Apresentação do Roadshow Institutional Presentation

Transcription

1 Apresentação do Roadshow Institutional Presentation March

2 Disclaimer 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

3 COMPANY OVERVIEW

4 1 Platform of brands of reference Arezzo&Co is the leading Company in the footwear, handbags and accessories industry through its platform of Top of Mind brands 4

5 1 ( Own The 6 th Brand OWME + Me ) TARGET MINDSET MATTERS NOT YOUR AB1 Classes 35+ SEGMENT WELLNESS TIMELESS CONSTRUCTIONS COMFORT + BEAUTY 5

6 1 Company overview Arezzo&Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generation Leading company in the footwear and accessories industry with presence in all Brazilian states Controlling shareholders are reference in the sector Development of collections with efficient supply chain Asset light: high operational efficiency Strong cash generation and high growth 12.1 million pairs of shoes (1) More than 45 years of experience in the sector ~11,500 models created per year 90,9% outsourced production (1) Net revenues CAGR: 7.9% ( ) 1,2 million handbags (1) 2,288 points of sale ~12% total market share and ~25% market share on AB classes Wide recognition Average lead time of 40 days 15 to 18 launches per year ROIC of 27.4% in ,405 employees Net Profit CAGR: 8.1% ( ) Increased operating leverage 1. As of Refers to the Brazilian women footwear market (source: Company estimates). 6

7 1 Successful track record of entrepreneurship The right changes at the right time accelerated the Company's development Foundation and structuring Industrial Era Retail Era Corporate Era 70 s 80 s 90 s 00 s Industry Reference 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 Opening of the first shoe factory Opening of the flagship store at Oscar Freire Launch of new brands Consolidate leadership position + Merger First store Launch of the first design with national success Schutz launch Commercial operations centralized in São Paulo Fast Fashion concept Strategic Partnership (November 2007) Initial Public Offering (February 2011) 7

8 1 Shareholder Structure Others 34.0% Aberdeen BTG Pactual Management² 7.7% 7.0% 0.0% Birman family Float 51.4% 48.6% 1. Arezzo&Co capital stock is composed of 89,765,882 common shares, all nominative, book-entry shares with no par value 2. Shareholder structure as of March 15 th Includes Stock Options plan 8

9 Distribution 1 Strong platform of brands Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segments Foundation Brands profile Female target market Trendy New Easy to use Eclectic Fashion Up to date Bold Provocative Pop Flat shoes Affordable Colorful Design Exclusivity Identity Seduction Casual Young Urban Modern years years years years years channel 1 POS 1 % gross rev. 2 O F MB EX , % 65% 13% 2% O F MB EX O F MB EX % 17% 29% 18% 1, ,227 9% 47% 36% 16 2% O MB EX % 4% 64% O MB EX % 47% 0% % Web Gross Revenue Retail price point R$59.9MM (7%) R$56.7MM (10%) R$9.6MM (6%) R$1.2MM (2%) R$1.6MM (9%) R$220 / pair R$380 / pair R$110 / pair R$1500 / pair R$280 / pair Sales Volume 3 R$891MM R$551MM R$149MM R$54MM R$17MM % Gross Revenues % 33.0% 9.5% 3.2% 1.0% Notes: 1. Points of sales (LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports (including US and ROW wholesalers). 2. % of each brand gross revenues (LTM) does not include other revenues (not generated by any of the 5 brands). 3. Gross revenues LTM, including external market; does not include other revenues (not generated by any of the 5 brands). 4. % of Company s total gross revenues as of December 31th,

10 1 Multiple distribution channels Flexible platform through different distribution channels with specific strategies, maximizing the Company's profitability Points of Sale (2017) franchises in more than 220 cities in Brazil 48 owned stores in Brazil 2,288 multibrand¹ clients in more than 1,253 cities Broad distribution network throughout Brazil 382 franchises + 15 owned stores multibrand clients Gross Revenue Breakdown by Channel (R$ mm)² 67 franchises + 22 owned stores multibrand clients 44,6% 20,5% 17,8% 7,7% 0,3% 9,2% 100% franchises + 3 owned stores multibrand clients 4 owned stores + 23 multibrand clients Franchises Multibrand Owned Stores Web commerce Other Foreign Market Total Notas: 4 owned stores + 1. Without store overlap between brands 2. As of December multibrand clients 3. Domestic Market multibrand without overlap. 10

11 BUSINESS MODEL

12 2 Unique business model in Brazil Customer focus: we are at the forefront of Brazilian women fashion and design ABILITY TO INNOVATE SOLID MARKETING AND COMMUNICATION PROGRAM EFFICIENT SUPPLY CHAIN NATIONWIDE DISTRIBUTION STRATEGY SEASONED MANAGEMENT TEAM WITH PERFORMANCE BASED INCENTIVES R&D Communication & Marketing Sourcing & Logistics Multi-channel Management BRANDS OF REFERENCE 12

13 2 Ability to Innovate We develop 15 to 18 collections per year I. Research II. Development III. Sourcing IV. Store Delivery Creation: 11,500 SKUs / year Available for selection: 63% of SKUs created / year Stores: 52% of SKUs created / year Activities JAN FEV MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Creation Launch Orders Production Delivery Normal sale Discount sale Winter I Winter II Winter III Summer I Summer II Summer III Summer IV Arezzo&Co delivers on average 5 new models at the stores per day, allowing for consistent desiredriven purchases 13

14 2 Broad Media Plan Each brand has an integrated and expressive communication strategy, from the creation of campaigns to the point of sale STRONG PRESENCE IN SOCIAL, DIGITAL AND PRINT MEDIA LIVE MARKETING AND EXPERIENCE AT POINT OF SALE OVER 12 MILLION FOLLOWERS OVER 4 MILLION MONTHLY WEBSITE ACCESS DIGITAL COMMUNICATION CUSTOMER ACTIVATION THROUGH FASHION AND LIFESTYLE EVENTS PUBLIC RELATIONS CUSTOMIZED CONTENT FOR DIFFERENT CLIENTS INTERNATIONAL CELEBRITIES ENDORSEMENT AND STRONG PRESENCE IN THE PRESS 14

15 2 reflected Communication & Marketing Program in every aspect of the stores Stores are constantly changed to incorporate the concept of each new collection, resulting in a higher level of desire-driven purchases POS materials (catalogs, packaging, and others) Store layout & visual merchandising Flagship stores All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection 15

16 2 concepts Atmosphere of Stores: differentiated for each brand Home Feeling Iguatemi Faria Lima - SP Wall display Each theme is disposed in different niches Experimental and creative Smart Mirror Mobile Checkout Distinguished storefront Suspended Shelves Shelves, Niches and Suspended shelves Combos Visual merchandising: Increased number of models exposed Products highlighted in the center of the stores Favorable lighting project Distribution of the furniture provides more comfort to the customers New Store Concept New store concept being tested in flagship stores New digital experience: mobile check out, RFID mirror and touch tv Expected roll out for 2018/19 Accessories Storage Display of a large variety of products Inventory at the sales area: lower necessity of additional space for storage Sophisticated lighting Atmosphere of a jewelry store Private shop experience Focus on exclusivity, design and high quality materials Oscar Freire St 1128 Experimental and creative space Interaction with the customer 16

17 2 Flexible Production Process Production speed, flexibility and scalability to ensure Arezzo&Co s expected growth based on asset light model Sourcing Model Owned factory with capacity to produce 1,1mm pairs annually and a strong relationship with Vale dos Sinos production cluster as the main outsourcing region Gains of scale 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 Certification and auditing of suppliers In-house certification and auditing ensure quality and punctuality (ISO 9001 certification in 2008) New Distribution Center Espirito Santo State Joint purchases Coordination of material purchase jointly with shoe, handbag and accessories suppliers Sourcing model 91% of production outsourced¹ 9% 91% Arezzo&Co Owned Factories Others Consolidation and improvement of distribution in national scale Reception: 100,000 units/day Storage: 100,000 units/day Picking: 150,000 units/day Distribution: 200,000 units/day 17

18 Operation composed by flagship stores in key Brazilian locations Owned stores are key to develop retail know-how and increase brands visibility Flagship Stores Greater brand awareness coupled with operational efficiencies Owned stores are larger and more productive than average and are located in key cities of Brazil (mainly SP and RJ) Average Annual Sales per Store 2017 Franchise Owned R$2,6mm R$5,8mm Arezzo Iguatemi / SP The direct customer interaction enables the development of retail capabilities, which are also reflected at franchised stores Flagship stores ensure greater visibility and reinforce brand image Anacapri Oscar Freire/ SP Total sales area and # of stores (000 m 2 ) -0,5% 0,8% 1,1% 38,8 38,6 38,9 39,4 5,8% 41,2 Schutz Oscar Freire/ SP Schutz Iguatemi/ SP Arezzo Oscar Freire/ SP 4T16 1T17 2T17 3T17 4Q17 Franchises Owned Stores Area 18

19 2 Strong focus on performance in both owned and franchised stores Structure applied to retail in order to achieve better sales and margin results as well as to integrate and connect all monobrand stores back office Strong focus on franchise and owned store performance All sales team (4,000+ people) get connected through national internet broadcast for three sales conventions per year, creating an aligned sales pitch and a 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 19

20 2Model allows fast expansion with low invested capital Efficient management of the franchise network Successful Partnership: Win Win 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 amounts to 100% As mono-brand stores, franchises reinforce branding in each city they are located Seal of Excellence from ABF (Brazilian Association of Franchising) Franchise Concentration per Operator (# of franchises by # of franchisees) 3 franchises 2 franchises 4 or more franchises 10% 24% 10% 56% 1 franchise 96% satisfaction of franchisees 1 5-year contract and average payback of months 2 Notes: 1. 96% of the current franchisees indicated they would be interested in opening a franchise if they did not already have one 2. For a regular Arezzo brand store, with expected annual sales of R$ 2,2 million, the average investment is approximately R$ 670 thousand, including store capex, franchise fee, WC and initial inventory) 20

21 2 Multibrand stores as tool for increased capilarity Multibrand stores widen the distribution network and the brands visibility, resulting in a stronger retail footprint Multibrand stores gross revenue¹ % 13.2% Gross Revenue # Stores MB Improved distribution and brand visibility Greater brand distribution network Presence in over 1,253 cities Fast expansion at low investment and risk Main focus: increase share of wallet, through the sale of more brands at the same POS and also handbags as part of the mix Important sales channel for smaller cities and the Brazilian countryside Sales team optimization: internal team and commissioned sales representatives Multi-brand stores Notes: 1. Domestic market only 21

22 2 New Organizational Structure The new structure presents a reduction in the number of CEO reports, value chain integration and higher speed in decision making, with an increased focus on people and sustainability Board of Directors Risk, Audit and Finance Committee Internal Auditing People Committee CEO Strategy Committee Brands Silvia Machado Industrial & Operations Cisso Klaus/ Cassiano Lemos New Business Development Administrative & Finance Daniel Levy Expansion, HR & Management Marco Aurélio Vidal BU Arezzo BU Schutz BU Anacapri BU A.Birman E-commerce Commercial (Multiband/Exports) Sourcing Engineering Quality Industry Planning Logistics USA Fiever/ New Brands Strategic Planning /Innovation /Franchising /CRM /PMO Portfolio Management /Competitive Finance/Legal/Fiscal IT Controller Investor Relations Risk Management People Expansion Sustainability*/PR Non productive purchase Management (Method, goals and indicators) intelligence

23 2 Corporate governance The Board is comprised of 7 members, of which 2 are independent, and has a very large engagement on the strategic planning of Arezzo&Co Board of Directors Name Experience Name Experience Title Title Alessandro Carlucci Chairman of the Board José Bolonha Vice Chairman of the Board Natura s CEO for over a decade and former Board Member of Lojas Renner, Redecard, Alcoa Latam and Itau-Unibanco Founder and CEO of Ethos Desenvolvimento Humano e Organizacional ; Board member of the Inter-American Economic and Social Council (UN, WHO) Alexandre Birman Member Juliana Rozenbaum Member Current CEO of Arezzo&Co and part of the controlling group. Founder of Schutz brand, with over 18 year of experience on the footwear industry. Over 13 years of experience as sell side equity research analyst, focused on retail and consumer sector Paula Bellizia Independent member CEO of Microsoft Brasil. Former CEO for Apple Brasil and Facebook Latam Sales Diretor. Member of the Economic and Social Development Council (CDES). Luiz Fernando Giorgi member 28 years of experience in Management and Leadership. Current member of people committees for Santander, Sul América and Grupo Martins Guilherme A. Ferreira Independent Member CEO of Bahema Participações, current board member of Petrobras, Valid, Sul América, Gafisa and T4F Committees Risk, Audit and Finance Committee Guilherme A. Ferreira (Coordinator) Members: Alessandro Carlucci, Guilherme A. Ferreira and Edward Ruiz Strategy and Brands Committee Juliana Rozenbaum (Coordinator) Members: Alexandre Birman, Paula Bellizia and Juliana Rozenbaum People Committee José Bolonha (Coordinator) Members: Luiz Fernando Giorgi, José Bolonha and Cláudia Falcão 23

24 Multibrand and multichannel strategy 2Organic growth leveraged by multi-brand, multichannel strategy in footwear and handbags REVENUE BREAKDOWN 2017 FRANCHISES FOCUS ON SSS FOCUS ON BAGS SERVICES SEGMENTATION NEW CATEGORIES FOCUS ON SSS LIFE STYLE NATIONAL ROLL-OUT ON-GOING INVEST. EM MKT LAUNCH OF FRANCHISES FIRST FRANCHISE IN % R$ 748 MM MULTIBRANDS CROSS-SELL OF BAGS ACTIVATION POS MKT INCREASE IN SHARE OF WALLET CUSTOMERS ATTRACTION CROSS-SELL OF BAGS RECENT RECOGNITION OF THE BRAND IN THE CHANNEL INCREASE PENETRATION SOLD AT SELECTED POINTS AND IN LINE WITH THE BRANDING EXPANSION IN NEW POINTS OF SALE 20.5% R$ 344 MM OWNED STORES FOCUS ON SSS GROWTH WITH FOCUS ON SSS REFRESH FLAGSHIP FINALIZE TRANSFER OF PILOT STORES RETAINING A MAXIMUM OF 2 FLAGSHIPS FOCUS ON SSS OPENING OF MADISON STORE OPENING OF FLAGSHIP STORES 17.8% R$ 299 MM WEB COMMERCE CHANNEL BOOST, EX.: APP PILOT STORE SHIPPING FASHION INFO SHOP NEW APP BOOST DIGITAL PRESENCE INCREASE TRAFFIC AND CONVERSION LAUNCH IN 2017 IN BRAZIL AND 2018 USA AND EUROPE TOOL FOR ENHANCING BRAND AWARENESS AND PENETRATION 7.7% R$ 129 MM OVERSEAS MARKET FOCUS ON KEY ACCOUNTS USA PROJECT MULTIBRAND STORES NOT A CURRENT FOCUS NEW FACTORY WILL ENABLE SERVICING OF GROWING DEMAND NOT A CURRENT FOCUS 9.2% R$ 154 MM REPRESENTATIVENESS OF THE BRAND % R$891 MM 33.0% R$552 MM 9.5% R$160 MM 3.2% R$54 MM 1.0% R$17 MM 100% R$ BI

25 2 Clear focus of the future Brands Channels Other brands Fiever Alexandre Birman Categories Department stores Kiosks Outlets Online Exports Owned stores Multi-brand Franchises Anacapri Other categories Clothing Schutz Other accessories Arezzo Leather accessories Handbags Footwear Core Adjacencies North America Latin America Europe Middle East Brazil Class A1 Class A2 Class B1 Class B2 Female White soles Wellness Teenager Male Full plastic Children Geography Class C1 Segment Class C2 Positioning 25

26 Key messages 2Arezzo&Co keeps developing its business model in a sustainable way Consolidated business model with multiple growth opportunities Sustainable growth and improvement in the profitability of existing brands. Launch of a new brand Owme and encouraging results in Fiever brand Staff management an ongoing development Shareholders value creation sustained by leadership and training of talents Strengthening of Company s culture Ownership of the value chain, greater competitive advantage More agile and collaborative model Sell-out oriented to boost results in the value chain Company s resilient financial growth Consistent dividend payout combined with a strong cash flow Expenses optimization in line with growing revenues Multi-channel management know-how, excellent platform to lift brands Digital transformation and Omni channel growth as key priorities Strong knowledge in franchises management coupled with efficiency opportunities Multibrand channel boosting the growth of new brands 26

27 03 FINANCIAL HIGHLIGHTS

28 2.00 0, , , , , ,0 800,0 600,0 400,0 200, , , ,0 500, , , , , , , 0 Operational and financial highlights 3Gross Revenue Breakdown by Brand Domestic Market (R$ million) CAGR: 7,3% % Q16 4Q17 Arezzo Schutz Anacapri Others Others: includes only domestic markets for Alexandre Birman and Fiever brands and other revenues. 28

29 2.00 0, , , , , ,0 800,0 600,0 400,0 200, , , ,0 500,0 (500,0) (1.000, 0) (1.500, 0) (2.000, 0) (2.500, 0) (3.000, 0) Operational and financial highlights 3Gross Revenue Breakdown by Channel Domestic and External Market (R$ million) CAGR: 8.7% % T16 4T17 Foreign Market Franchise Multibrands Owned Stores Web commerce Others Total Others: includes domestic market revenues that are not specific for distribution channels. 29

30 Key highlights Operational and financial highlights Gross revenue reached R$ million in 2017, a increase of 8.0% over Sales area increased 5,8% in the last twelve months. Net Revenues (R$ mln) CAGR : 21.5% Number of Stores (R$ mln) and Total Area (m 2-000) Area CAGR : 13.4% 89,4% 26,7% 18,8% 38,7% ,3% ,6% 9,8% ,4% ,3% ,9% ,5% 0,8% 1,1% 38,8 38,6 38,9 39, ,8% , T16 1T17 2T17 3T17 4Q17 Franchises Owned Stores Area

31 ,0 % 45,0 % 40,0 % 35,0 % 30,0 % 25,0 % 20,0 % 15,0 % 10,0 % 5,0% 250,0 200,0 150,0 100,0 50,0-16, 0% 14, 0% 12, 0% 10, 0% 8,0 % 6,0 % 4,0 % 2,0 % 0,0 % 3 Operational and financial highlights Gross Profit Evolution (R$ MM) and Gross Margin (%) Net Profit Evolution (R$ MM) and Net Margin (%) bps 460 bps 15,2% 43,7% 44,2% 43,3% 42,5% 44,3% 45,8% 45,2% 46,6% 13,5% % 92 11,9% 11,5% 11,4% 10,7% 9,4% ,4% ,6% % Q16 4Q17 Gross Profit Gross Margin Q16 4Q17 * Net Profit Net Margin * * The Company obtained an injunction in 4Q17 exempting it from payment of income and social contribution taxes (IR and CSLL) on an ICMS tax benefit granted by the government of Espírito Santo because of the distribution center located in the state. This led to a gain of R$21.9 million during the quarter, representing the tax exemption for 4Q17 and the reversal of the tax paid earlier in the year. 31

32 2.00 0, , , , , ,0 800,0 600,0 400,0 200, , , , , ,0 800,0 600,0 400,0 200,0 300,0 250,0 200,0 150,0 100,0 50,0-20, 0% 18, 0% 16, 0% 14, 0% 12, 0% 10, 0% 8,0 % 6,0 % 4,0 % 2,0 % 0,0 % 3 Operational and financial highlights Gross Revenue (R$ MM) EBITDA Evolution (R$ MM) and EBITDA Margin (%) CAGR: 8.7% % ,3% 16,7% 16,6% 16,1% 14,8% 15,2% 14,3% bps 15,9% 15,0% 1.1% Q16 4Q Q16 4Q17 Foreign Market Domestic Market EBITDA Margin EBITDA 32

33 3 Operational and financial highlights Arezzo&Co has a solid balance sheet with a healthy net cash position, coupled with a strong ability to generate operating cash flow and dividend payments Operating cash flow yield¹ 5.0% Arezzo&Co generated R$173.9 mm in operating cash flow in 2017, translating into cash flow yield of 5,0% Dividend Payout (YTD) 85.0% Working Capital (% of Net Revenue) 23.5% Consistent dividend payments, with a payout of more than 85% of net profit in (or 100% payout considering the distributable income) Reduction in working capital needs by 230 bps from 4Q17 to 4Q16. Capex / Depreciation LTM -0.7x From 2015 onwards capex trended roughly in line or below depreciation Net Debt / EBITDA - 0.8x The Company has a strong balance sheet and a net cash/ebitda ratio of -0.8x in Dec/17. 1) Operating cash flow yield = LTM Operating cash flow / Firm value. Considered Cash Flow LTM of R$ 3.466,6mm (as of 12/31/2017) 33

34 3 Operational and financial highlights Cash Conversion Cycle (R$ thousand) Capex (R$ thousand) Cash Conversion Cycle Change #days (R$'000) #days (R$'000) (in days) Summary of investments 4Q17 4Q16 Δ 17 x 16 (%) Δ 17 x 16 (%) Inventory¹ Accounts Receivable² (-) Accounts Payable¹ ¹ Days of COGS ² Days of Net Revenues Total CAPEX ,5% (14,0%) Stores - expansion and refurbishing ,4% ,7% Corporate ,1% ,8% Other (31,8%) (59,3%) Operational Indicators Operating Indicators Δ 17 x 16 # of pairs sold ('000) ,1% # of handbags sold ('000) ,4% # of employees ,7% # of stores* Owned Stores Franchises Outsourcing (as % of total production) 90,9% 90,0% 0,9 p.p SSS² Sell-in (franchises) 5,0% 4,3% 0,7 p.p SSS² Sell-out (ow ned stores + franchises + w eb) 3,9% 4,1% -0,2 p.p Cash Flow From Operating Activities (R$ thousand) Operating Cash Flow 4Q17 4Q16 Profits before income tax and social contribution Depreciações e amortizações Others Decrease (increase) in assets / liabilities Trade accounts receivables Inventories Suppliers Change in other noncurrent and current assets and liabilities Δ 17 x 16 (R$) Δ 17 x 16 (%) Δ 17 x 16 (R$) Δ 17 x 16 (%) (4.752) (10,2%) ,5% ,1% ,4% ,4% 442 (21.120) n/a (1.505) (17,7%) (23.444) (292) (16.195) n/a (30.859) (38.088) (19,0%) (9.168) (71,1%) (6.065) (5.020) (1.045) 20,8% (4.604) (36.606) (87,4%) ,4% (8.144) (49,9%) (15.802) (87,3%) n/a Payment of income tax and social contribution Net cash flow generated by operational activities (17.555) (17.333) (222) 1,3% (45.466) (36.542) (8.924) 24,4% ,6% ,0% 34

35 3 Operational and financial highlights Indebtedness (R$ thousand) Total indebtedness of R$181.7 million in 4Q17 against R$106,0 million in 4Q16. Long term indebtedness of 9.9% of total debt in 4Q17, compared to 25.5% in 4Q16. The weighted average cost of the company s total debt in 4Q17 remained at low levels. It is worth mentioning that during 4Q17, the Company distributed the amount of R$ 21.9 million in dividends. Cash position and Indebtedness 4Q17 3Q17 4Q16 Cash Total debt Short term % total debt 90,1% 78,3% 74,5% Long-term % total debt 9,9% 21,7% 25,5% Net debt ( ) ( ) ( ) 35

36 Appendix 36

37 A 4Q17 Key financial indicators Key financial indicators 4Q16 Δ (%) 17 x Δ (%) 17 x 16 Gross Revenues ,8% ,0% Re Net Revenues ,3% ,8% Me COGS ( ) ( ) 4,5% ( ) ( ) 6,8% Me Gross Profit ,7% ,6% F Gross margin 46,6% 45,2% 1,4 p.p 45,8% 44,3% 1,5 p.p SG&A ( ) ( ) 18,2% ( ) ( ) 13,1% % of net revenues (34,4%) (31,2%) (3,2 p.p) (33,1%) (32,1%) (1,0 p.p) Selling expenses (83.722) (74.764) 12,0% ( ) ( ) 9,0% Ow ned stores and w eb commerce (35.865) (32.970) 8,8% ( ) ( ) 3,7% Selling, logistics and supply (47.857) (41.794) 14,5% ( ) ( ) 12,9% M General and administrative expenses (30.063) (23.971) 25,4% ( ) (85.447) 23,6% Other operating revenues (expenses) (1.287) (581) 121,5% (2.104) (2.411) (12,7%) Depreciation and amortization (10.002) (6.533) 53,1% (32.632) (25.815) 26,4% EBITDA ,1% ,4% EBITDA margin 15,0% 15,9% (0,9 p.p) 15,2% 14,3% 0,9 p.p Net incom e ,5% ,0% L Net margin 15,2% 10,6% 4,6 p.p 11,4% 9,4% 2,0 p.p Working capital¹ - as % of revenues 25,2% 27,5% (2,3 p.p) 25,2% 27,5% (2,3 p.p) Invested capital² - as % of revenues 38,9% 42,3% (3,4 p.p) 38,9% 42,3% (3,4 p.p) Total debt ,4% ,4% Net debt³ ( ) ( ) 14,2% ( ) ( ) 14,2% Net debt/ebitda LTM -0,8x -0,8x - -0,8x -0,8x - W (1) The Company obtained an injunction in 4Q17 exempting it from payment of income and social contribution taxes (IR and CSLL) on an ICM S tax benefit granted by the government of Espírito Santo because of the distribution center located in the state. This led to a gain of R$21.9 million during the quarter, representing the tax exemption for 4Q17 and the reversal of the tax paid earlier in the year. (2) Working Capital: current assets minus cash, cash equivalents and financial investments less from 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 contributions. (4) Net debt is equal to total interest bearing debt position at the end of a period less cash, cash equivalents and short-term financial investments. 37

38 A 4Q16 History Franchises and Owned Stores History of Stores 1Q17 2Q17 3Q17 4Q17 Sales area 1,3 - Total (m²) Sales area - franchises (m²) Sales area - ow ned stores² (m²) Total number of domestic stores # of franchises Arezzo Schutz Anacapri # of ow ned stores Arezzo Schutz Alexandre Birman Anacapri Fiever Total number of international stor # of franchises # of ow ned stores (1) Includes areas in square meters of the seven stores overseas (2) Includes seven outlet type stores with a total area of 1,952 m² (3) Includes areas in square meters of storesexpanded 38

39 Balance Sheet - IFRS AAssets 4Q17 3Q17 4Q16 Liabilities 4Q17 3Q17 4Q16 Current assets Cash and Banks Financial Investments Trade accounts receivables Inventory Taxes recoverable Other credits Non-current assets Long-term receivables Trade accounts receivables Deferred income and social contribution Other credits Investments property Property, plant and equipment Intangible assets Total Assets Current liabilities Loans and financing Suppliers Other liabilities Non-current liabilities Loans and financing Related parties Other liabilities Equity Capital Capital reserve Income reserves Other comprehensive income Profit Additional proposed dividend Total liabilities and shareholders' equity

40 A Income Statement - IFRS Income statement - IFRS 4Q17 4Q16 Var.% Var.% Net operating revenue ,3% ,8% Cost of goods sold ( ) ( ) 4,5% ( ) ( ) 6,8% Gross profit ,7% ,6% Operating income (expenses): ( ) ( ) 18,2% ( ) ( ) 13,1% Selling (91.564) (79.388) 15,3% ( ) ( ) 10,4% Administrative and general expenses (32.223) (25.880) 24,5% ( ) (92.846) 22,6% Other operating income net (1.287) (581) 121,5% (2.104) (2.411) -12,7% ROL LAIR Income before financial result ,1% ,7% IR Financial income (2.694) (844) 219,2% ,9% Alíqu LL Income before income taxes ,2% ,5% M. Líq Income tax and social contribution (10.721) -226,5% (28.463) (40.851) -30,3% Current (9.122) -307,5% (31.591) (42.971) -26,5% ROL Deferred (5.374) (1.599) 236,1% ,5% LAIR IR Net income for period ,5% ,0% Alíqu 40

41 Cash Flow Statement - IFRS ACash Flow - IFRS 4Q17 4Q Operating activities Income before income tax and social contribution Adjustm ents to reconcile net incom e w ith cash from operational activit Depreciation and amortization Income from financial investments (3.493) (7.517) (24.844) (29.239) Interest and exchange rate (2.318) Other Decrease (increase) in assets Trade accounts receivables (292) (30.859) (38.088) Inventory (6.065) (5.020) Recoverable taxes (31.064) (1.029) (39.212) (6.849) Variation other current assets (549) (1.700) (4.384) (6.112) Judicial deposits Decrease (increase) in liabilities Suppliers (4.604) (36.606) Labor liabilities (1.306) Fiscal and social liabilities Variation in other liabilities Paym ent of incom e tax and social contribution (17.555) (17.333) (45.466) (36.542) 41

42 Cash Flow Statement - IFRS ACash Flow - IFRS 4Q17 4Q Net Operating cash flow activities from operating activities Investing Income before activities income tax and social contribution Adjustm Sale of fixed ents and to reconcile intangible assets net incom e w ith cash from operational activit Acquisitions of fixed and intangible assets Depreciation and amortization (7.604) (4.283) (21.548) (25.066) Financial Investments ( ) ( ) ( ) ( ) Income from financial investments (3.493) (7.517) (24.844) (29.239) Redemption of financial investments Interest and exchange rate (2.318) Net cash used in investing activities Other ( ) (21.541) (91.697) (20.958) Financing activities w ith third parties Decrease (increase) in assets Increase in loans Trade accounts receivables Payments of loans (292) (25.920) (17.383) (30.859) (88.451) (38.088) (81.201) Payments Inventory of Interest on loans (1.122) (281) (2.057) (6.065) (1.602) (5.020) Net Recoverable cash used taxes in financing activities w ith third parties (31.064) (1.029) (39.212) (11.674) (6.849) Financing Variation activities other current w ith assets shareholders (549) (1.700) (4.384) (6.112) Interest Judicial deposits on equity (2.858) (22.249) (24.398) (44.142) Decrease Distribution (increase) of profits in liabilities - (11.257) ( ) (29.961) Receivables (payables) w ith shareholders Suppliers 52 (4.604) 5 (36.606) (178) Share Issuance Labor liabilities (1.306) Repurchase of Shares (1.199) - (1.199) - Fiscal and social liabilities Net cash used in financing activities (4.005) (33.501) ( ) (72.350) Variation in other liabilities Increase (decrease) in cash and cash equivalents (2.146) (3.273) Cash Paym ent and of cash incom equivalents e tax and social contribution (17.555) (17.333) (45.466) (36.542) Foreign exchange effect on cash and cash equivalents (529) Cash and cash equivalents - Initial balance Cash and cash equivalents - Closing balance Increase (decrease) in cash and cash equivalents (2.146) (3.273) 42

43 Contacts CFO and IR Officer Daniel Levy IR Manager Aline Penna IR Coordinator Victoria Machado Telephone: