7

8 Net Profit (R$ million) and Net margin (%) 22.1% 20.2% 20.9% 18.9% % % Q12 4Q Net Income Net Margin The net profit by Cia. Hering grew 0.7% in 4Q13 and 2.3% in 2013, with loss of -1.9 p.p. in the net margin in 4Q13 and of -2.0 p.p. in Such results derive from the following factors: EBITDA growth with decrease in EBITDA margin in the Year and in 4Q13 as a result of the operational results (item 4). Increase of 6.6% in the financial result on the 4Q13 and decrease of 23% in 2013, mainly due to the lower cash balance throughout the year. Higher income and social taxes, due to the reduction in fiscal incentives on imported goods and the end of the treatment as investment subvention. 5) CAPITAL EXPENDITURES The investments totaled R$ 21.7 million in 4Q13 and R$ 72.2 million in The greater part was destined to the industrial area (R$ 10.0 million and R$ 34.6 million, respectively), and to IT infrastructure (R$ 7.8 million and R$ 26.6 million, respectively). 8

9 13.7% % Q12 4Q Industry IT Others Stores 6) CASH FLOW In 4Q13, Cia. Hering posted a negative free cash flow of R$ 28.4 million, totaling a free cash flow of R$ million in Such results derive mainly from EBITDA increase, combined with the greater need of investments in working capital in 2H13, the inventory increase as a part of preparing for SAP system implementation, in addition to a greater expense with IR&CS after the end of the treatment of the fiscal incentive on imports ( Pró-Emprego ) as investment subvention in the beginning of Cash Flow - Consolidated (R$ thousand) 4Q12 4Q13 Chg Chg. EBITDA 132, ,666 4, , ,994 31,598 Non cash items 1,680 1,214 (466) 4,236 4, Current Income tax and Social Contribution (33,340) (34,752) (1,412) (95,911) (116,654) (20,743) Working Capital Investment (95,442) (110,814) (15,372) (43,506) (131,139) (87,633) (Increase) in trade accounts receivable (106,716) (104,859) 1,857 (67,615) (48,805) 18,810 (Increase) decrease in inventories 7,352 10,956 3,604 6,361 (84,573) (90,934) Increase (decrease) in accounts payable to suppliers 5,627 (18,411) (24,038) 30,130 (1,550) (31,680) Increase (decrease) in taxes payable (248) 16,204 16,452 (16,895) (1,132) 15,763 Others (1,457) (14,704) (13,247) 4,513 4, CapEx (23,893) (21,691) 2,202 (63,489) (72,217) (8,728) Free Cash Flow (18,013) (28,377) (10,364) 208, ,685 (85,041) Reconciliation from accounting Cash flow to adjusted Cash flow 4Q12 4Q13 Chg Chg. CFS - Cash provided by operating activities (accounting) 13,601 1,574 (12,027) 309, ,638 (85,093) Adjustment Financial items allocated to operating cash (7,721) (8,260) (539) (37,516) (28,736) 8,780 Unrealized exchange and monetary variation (540) (477) 63 (2,803) (1,421) 1,382 Financial Result (7,727) (8,240) (513) (37,339) (28,759) 8,580 Interest paid on loans (89) 2,626 1,444 (1,182) CFS - Cash flow from investing activities (23,893) (21,691) 2,202 (63,489) (72,217) (8,728) Free Cash Flow (18,013) (28,377) (10,364) 208, ,685 (85,041) * The adjusted cash flow as presented above is not a Brazilian Generally Accepted Accounting Practice and IFRS financial performance measurement. The information on this table was calculated for the management of the Company and has not been audited by independent auditors 9

10 7) RETURN ON INVESTED CAPITAL - ROIC In 4Q13, ROIC by Cia. Hering was of 41.9%, with decrease of -5.5 p.p. concerning the same quarter in the previous year. Such contraction is mainly due to the increase of invested capital in working capital, boosted by the punctual increase in stock, and to the decrease in EBTIDA margin. Return on Invested Capital (ROIC) - R$ thousands 4Q12 4Q13 Var. 2013/2012 EBITDA 407, , % (-) Depretiation and Amortization (34,266) (33,991) -0.8% (+) Amortization - Right of use properties ¹ 5,448 4, % (+) Financial Results - Adjust to Present Value ² 22,723 19, % (-) IR&CS - Nominal Rate (34%) ³ (139,559) (147,479) 5.7% (+) IR&CS - IOC Tax Benefit ³ 14,294 13, % Operating Income 276, , % Fixed Assets 278, , % Accumulated amortization - Right of use properties 17,497 22, % Working capital 286, , % Average Invested Capital* 582, , % ROIC 47.4% 41.9% -5.5 p.p. 8) INDEBTEDNESS Cia. Hering closed 4Q13 with R$ million in cash and financial applications and a net cash flow of R$ million. The net cash flow by the Company was reduced by R$ 52.4 million, in comparison with 4Q12, mainly due to dividend payments superior to the free cash flow in the Year. Indebtedness - R$ thousand 3Q12 Chg. 4Q12 Chg. 3Q13 Chg. 4Q13 Chg. Short Term (25,474) 99% (24,555) 99% (492) 2% (2,092) 9% Long Term (303) 1% (152) 1% (22,340) 98% (22,339) 91% Total (25,777) 100% (24,707) 100% (22,832) 100% (24,431) 100% (-) Cash & Interest-earning bank deposits 326, , , ,779 (=) (Net Debt) Free Cash Flow 301, , , ,348 09) COMPENSATION TO SHAREHOLDERS In the meeting held on October 16th, 2013, the Board approved the payment of dividends, ad referendum to the Ordinary General Meeting, in the amount of R$ 49.9 million (R$ 0.30 per share), paid in October 30 th, In a meeting held in November 21at, 2013, the Board approved the payment of interest over the equity capital in the amount of R$ 19.3 million (R$ 0.12 per share), paid on December 20 th, In 2013, the distribution of dividends was approved and interest over equity capital regarding the exercise in the total amount of R$88.5 million (R$ per share). The amount of R$ 49.9 million was destined to the account of additional proposed dividends, of which, and that corresponds to the destination of net profit in 2013, to be shown as a proposal by the Board, subject to deliberation in Ordinary General Meeting, to be held in April, ) ACKNOWLEDGEMENTS In 2013, Cia. Hering received important awards that reflected the brand acknowledgement to its actings: Top 25 Brazilian Franchising 2013 Adolfo Bini awards: 1st place in the Industries category Award The Most important in Retail : Category: Department stores/stores; performed by BR WEEK 10

11 Award Brands of those who decide : 1st place, performed by Jornal do Comércio (RS) Award Franchising Excellence 2013 : 8th time for the Hering Store network and 10 th time for PUC network; performed by ABF 500 GREATEST OF THE SOUTH 2013, is a performance by AMANHÃ, with technical support by PricewaterhouseCoopers (PwC). Prize Best Brazilian Franchise in 2013 : once again, winner in the categories: Garment, Shoes and Accessories; carried out by magazine Pequenas Empresas e Grandes Negócios, from Globo publishing, in a partnership with Serasa. Award Top of Mind 2013 (SC): winner in the category: adults design brand, carried out by Jornal A Notícia. Most Admired Companies 2013 : Honored in the segments of garment and manufacturing; promoted by Carta Capital. Ranking The Best in Rural Money : first place in the textile industry. Ranking Most Valuable Brazilian Brands : first place, third time in a row; carried out by Interbrand. 11) EMPLOYEES We are aware that a Company is also an important element in the transformation of society and its individuals. The seeking after results, which is the reason of being of every company, must be aligned with responsible practices, in social and environmental points-of-view, in such way that the growth by the organization enables the development of its employees, does not compromise the quality of life of both current and future generations, and that also means the growth of all who surround it. Cia Hering has been evolving in their People Management processes, towards reflecting the alignment of those with the long-term Culture and Strategy, ensuring the engagement of our employees in the search for delivering value to all stakeholders. In 2013, we enhanced our organizational model into a structure centered on brand management, enabling higher focus on our businesses and improving competences to sustain our growth. During the year, we continued implementing the people management cycle, expanding the process to all franchise managers and consultants, implementing the strategy and policies of compensation and benefits, the development architecture design and the succession planning for critical positions. The Company ended the year with 9,342 employees. 12) OUTLOOK The year of 2014 initiates with important challenges in the economic scenario, with uncertainty regarding the consumption environment and cost pressures to be administered. In this context, our goal for the year will be to minimize the adverse impacts on our short-term operational results at the same time we implement our new organizational model and work in the construction of a new cycle of growth in our brands. This way, we reinforce our trust in the growth capacity of our brands and in the value generation potential through our business model. In the Hering brand, besides the continuity of the Hering Store network expansion, with the opening of 70 stores in the year and the strategy for increasing penetration in the multi-brand retail, our SSS growth plan should begin to present positive impacts starting from the second semester, through its 4 fronts: (i) assortment, (ii) planning, (iii) style and (iv) execution. In the children s market, we will follow the combined strategy for the Hering Kids and PUC brands beyond the expansion of the Hering Kids format with 30 openings in the year. In dzarm., we will be working in the development of a new business plan which should be finalized throughout the next quarters. Regarding results, sales growth should be partially compensated by the increase in operational expenses, due to the investments in our new brands management structure, as well as cost pressures. So, our operational results should grow less than the expected growth in sales. 11

12 Independent of the short-term challenges, we will continue betting on organic growth, exploring our brands potential combined to a winning business model which has demonstrated high value generation power. We remain confident that the evolution in our organizational structure will help us exploring growth opportunities already identified as well as developing new growth avenues. 13) MANAGEMENT S PROPOSED CAPITAL BUDGET The Company presents in the table below, the capital budget for the fiscal year of 2014, according to the Normative Instruction 480/09, published by CVM on December 07, ) INDEPENDENT AUDITORS Capital budget and working capital - R$ thousand Investments 99,951 Stores 23,240 Industry 29,851 Logistics 6,731 IT 32,664 Others 7,465 Total 99,951 Company Capital (Profit retention reserve) 99,951 Cia. Hering policy with its independent auditors is referred to the provision of services not related to external auditing based on principles that preserve the independence of the auditors. These principles are based on the fact that the auditor should not assess his/her own work, nor carry out managerial functions or even advocate for its customer. During the period ended on December 31, 2013, the Company s independent auditors were not hired for other services beyond the examination of the financial statements of the period. 15) ARBITRATION CLAUSE The Company, its shareholders, managers and the Fiscal Board (when needed) members undertake to resolve by arbitration, every and all dispute or controversy which may arise among them, especially related to or derived from enforcement, validity, effectiveness, construal, violation and its effects of provisions contained in the Brazilian Corporation Law number 6,404/76, in the Company s Bylaws, in the rules issued by the Brazilian Monetary Committee (CMN), by the Brazilian Central Bank and by the Brazilian Securities and Exchange Commission (CVM), as well as other rules related to the capital markets operation in general besides those included in the Novo Mercado Listing Regulation, in the Novo Mercado Listing Agreement and in the Arbitration Regulation of the Market Arbitration Panel. 12

13 Balance Sheet IFRS (R$ thousand) ASSETS Current assets 934, ,186 Cash and cash equivalents 140, ,470 Trade accounts receivable 478, ,482 Inventories 295, ,996 Recoverable taxes 11,466 13,241 Other accounts receivable 8,577 3,574 Prepaid expenses Noncurrent assets 363, ,148 Long-term receivables 31,178 35,494 Interest-earning bank deposits 1,069 1,016 Other accounts receivable 8,145 6,798 Recoverable taxes 5,517 9,189 Deferred income and social contribution taxes 16,447 18,491 Property, plant and equipment 278, ,486 Intangible assets 54,669 39,168 TOTAL ASSETS 1,298,958 1,182,334 LIABILITIES AND SHAREHOLDER S EQUITY Current liabilities 312, ,979 Borrowings and financing 2,092 24,555 Trade payables 153, ,688 Payroll and related taxes 36,641 36,191 Taxes in Installments 3,916 7,527 Taxes and social security contributions payable 62,711 50,559 Provisions for contingencies and other provisions 29,918 22,033 Tax incentive obligations 16,840 11,614 Interest on equity and dividends payable Other accounts payable 7,029 7,369 Noncurrent liabilities 78,915 83,355 Noncurrent liabilities 78,915 83,355 Borrowings and financing 22, Taxes in Installments 11,697 14,772 Provisions for contingencies and other provisions 9,815 11,747 Employee Benefits 9,507 19,121 Tax incentive obligations 25,417 37,241 Other accounts payable Shareholder's equity 907, ,000 Capital 239, ,974 Capital reserve 10,209 6,602 Earnings reserve 597, ,371 Valuation adjustments to equity 10,064 8,170 Additional dividends proposed 49, ,883 TOTAL LIABILITIES AND SHAREHOLDER S EQUITY 1,298,958 1,182,334 13

14 Income Statement - IFRS (R$ thousand) R$ Thousand 4Q12 4Q Q13 / 4Q / 2012 Net Revenue 457, , % 1,491,316 1,679, % Cost of Goods Sold (245,761) (277,375) 12.9% (812,137) (921,234) 13.4% Gross Profit 212, , % 679, , % Operating Expenses (88,101) (97,292) 10.4% (306,049) (353,542) 15.5% Selling Expenses (73,175) (74,692) 2.1% (243,043) (261,977) 7.8% Management Remuneration (1,811) (1,971) 8.8% (7,006) (7,546) 7.7% Administrative and General Expenses (9,079) (14,679) 61.7% (36,018) (45,626) 26.7% Depreciation and Amortization (9,020) (9,040) 0.2% (34,266) (33,991) -0.8% (-) Allocated to Cost 4,587 5, % 16,978 18, % Profit Sharing N.D (3,691) (17,125) 364.0% Other Operating Income (Expenses), net 397 (2,281) N.D 997 (5,549) N.D Operating Income Before Financial Results 123, , % 373, , % Financial income 14,984 16, % 66,723 59, % Financial expenses (7,257) (8,064) 11.1% (29,384) (31,182) 6.1% Total Financial Income (Expenses) 7,727 8, % 37,339 28, % Operating Income Before Interest in Subsidiaries 131, , % 410, , % Income and Social Contribution Taxes - Current (33,340) (34,752) 4.2% (95,911) (116,654) 21.6% Income and Social Contribution Taxes - Deferred 2,661 (419) N.D (3,544) 1,064 N.D Net Income for the Period 101, , % 311, , % Owners of the Company 101, , % 311, , % EBITDA 132, , % 407, , % 14

15 Cash Flow IFRS (R$ thousand) R$ Thousand 4Q12 4Q Cash flow from operating activities Net income for the period 101, , , ,172 Adjustments to reconcile net income to net cash generated by operating activities: Deferred taxes (2,661) 419 3,544 (1,064) Unrealized exchange and monetary variation ,803 1,421 Depreciation and amortization 9,020 9,040 34,266 33,991 Provision for doubtful accounts 1,844 1,552 2,247 5,519 Result on the sale of fixed assets ,545 1,094 Stock option plan 943 1,001 2,691 3,607 s in assets and liabilities (Increase) in trade accounts receivable (108,560) (106,411) (69,862) (54,324) (Increase) decrease in inventories 7,352 10,956 6,361 (84,573) (Increase) decrease in recoverable taxes (2,414) 5, ,447 (Increase) decrease in other accounts receivable 188 (1,374) 5,558 (3,098) Increase (decrease) in accounts payable to suppliers 5,627 (18,411) 30,130 (1,550) Increase (decrease) in accounts payable and provisions 769 (19,207) (1,069) 2,572 Increase (decrease) in IRPJ e CSLL (11,622) 11,111 (15,071) 13,841 Increase (decrease) in taxes payable 11,374 5,093 (1,824) (14,973) Interest paid on loans (546) (457) (2,626) (1,444) Cash provided by operating activities 13,601 1, , ,638 Cash flows from investing activities Purchase of property, plant and equipment (16,771) (14,304) (44,111) (49,655) Purchase of intangible (7,122) (7,387) (19,378) (22,562) Cash used in investing activities (23,893) (21,691) (63,489) (72,217) Cash flows from financing activities Capital increase - - 6,095 3,461 Interest-earning bank deposits (17) (24) (79) (53) Interest on equity and dividends (120,972) (69,231) (248,245) (208,337) Borrowings 1,012 1,734 10,440 25,278 Repayments of loans (2,076) (154) (20,832) (25,530) Cash used in financing activities (122,053) (67,675) (252,621) (205,181) Decrease in cash and cash equivalents (132,345) (87,792) (6,379) (52,760) Decrease in cash and cash equivalents At beginning of period 325, , , ,470 At end of period 193, , , ,710 (132,345) (87,792) (6,379) (52,760) The statements contained in this release relative to the business outlook, operational and financial performance projections and references to the Company s growth potential are mere forecasts based on the management s expectations about its future performance. These forward-looking statements are highly dependent on market performance, on the economic status of Brazil, the industry and on international markets, and may, therefore, change. 15