Results 3Q18. October 25, 2018 B3: LREN3; USOTC:LRENY. CONFERENCE CALL ON RESULTS October :00 p.m. (Brazil) / 12 noon (US-EST)

Transcription

1 Results 3Q18 October 25, 2018 B3: LREN3; USOTC:LRENY CONFERENCE CALL ON RESULTS October :00 p.m. (Brazil) / 12 noon (US-EST) Access in Portuguese: ou Access in English: Password: Lojas Renner Replay: Password in English: Access webcast here. *The Conference call will be held in Portuguese only with simultaneous translation into English.

2 Highlights of the Period October 25, 2018 LOJAS RENNER S.A. (B3: LREN3; USOTC: LRENY), the largest fashion retailer in Brazil, announces its results for the third quarter (3Q18) and the first nine months of 2018 (9M18). Consolidated Information (R$ MM) 3Q18 3Q17 Var. % 9M18 9M17 Var. % Net Rev enue from Merchandise Sales 1, , % 4, , % Growth in Same Store Sales (%) 6.9% 13.4% - 5.1% 9.5% - Gross Profit from Merchandise Sales % 2, , % Gross Margin from Retailing Operation (%) 54.3% 53.9% 0.4p.p. 56.0% 55.1% 0.9p.p. Operating Expenses (SG&A) (667.2) (592.4) 12.6% (1,936.3) (1,715.0) 12.9% SG&A as a % of Net Rev enue from Merchandise Sales (%) 39.0% 39.2% -0.2p.p. 39.6% 39.2% 0.4p.p. Ajusted EBITDA from Retailing Operation % % Ajusted EBITDA Margin from Retailing Operation (%) 15.2% 13.3% 1.9p.p. 15.5% 14.1% 1.4p.p. Financial Products Result % % Ajusted Total EBITDA (Retail + Financial Products) % 1, % Ajusted Total EBITDA Margin (%) 20.3% 19.8% 0.5p.p. 21.1% 19.9% 1.2p.p. Net Income % % Net Margin (%) 11.3% 9.3% 2.0p.p. 11.9% 9.2% 2.7p.p. ROIC LTM (%) 22.7% 21.3% 1.4p.p. 22.7% 21.3% 1.4p.p. 02

3 Operational Highlights 3Q18 Net Revenue +13.1% Same Store Sales +6.9% Good pace of sales with the assertiveness of the new collection Gross Profit +13.9% Gross Margin +0.4 p.p. EBITDA Retail Margin +1.9 p.p. Financial Products Result -11.5% Adequate commercial management Contribution from foreign exchange hedge on imported products Combination of gains in gross margin with effective control over expenditures Maintenance of portfolio s credit quality Efficiency in credit recoveries Revenue impacted by falling interest rates Net Margin +2.0 p.p. Growth in Total Adjusted EBITDA Net financial result and effective income tax rate lower Capex R$ MM Rollout of 14 stores: 3 Renner, 3 Ashua, 6 Camicado and 2 Youcom Increased investments in modernization of installations and systems 03

4 Businesses Breakdown Businesses Breakdown 3Q18 3Q17 Var. % 9M18 9M17 Var. % Stores in Operation Net Openings Selling Area (thousand m²) % % Net Rev enue (R$ MM) 1, , % 4, , % Gross Margin (%) 54.3% 53.9% 0.4p.p. 56.2% 55.1% 1.1p.p. Stores in Operation Net Openings Selling Area (thousand m²) % % Net Rev enue (R$ MM) % % Gross Margin (%) 53.3% 53.5% -0.2p.p. 52.1% 53.6% -1.5p.p. Stores in Operation Net Openings Selling Area (thousand m²) % % Net Rev enue (R$ MM) % % Gross Margin (%) 57.2% 58.0% -0.8p.p. 57.9% 58.2% -0.3p.p. 04

5 Net Revenue from Merchandise Sales Net Revenue from Merchandise Sale and Same Store Sales CAGR 3Q14 3Q18 = 13.1% +13.1% 3Q18 saw a recovery to a good level of sales, combined with commercial management, reflected in a product mix adequate for the transitional period between collections. Same store sales reverted to levels last seen early in the year, despite consumer confidence levels still influenced by the macroeconomic environment. Net Consolidated Revenue of Camicado and Youcom had increased 10.0% and 46.5%, respectively. CAGR 9M14 9M18 = 13.3% 3, , , % 7.8% 0.1% +11.7% 4, % 4, % Consequently, in the first nine months of 2018, the Company reported growth in Net Revenue of 11.7% and Same Store Sales of 5.1%. This performance is indicative of consistent gains in market share during the year when set against the market as a whole for apparel and footwear, which recorded a decline of 1.6% between January and August according to the Federal Government Statistics Office s (IBGE) Monthly Retailing Survey Index, for apparel and footwear. 9M14 9M15 9M16 9M17 9M18 Net Revenue (R$ MM) SSS - Same Store Sales (%) 05

6 Gross Profit from the Retailing Operation Gross Profit and Gross Margin from Retailing Operation CAGR 3Q14 3Q18 = 14.2% +13.9% % 53.1% 53.7% 53.9% 54.3% 3Q14 3Q15 3Q16 3Q17 3Q18 Gross Profit (R$ MM) Gross Margin (%) The improvement of 0.4 p.p. in Gross Margin reinforces the adequate commercial management combining sales performance with the protection of margins. Gross Margin in 3Q18 was also positively effected by hedges contracted on imported goods. The 0.4 p.p. increase in gross margin at Renner also offset thinner margins at Youcom and Camicado, due to the more promotional activity at both banners. CAGR 9M14 9M18 = 14.9% +13.5% In the light of the foregoing factors, the Gross Margin from Merchandise Sales reported 56.0% for the ninemonth period, with expansion of 0.9 p.p.. This improvement reflected the the positive impact of the hedges on imported goods, as well as the assertiveness of the collections, markdown management and the commercial decisions adopted in the period. 06

7 Operating Expenses Sales, General and Administrative Expenses (SG&A) CAGR 3Q14 3Q18 = 14.7% +12.6% Operating Expenses (R$ MM) 3Q18 3Q17 Var. % 9M18 9M17 Var. % Operating Expenses (SG&A) (667.2) (592.4) 12.6% (1,936.3) (1,715.0) 12.9% % Over Net Revenue from Merchandise Sales 39.0% 39.2% -0.2p.p. 39.6% 39.2% 0.4p.p. Selling Expenses (476.7) (435.5) 9.5% (1,416.1) (1,282.2) 10.4% General and Administrative Expenses (190.5) (156.9) 21.4% (520.2) (432.8) 20.2% Other Operating Expenses (1.6) (21.9) -92.8% (41.3) (79.5) -48.0% Management Remuneration (2.9) (2.6) 11.2% (8.5) (8.6) -0.9% Tax Expenses (14.1) (13.2) 6.9% (42.0) (37.8) 11.1% Profit Sharing Program (8.8) (10.7) -17.8% (23.1) (41.6) -44.4% Recovery of Tax Credits % % Other Operating Revenues/ (Expenses) (1.6) (0.6) 145.9% (2.3) (0.7) 242.6% Total Operating Expenses (668.8) (614.3) 8.9% (1,977.6) (1,794.5) 10.2% CAGR 9M14 9M8 = 15.1% +12.9% Operating Expenses (SG&A) increased by 12.6%, proportionally lower than growth of 13.1% in Net Revenue from Merchandise Sales, what generated operating leverage in the quarter. Once again, this reflected the improvement in the Company s commercial operations and effective budget controls despite the pace of new store openings and continuing implementation of projects. Higher General & Administrative Expenses were due principally to the strengthening of the structure in key areas of the Company over the past 12 months with a view to ensuring the competitiveness of the business, with the initiatives taken in the new business cycle, and also the centralization of activities in the administration of costs previously allocated in Selling Expenses. Other operating expenses were 92.8% less than 3Q17, due to the recognition of R$ 20.0 million in recovered tax credits and the reduced level of provisioning for the Profit Sharing Program (PPR). Operating Expenses for 9M18 reported an increase in line with the rate of expansion of the business and the strengthening of structures to support the business model. 07

8 Adjusted EBITDA of the Retailing Operation EBITDA and EBITDA Margin from Retailing Operation CAGR 3Q14 3Q18 = 16.2% +29.3% % 14.6% 13.0% 13.3% 15.2% 3Q14 3Q15 3Q16 3Q17 3Q18 EBITDA from Retail (R$ MM) EBITDA Margin (%) CAGR 9M14 9M18 = 16.5% +23.3% % 16.2% 15.3% 14.1% 15.5% 9M14 9M15 9M16 9M17 9M18 EBITDA from Retail (R$ MM) EBITDA Margin (%) The 1.9 p.p. increase in the EBITDA of the Retailing Operation was due to an improved Gross Margin from Merchandise Sales, control of expenses and Other Operating Expenses. Excluding the non-recurring effect of R$ 20.0 million of recovered tax credits, the EBITDA Margin of the Retailing Operation would have grown 0.7 p.p.. EBITDA of the Retailing Operation in 9M18 rose 23.3%, a 1.4 p.p improvement, thus conserving the higher Gross Margin. 08

9 Payment Conditions and Average Ticket Sales Breakdown by Payment Conditions Average Ticket +3.6% 3Q18 3Q % Renner Card and Co-branded Average Ticket (R$) Company Average Ticket (R$) At the end of September, Company reached the important milestone of 30.0 million of issued cards, accounting for 45.2% of merchandise sales in 3Q18, against 45.7% in the same quarter in 2017, the lower participation mainly a reflection of greater customer caution in relation to interest bearing installment purchases in the light of the current economic scenario. 09

10 Financial Products Results Financial Products Result CAGR 3Q14 3Q18 = 8.9% -11.5% % 32.7% 28.5% 20.8% 25.0% 3Q14 3Q15 3Q16 3Q17 3Q18 Financial Products Result (R$ MM) FP/Total EBITDA (%) CAGR 9M14 9M18 = 11.4% +5.8% % 22.5% 24.4% 29.3% 26.3% 9M14 9M15 9M16 9M17 9M18 Financial Products Result (R$ MM) FP/Total EBITDA (%) Financial Products Result (R$ MM) 3Q18 3Q17 Var. 9M18 9M17 Var. % Revenues, Net of Funding and Taxes % % Renner Card (Private Label) % % Co-branded Card Meu Cartão % % Quick Withdrawal and Insurances % % Credit Losses, Net of Recoveries (68.3) (71.4) -4.4% (204.8) (177.1) 15.7% Renner Card (Private Label) (15.7) (26.0) -39.5% (70.1) (75.6) -7.3% Co-branded Card Meu Cartão (52.1) (46.6) 11.9% (133.8) (93.9) 42.4% Quick Withdrawal - Saque Rápido (0.5) % (0.9) (7.5) -87.4% Operating Expenses (70.1) (58.8) 19.1% (205.0) (164.7) 24.4% Financial Products Result % % % of Company's Total Adjusted EBITDA 25.0% 32.7% -7.7p.p. 26.3% 29.3% -3.0p.p. Revenues from Financial Products were impacted by a reduction in the participation of the Private Label in total sales in the light of greater consumer caution with respect to interest-bearing installment purchases, as well as the incorporation of a portion of revenues generated from booklet payments and from cash withdrawals now included in the Co-branded portfolio. The more moderate growth in revenues from the Co-branded credit card was due the stabilization in portfolio growth and lower spreads between comparative periods. Net Losses were 4.4% lower due to the improvement in processes for granting and recovery of credit. Operating Expenses rose 19.1% due to higher compliance costs following the incorporation of Realize CFI, Co-branded processing volume and also call center related costs, which rose due to recent regulatory changes implemented by the Brazilian Central Bank. 10

11 Customer Accounts Receivable Customer Accounts Receivable Sep. 18 Sep. 17 Var.% (R$ MM) Cartão Renner (Private Label) - Net Portfolio % Renner Card (Private Label) - Total Portfolio % Estimated Credit Losses (65.2) (48.8) 33.7% Present Value Adjustment (13.7) (23.1) -40.4% Other (33.5) (39.1) -14.4% Cartão bandeira (Meu Cartão) - Net Portfolio % Meu Cartão (Co-Branded) - Total Portfolio 1, % Estimated Credit Losses (210.5) (85.7) 145.5% Present Value Adjustment (3.6) (5.5) -35.0% Quick Whihdrawal - Net Portfolio % Fees and Transactions Receivable % Estimated Credit Losses (9.6) (15.0) -35.7% Total Third-Party Credit Card Companies % Other Accounts Receivable % Total Credit Portfolio, Net 2, , % Customer Accounts Receivable Sep.18 Private Label Co-branded Quick Withdrawal Others As of September 30, 2018, Customer Accounts Receivable were 12.7% higher than the position in September 2017 due to growth in sales in the period and increased use of Meu Cartão. 11

12 Analysis of the Financial Products Portfolio Total Portfolio (Financial Products) 1,593,272 1,620, % 1,880,502 2,220,855 The Total Financial Products portfolio posted a growth of 18.1% in 3Q18, the principal driver being the Co-branded credit card. Excluding the effect of the change in period for writingoff credits from 180 to 360 days, portfolio growth would have been 14.7%. 1,343, % 21.2% 21.5% 20.4% 21.0% 18.8% 17.2% 9.1% 12.0% 6.5% 6.8% 6.9% 6.9% 6.4% 3.9% 4.8% 4.2% 3.8% 3.1% 3Q14 3Q15 3Q16 3Q17 3Q18 Portfolio % Past Due over 90 days % Past Due over Total Portfolio % Past Due over 90 days - Pro forma % Past Due over Total Portfolio - Pro forma Net Losses/Portfolio The percentage increases of delinquency in the portfolio and delinquency involving delays of more than 90 days, once again, reflected the change in the term for writing down credits to 360 days. Excluding the above effect, the total delinquency ratio would have been cut from 18.8% in 3Q17 to 17.2% in 3Q18. And delinquencies of more than 90 days would have been reduced from 6.9% in 3Q17 to 6.4% in 3Q18. Net Losses fell from 3.8% to 3.1% in 3Q18, the lower ratio in the last five year. 12

13 Delinquency Renner Card Co-branded Card(*) Quick Withdrawal 21.1% 21.3% 21.4% 20.4% 18.8% 14.9% 17.6% 17.1% 17.9% 20.5% 3.4% 4.2% 3.3% 2.9% 1.6% 3Q14 3Q15 3Q16 3Q17 3Q18 4.2% 6.1% 4.0% 0.8% -1.3% 3Q14 3Q15 3Q16 3Q17 3Q18 Private Label - Renner Card: The reduction in the percentage of losses and delinquencies are a reflection of important improvements made in processes for granting and recovery of credit, this already capturing the effects of enhanced digitization, a case in point being the Negotiation Portal. Co-Branded (Meu Cartão): Excluding the effect of changes in the credit write-off in 360 days, Pro-Forma Net Losses were 4.7% in 3Q18, the result of advances in the processes for granting and recovery of credit. The Pro-forma Percentage of Overdues reached 15.8%, an indication of improved portfolio quality. Quick Withdrawal (Saque Rápido): Net Losses were 0.8% due mainly to the improved clawback of credits written off in relation to a significantly larger portfolio in previous periods. The increase in the percentage of Past Dues was, above all, a reflection of the reduction in the portfolio and the lower representativity of concessions of new credit relative to total portfolio. In addition, these results reflected improvements in the processes for granting credit and prevention of fraud with the use of facial biometrics. Pro forma information exclude the effect of changes in the credit from 180 days to 360 days 13

14 Total Adjusted EBITDA Total Adjusted EBITDA and EBITDA Margin EBITDA Reconciliation (R$ MM) 3Q18 3Q17 Var.% 9M18 9M CAGR 3Q14 3Q18 = 14.2% +15.9% Net Income % % ( + )Income and Social Contribution Taxes % % ( + )Financial Result, Net % % % 18.5% 18.2% 19.8% 20.3% ( + )Depreciation and Amortization % % Total EBITDA % 1, % ( + ) Stock Option Plan % % ( + ) Result on Write-Off and Provision for Impairment of Fixed Assets % % Total Adjusted EBITDA* % 1, % 3Q14 3Q15 3Q16 3Q17 3Q18 Total Adjusted EBITDA Margin* 20.3% 19.8% 0.5p.p. 21.1% 19.9% 1.2p.p. Total EBITDA (R$ MM) EBITDA Margin (%) CAGR 9M14 9M18 = 15.1% % 1, % 20.9% 20.3% 19.9% 21.1% 9M14 9M15 9M16 9M17 9M18 Total EBITDA (R$ MM) EBITDA Margin (%) *Pursuant to Article 4 of CVM Instruction 527, the Company has chosen to show its Adjusted EBITDA as in the above table in order to provide the information that best reflects the gross operating cash generation from its activities. These adjustments are based on: a) the Stock Option Plan corresponding to the fair value of the respective financial instruments recorded pro rata temporis, during the period services are rendered and offset by the Equity Capital Reserve and thus not representing a cash outflow; b) Statutory Participations are of a contingent nature and are related to the generation of profits pursuant to Article 187 of Law 6.404/76; and c) the Write-off or Sale of Fixed Assets refer to results accounted for this end, therefore having no cash impact. The 0.5 p.p. gain in Total Adjusted EBITDA Margin is a reflection of the improvement in EBITDA Margin from Retailing, the consequence of a better Gross Margin and efficiency in the management of Operating Expenses. In 9M18, Total Adjusted EBITDA was R$ 1,030.7 million, equivalent to an expansion of 1.2 p.p. in Total Ebitda Margin. 14

15 Free Cash Flow Cash Flow (R$ MM) 3Q18 3Q17 Var. 9M18 9M17 Var. Total Adjusted EBITDA , (+/-) Income and Social Contribution Taxes/Others (22.4) (75.7) 53.3 (190.1) (221.8) 31.6 Operating Cash Flow (+/-) Changes in Working Capital (109.1) (249.2) (193.4) (55.8) Accounts Receivable (38.7) Operating Financing (Financial Products) 74.5 (294.2) (203.7) Inventories (126.6) (74.0) (52.6) (289.1) (166.4) (122.7) Suppliers (10.3) (53.4) (33.8) (19.7) Other Accounts Receivable/Payable (1.9) 29.2 (31.1) (296.1) 26.1 (322.1) (-) Capex (158.3) (134.9) (23.4) (386.6) (320.0) (66.6) (=) Free Cash Flow (20.5) The increase in the generation of Free Cash Flow in the quarter is a reflection above all of the improvement in operating cash generation and the normalization of the financing structure of financial products, which in 3Q17 was affected by the amortization of funding lines, related to initial operations at Realize. 15

16 Financial Result, Net Financial Result, Net (R$ MM) 3Q18 3Q17 Var. 9M18 9M17 Var. % Financial Revenue % % Gains on Cash Equivalents % % Other finance revenues % % Financial Expenses (29.9) (32.2) -6.9% (79.3) (109.6) -27.6% Interest on Loans, Borrowings and Swap (23.3) (27.1) -14.2% (66.8) (97.5) -31.4% Other Finance Expenses (6.7) (5.0) 32.5% (12.5) (12.1) 3.0% Exchange Variation, Net 0.8 (0.5) % Hedge Operations (NDF), Net 0.0 (0.0) (3.8) - Financial Result, Net (17.5) (21.3) -18.1% (44.7) (68.7) -35.0% The Net Financial Result for the quarter was 18.1% lower due to the decrease in Financial Expenses, a reflection of the decline in the cost of funding and the reduction in structural debt. 16

17 Net Debt Net Debt Net Debt (R$ MM) Sep. 18 Sep. 17 Var % Borrowings and Financing (996.5) (1,112.9) -10.5% 1, , , Current (665.9) (385.2) 72.8% Noncurrent (330.6) (727.7) -54.6% Operational Financing (757.5) (592.0) 28.0% Current (458.3) (173.1) 164.7% 1.18x 1.08x 0.86x 0.58x 0.49x Noncurrent (299.2) (418.8) -28.6% Gross Debt (1,754.0) (1,704.9) 2.9% Sep.14 Sep.15 Sep.16 Sep.17 Sep.18 Cash and Cash Equivalents and Financial Investments % Net Debt (799.4) (842.1) -5.1% Net Debt (R$ MM) Net Debt/EBITDA LTM (x) Net Debt / Total Adjusted EBITDA (LTM) 0.49x 0.58x - Operational finance is used for financing the Financial Products portfolios and its variation is reflection of the financed volumes of these products. Debt servicing charges related to capital management are booked to the Financial Result, Net. Conversely, the costs of Operational Financing relative to the volume of Financial Products are reflected in the Operational Result. On September 30, 2018, the Company s Net Debt was 5.1% less than reported on September 30, 2017, a result of increased cash generation over the past 12 months. 17

18 Investments CAPEX CAPEX Summary (R$ MM) 3Q18 3Q17 9M18 9M New Stores Remodeling of Installations IT Equipament & Systems % 7.1% 8.1% 5.4% 9.2% 3Q14 3Q15 3Q16 3Q17 3Q18 CAPEX (R$ MM) CAPEX/Net Revenue from Merchandise Sales (%) 9.5% 7.1% 8.1% 5.4% 7.9% 9M14 9M15 9M16 9M17 9M18 CAPEX (R$ MM) CAPEX/Net Revenue from Merchandise Sales (%) Distribution Centers Others Total Capex Out of the total invested in fixed assets in the quarter, 72.2% were applied in the opening of new stores and remodeling and a further 21.8% in technology. In the 9M18 period, the Company invested million. During the period, the Company continued its expansion plan, with the opening of 14 stores, of which 3 in the Renner format, together with 6 Camicado, 2 Youcom and 3 Ashua units. Ashua Curve & Plus Size was launched in 2016, exclusively using Renner s e-commerce channel. In response to a good sales performance, in 3Q18, the Ashua brand opened its first three bricks and mortar stores. Consequently, in September, Renner was operating 340 stores, including 5 in Uruguay and 3 with the Ashua banner, Camicado, 107 units and Youcom, 90 units, with sales areas of thousand m 2,, 46.4 thousand m² and 14.6 thousand m 2, respectively. Depreciation and Amortization expenses totaled R$ 81.3 million in 3Q18, 2.0% less than 3Q17, due to the reduction in depreciation rates from December 2017 following the revision of the useful life of the fixed assets pursuant to CPC 04 and 27 (accounting pronouncements). 18

19 New Income and Dividends Net Income CAGR 3Q14 3Q18 = 23.5% +38.4% CAGR 9M14 9M18 = 23.1% +44.8% % 7.7% 6.7% % 11.3% % 9.1% 8.6% 9.2% 11.9% 3Q14 3Q15 3Q16 3Q17 3Q18 Net Income (R$ MM) Net Margin (%) 9M14 9M15 9M16 9M17 9M18 Net Income (R$ MM) Net Margin (%) The increase in Net Margin (+2.0 p.p.) in 3Q18, reflected the better operational result during the period with gains in both Gross Margin and efficiency in the control of operating expenses, combined with lower Net Financial Expenses and lower Depreciation overheads. Also contributing to the increase in Net Income is the lower effective income tax rate, the consequence of recognition of R$ 24.7 million following a legal ruling for which there is no further appeal, allowing the deduction in double of expenses incurred with the Workers Food Program PAT, directly from taxable profits. In 9M18, Net Income was R$ million, equivalent to a Net Margin of 11.9%. In 3Q18, Lojas Renner credited shareholders with dividends in the form of interest on capital of R$ 57.0 million, corresponding to R$ per share considering 715,880,536 common shares, from which treasury stock has been excluded. For the full 9M18 period, paid out Interest on Capital has already reached R$ million, corresponding to R$ per share. 19

20 Consolidated Income Statement In R$ thousand Income Statement 3Q18 3Q17 Var % 9M18 9M17 Var. % Net Operating Revenues 1,943,288 1,746, % 5,591,670 4,992, % Net Revenues from Sales of Goods 1,711,461 1,512, % 4,890,311 4,377, % Net Revenue from Financial Products 231, , % 701, , % Costs of Sales and Services (789,181) (702,553) 12.3% (2,173,627) (1,984,148) 9.5% Cost of Goods (782,320) (696,818) 12.3% (2,152,757) (1,966,655) 9.5% Cost of Financial Products (6,861) (5,735) 19.6% (20,870) (17,493) 19.3% Gross Profit 1,154,107 1,043, % 3,418,043 3,008, % Operating Expenses (895,619) (837,896) 6.9% (2,637,526) (2,404,013) 9.7% Selling (476,685) (435,509) 9.5% (1,416,130) (1,282,218) 10.4% General and Administrative (190,538) (156,914) 21.4% (520,176) (432,805) 20.2% Losses on Receivables, Net (68,260) (71,408) -4.4% (204,802) (177,051) 15.7% Other Operating Results (160,136) (174,065) -8.0% (496,418) (511,939) -3.0% Financial Products Expenses (69,896) (58,469) 19.5% (204,296) (164,093) 24.5% Other Operating Results (90,240) (115,596) -21.9% (292,122) (347,846) -16.0% Operating profit before Financial Results 258, , % 780, , % Total Financial Result, Net (17,462) (21,305) -18.0% (44,661) (68,682) -35.0% Financial Revenue 12,886 11, % 37,768 47, % Financial Expense (30,348) (33,220) -8.6% (82,429) (115,823) -28.8% Profit Before Income & Social Contribution Taxes 241, , % 735, , % Income and Social Contribution Taxes (46,815) (44,304) 5.7% (155,494) (135,112) 15.1% Profit for the Period 194, , % 580, , % Earnings per Share - Basic R$ % % Earnings per Share - Diluted R$ % % Number of shares outstanding at End of Year (in thousands) 717, , , ,986-20

21 Consolidated Balance Sheet In R$ thousand Balance Sheet Assets Sep. 18 Dec.17 Sep.17 TOTAL ASSETS 7,547,252 7,547,658 6,486,567 Current Assets 4,779,355 4,907,941 4,010,903 Cash and Cash Equivalents 555,121 1,059, ,949 Financial Investments 399,440 82,360 91,875 Trade Accounts Receivable 2,281,306 2,644,258 2,024,917 Inventories 1,212, , ,666 Recoverable Taxes 253, , ,320 Derivative Financial Instruments 25,915 6, Other Assets 38,713 45,818 39,413 Prepaid Expenses 12,739 5,266 10,109 Non-current Assets 2,767,897 2,639,717 2,475,664 Long Term Assets Judicial Deposits 10,091 10,615 10,521 Recoverable Taxes 85,418 80,331 73,126 Deferred Income Tax and Social Contribution 169, , ,752 Other Assets 8,144 9,299 9,798 Prepaid Expenses 1, Investments Fixed assets 1,910,603 1,813,627 1,716,613 Intangible 582, , ,558 Balance Sheet Liabilities and Shareholders' Equity Sep. 18 Dec.17 Sep.17 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,547,252 7,547,658 6,486,567 Current Liabilities 3,239,419 2,941,712 2,331,216 Borrowings, Financing and Debentures 665, , ,235 Financing - Financial Services Operations 458, , ,123 Finance Leases 474 9,890 6,466 Suppliers 788, , ,953 Obligations with Credit Card Administrators 553, , ,839 Rentals Payable 49,899 59,393 47,610 Taxes and Contributions Payable 221, , ,273 Social and Labor Obligations 222, , ,643 Statutory Obligations 140, , ,821 Labor and Civil Security Tax Provisionss 45,276 35,996 36,028 Derivative Financial Instruments 18 3,137 15,066 Other Obligations 92,602 74,252 69,159 Non-current Liabilities 700,351 1,382,500 1,236,683 Borrowings, Financing and Debentures 330, , ,673 Financing - Financial Services Operations 299, , ,847 Finance Lease 33,362 58,896 61,358 Deferred income and social contribution taxes 6, Taxes Obligations Provision for Tax Risks 28,760 26,083 26,096 Other Obligations 1,634 2,429 2,698 Shareholders' Equity 3,607,482 3,223,446 2,918,668 Capital Stock 2,614,480 2,556,896 2,553,723 Capital Reserves 72,052 66,428 58,426 Profit Reserves 499, ,022 60,168 Retained Value Adjustments 23,289 4,100 (10,478) Accumulated Profit 397, ,829 21

22 Consolidated Cash Flow Indirect Method In R$ thousand Statement of Cash Flows - Indirect Method 3Q18 3Q17 9M18 9M17 Cash Flows from Operating Activities Profit for the Year 194, , , ,878 Adjustment to Reconcile Net Income to Cash and Cash Equivalents Provided by Operating Activities - - Depreciation and amortization 81,285 82, , ,592 Loss on write-off of fixed assets, net 1,319 3,823 4,031 5,039 Gross costs of debentures structuring (deferral) Interest expense on loans, debentures and lease 23,285 27,139 66,836 97,459 Share purchase option plan ans restricted share plan 10,555 10,734 26,224 29,681 Provision for tax, civil and labor risks 6,512 (12,610) 11,957 (8,888) Income and social contributions taxes 46,815 44, , ,112 Net foreign exchange variation (759) 567 (3,337) (71) Net Present Value Adjustment (629) (5,208) (37,584) (15,886) Impairment oin assets 13,909 48,294 25,301 34, , ,296 1,061, ,885 Changes in Assets and Liabilities - - Trade Accounts Receivable 80,755 90, , ,404 Inventories (142,564) (92,326) (274,674) (170,610) Other Assets (18,235) 36,757 (79,941) 19,753 Financing - Financial Services Operations 74,493 (294,213) 59,966 (203,665) Suppliers 104, ,085 (51,103) (32,877) Taxes and Contribution Payable (37,324) (25,731) (205,350) (157,611) Social Charges and Labor Legislation Obligations 23,197 29,200 (13,712) 34,339 Rent Payable 1,030 (1,065) (9,494) (7,998) Statutory Obligations - - (10,821) (6,734) Obligations with Card Administrators 37,263 16,599 28, ,948 Other Liabilities 25,151 (10,863) 17,732 6,087 (Cont.) 22

23 Consolidated Cash Flow Indirect Method (Cont.) In R$ thousand Statement of Cash Flows - Indirect Method 3Q18 3Q17 9M18 9M17 Cash Provided by Operating Activities 524, , , ,921 Payment of Income Tax and Social Contribution (36,522) (77,592) (204,000) (229,701) Payment of Interest on Borrowings, Financing and Debentures (27,579) (23,377) (85,266) (92,938) Net Cash Used in Operating Activities, Before Financial Investments 460, , , ,282 Reduction (Increase) in Financial Investments (311,259) (91,875) (317,080) (91,875) Net Cash Used in Operating Activities 149,349 10, , ,407 Cash Flow from Investing Activities Purchases of Fixed Assets (125,870) (117,211) (288,312) (260,897) Purchases of Intangible Assets (32,441) (17,721) (98,289) (59,105) Proceeds from Disposal of Fixed Assets Net Cash Used in Investing Activities (158,093) (134,494) (386,170) (319,489) Cash Flows from Financing Activities Capital increase 14,433 19,642 57,584 57,505 Buyback Shares - - (16,988) (8,836) Borrowings Obtained 24, , , ,396 Borrowings Amortization (203,345) (427,631) (344,964) (746,027) Payment of Structuring Costs of Borrowings and Debentures - (256) - (1,360) Installment Lease Financing (29,089) (4,785) (38,571) (8,181) Interest on capital and dividends paid - (6,986) (279,240) (245,989) Net Cash Generated by Financing Activities (193,735) (73,320) (363,253) (102,492) Effect of exchange rate changes on cash and cash equivalents (93) (2,236) 1,012 (1,358) Changes in Cash and Cash Equivalents (202,572) (199,389) (504,752) (123,932) Cash and Cash Equivalents at the Beginning of the Quarter 757, ,338 1,059, ,881 Cash and Cash Equivalents at the End of the Quarter 555, , , ,949 23

24 About Lojas Renner S.A. The Company was incorporated in 1965 and has been listed since A pure, widely held company since 2005, with a 100% free float, Lojas Renner was deemed the first Brazilian corporation. Renner s equities are traded on the B3 under the LREN3 symbol on the Novo Mercado, the highest level of Corporate Governance, and via ADRs on the US OTC market under the LRENY symbol. As of September 28, 2018, the closing price of the LREN3 share was R$ 31.00, the Company reporting a market capitalization of R$ 22.3 billion. Lojas Renner is the largest fashion retailer in Brazil, in June 2018 with 340 Renner stores (including 5 stores in Uruguay and 3 Ashua), 107 Camicado and 90 Youcom units, in addition to Renner s online platforms and the exclusive e-commerce brand, Ashua. Renner designs and sells quality apparel, footwear and underwear for women, men, adolescents and children under 18 private labels of which 6 represent the Lifestyle concept, each one reflecting a style of being and dressing. Lojas Renner also sells accessories and cosmetics under two proprietary brands as well as offering specific items bearing third party labels. In May 2011, Renner acquired Camicado, a company in the home decor segment and in 2013, launched Youcom, a new business model focused on the younger generation in a specialized store environment. The Company also owns Realize CFI, a financial institution which supports Renner s retail business, through the management of the financial products offered. The target customers of Renner and Camicado are women between the ages of 18 and 39 who are in the medium-high consumption groups in Brazil. Conversely, Youcom caters for the younger consumer between the ages of 18 and 35. Lojas Renner offers its customers fashion products in various styles with quality and competitive prices in practical and pleasant shopping environments.. 24

25 Contatos Relações com Investidores Laurence Gomes CFO and IRO Paula Picinini Investor Relations Tel Carla Sffair Investor Relations Tel Melina Rodrigues Investor Relations Tel Diva Freire Corporate Governance Tel Legal Notice This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Lojas Renner S.A. and are merely projections and, as such, are based exclusively on the expectations of the Company s management concerning the future of the business. Such forward-looking statements depend substantially on changes in market conditions, the performance of the Brazilian economy, the sector and the international markets and are therefore subject to change without prior notice. All variations as well as roundings presented herein are calculated on the basis of numbers in thousands of Reais. 25