LOJAS RENNER ANNOUNCES TOTAL NET REVENUE OF R$ MILLION IN 3Q08

Transcription

1 LOJAS RENNER ANNOUNCES TOTAL NET REVENUE OF R$ MILLION IN 3Q08 Porto Alegre, October LOJAS RENNER S.A. (Bovespa: LREN3), the second largest department store chain merchandising apparel in Brazil, today announces its results for the third quarter 2008 (3Q08) and the accumulated nine-month period for 2008 (9M08). Except where indicated to the contrary, the following financial and operating information is consolidated according to Brazilian Corporate Law and comparisons refer to the third quarter (3Q07) and the first nine months of 2007 (9M07). Given the relevance of the revenues generated from financial services as a result of the growth in these operations and the alignment of the financial statements to international accounting practices, as from December 2007, the Company has begun to include revenue from financial services in Gross Operating Revenue. HIGHLIGHTS FOR PERIOD Total Net Revenues reported growth of 15.2%, increasing from R$ million in 3Q07 to R$ million in 3Q08. In 9M08, total Net Revenue was R$ 1,509.9 million, 17.7% more than the R$ 1,282.4 million reported for the same period in Number of Stores Net Revenue from Merchandise Sales posted an increase of 13.6% from R$ million in 3Q07 to R$ million in 3Q08. Same Store Sales posted growth of 5.0% over the same period. In 9M08 Net Revenue from Merchandise Sales was R$ 1,342.7 million, a rise of 16.8% over the same period Same Store Sales registered an increase of 6.9% in the accumulated period for 9M08. Sep.06 Sep.07 Sep.08 Gross Profit from Merchandise Sales was R$ million in 3Q08 and the Gross Margin from the retail operation was 45.9% as compared with 46.1% recorded in 3Q07. In 9M08, Gross Profit from Merchandise Sales was R$ million, equivalent to a growth of 0.8 of a percentage point in the Gross Margin from the Retailing Operation, increasing from 46.3% in the same period of 2007, to 47.1%. EBITDA 1 reached R$ 66.5 million in 3Q08, an EBITDA Margin on Net Revenue from Merchandise Sales of 14.8% in the quarter against 17.7% in 3Q07 (13.0% if calculated on the Company s total Net Revenues against 15.8% in 3Q07). In 9M08, EBITDA was R$ million, 13.3% higher than the R$ million for 9M07. The EBITDA Margin in 9M08 was 15.6% (13.8% of calculated on total Net Revenues) versus 16.0% in 9M07. If non-recurring items are 1 EBITDA = Earnings before Net Financial Expenses, Income Tax and Social Contribution, Depreciation, Amortization, Non-operating Results and Extraordinary Expenses. EBITDA is not a measure used in Brazilian accounting practices and does not represent cash flow for the periods under review. It should not be considered as an alternative for net income, as an indicator of operating performance or as an alternative for cash flow in the form of an indicator of liquidity. EBITDA does not have a standardized meaning and the Company s definition of EBITDA may not be comparable with the adjusted EBITDA of other companies. While in accordance with accounting practices used in Brazil EBITDA does not provide a measure of operating cash flow, management uses it to measure operating performance. In addition, the Company understands that certain investors and financial analysts use EBITDA as an indicator of the operating performance of a company and/or its cash flow. Earnings Release Page 1 de 15

2 excluded from EBITDA, the variation in the quarter would have been 14.0%, amounting to R$ 9.1 million and the EBITDA Margin would have been 15.4% versus 15.3% in 3Q08. In 9M08, EBITDA would have been R$ million with a growth of 19.3% while the EBITDA Margin would have been 15.9% against 15.6% in 9M07. Investments in Fixed Assets totaled R$ 36.7 million in 3Q08. The large part of capital expenditures was dedicated to the opening and preparation of new stores as well as remodeling installations and IT systems and equipment updates. In the first nine months of 2008, investments were R$ 85.2 million. In the period between July and September, two new outlets were unveiled, one in the state of São Paulo and the other in Paraná, totaling 103 stores in operation. The Renner Card accounted for 63.6% of 3Q08 sales. The Company issued a total of thousand cards during the quarter with the average ticket representing a growth of 7.0% in the period and increasing from R$ in 3Q07 to R$ In 9M08, the Renner Card amounted to 63.6% of total sales while the average ticket was R$ , a growth of 6.7% over 9M07. On October 27, Lojas Renner released a Material Fact announcing to its shareholders that due to the significant alterations on the Brazilian and global economic and financial scenario verified in the last few weeks, the Company s subsidiary LR Investimentos Ltda. and the shareholders of Leader Participações S.A. have amicably executed a Private Instrument of Termination of the Share Purchase Agreement, dated September 3, 2008 and amended on September 29, Pursuant to the Termination Agreement, the Share Purchase Agreement was resolved ipso jure, without any burdens or liabilities of any kind to the contracting parties. As a result the EGM of October 30, 2008 was cancelled. Earnings Release Page 2 de 15

3 STORE OPERATING PERFORMANCE Operating Data 3Q08 3Q07 9M08 9M07 Total Company s Net Revenues Net Revenues from Merchandise Sales Net Revenues from Merchandise Sales Nominal Growth over Previous Year Same Stores Sales Growth (2) Nominal Growth over Previous Year Number of Stores End of September Sales Area (in 000 m 2 ) (3) End of September Net Revenues per m 2 (R$ per m 2 ) Net Revenues per Average Sales Area Number of Employees End of September , , , , % 23.3% 16.8% 23.8% 5.0% 9.3% 6.9% 9.3% ,079 2,099 6,362 6,254 10,247 8,790 10,247 8,790 The third quarter of the year is characterized by the switch from fall/winter to spring/summer collections in August following on from the Preview, which presents fashion trends and key items that reflect the new season by the end of July. The quarter is also the school winter break period and has only one commemorative date: Fathers Day, which falls in August and without the same commercial appeal for Renner as other dates such as Mothers Day and the year-end holidays. Growth in Same Store Sales was 5.0% in 3Q08, particularly reflecting a slowdown in September sales. The less favorable macroeconomic scenario contributed to slower business with the inflationary spikes of the first semester sapping consumer confidence in the second half of the year. In addition, higher than normal temperatures in July and lower than expected ones in September in the South and Southeast regions also affected sales performance. In the accumulated period between January and September, Same Store Sales were up by 6.9%, reflecting the same factors at play as in the third quarter. The impact of an atypical performance in May 2007 also contributed to weaker performance, given the much higher comparative base due to promotion of winter items and the late arrival of lower winter temperatures in Poorer sales and erratic winter temperatures were also reflected in the Gross Margin from the Retailing Operation 45.9% in 3Q08 against 46.1% in 3Q07. For the accumulated nine-month period, the Gross Margin from the Retailing Operation was 47.1% against 46.3% due to the important gains in the first two quarters of In 3Q08, Net Revenue from Merchandise Sales reported an increase of 13.6% while average ticket represented growth of 7.0%, equivalent to a rise from R$ to R$ In 9M08, Net Revenue from Merchandise Sales grew 16.8% and the average ticket was R$ , a 6.7% improvement. 2 Stores are included in the comparable sales calculation beginning on the thirteenth month of their operations. Changes in comparable store sales between two periods are based on net sales of stores, which were in operation during both periods being compared. If a store is included in the calculation of comparable store sales for only a portion of one of the two periods being compared then that store will be included in the calculation for only the comparable portion of the other period. When the square meters of a store that is included in comparable store sales are increased or decreased, that store continues to be included in the comparable store sales calculation. When a store is closed, its sales are excluded from the calculation of comparable stores sales for the periods being compared. 3 Total square meters at the end of a period includes only retail selling space, excluding stockroom and back office areas. Earnings Release Page 3 de 15

4 Lojas Renner achieved the mark of 103 stores nationwide following the unveiling of two new units, one in the city of Taubaté, state of São Paulo, (Taubaté Shopping Center mall), and the other in the state of Paraná in the city of São José dos Pinhais (Shopping São José mall). Already in October, the Company has rolled out a further two new stores, one in Aparecida de Goiânia, state of Goiás and the other in Campinas, state of São Paulo. Today, a third store is being opened in Porto Velho, state of Rondônia, bringing the total store network up to 106 units. An additional four store inaugurations are forecast before the end of the year. Lojas Renner s performance in the period from January to September was once again better than the nominal increase in the Brazilian apparel and footwear business sector, which posted an accumulated increase of 15.5% to August according to data published by the IBGE, the government statistics office. However, the significant change in the macroeconomic scenario is impacting on consumer confidence which can translate into an atypical fourth quarter results for the sector and the Company. On the other hand, a tighter credit market and the appreciation of the US dollar against the Real may benefit Lojas Renner s year-end sales given that higher average ticket items that are dependent on longer terms of payment will be less attractive at a time of uncertainty. The scenario for next year is becoming clearer now and in spite of the less favorable outlook, Renner s prospects remain positive. The Brazilian market is at a pivotal moment in which the consumer is currently reevaluating future purchasing expectations set against a panorama where retailers are reducing credit payment terms for bigger ticket items. It is also worth pointing out that besides the many challenges to be faced, the adverse trading climate also brings with it opportunities for Renner. During such periods the leading operators normally gain market share and are able to better ride out periods of economic turbulence by continuing to offer the same payment options, avoiding the need to anticipate receivables and maintaining supply contracts. In spite of a scenario of increasing interest rates and higher inflation, the trading environment appears favorable to major operators in the retail segment. Many of smaller retailers and businesses could face delinquency problems, in turn losing capacity to maintain their credit options open to customers and consequently facing difficulties in keeping payments current to suppliers. RESULTS FROM THE RETAILING OPERATION Net Revenue Net Revenue from Merchandise Sales reported a year on year increase of 13.6% in the quarter, increasing from R$ million to R$ million. Same Store Sales posted growth of 5.0% over 3Q07. In 9M08, growth in Net Revenue from Merchandise Sales was 16.8%, increasing from R$ 1,150.0 million to R$ 1,342.7 million. In the same period, Same Store Sales rose 6.9%. The disparity in growth rates for the two periods largely reflects the deceleration in September sales. In addition, higher than normal temperatures in July and lower than expected ones in September in the South and Southeast regions also affected sales performance in 3Q08. The accumulated period between January and September was also impacted by the atypical performance in May 2007 when there was a much higher comparative base. Earnings Release Page 4 de 15

5 Gross Profit Gross Profit from Merchandise Sales 3Q08 3Q07 9M08 9M07 Gross Revenues from Merchandise Sales , ,545.8 Deductions of Goods Sold (146.2) (136.4) (446.6) (395.8) Net Revenues from Merchandise Sales , ,150.0 Cost of Goods Sold (242.8) (213.3) (710.6) (617.9) Gross Profit from Merchandise Sales Gross Margin from Retailing Operation 45.9% 46.1% 47.1% 46.3% Gross Profit from Merchandise Sales was R$ million against R$ million in 3Q07, an increase of 13.2% in the period. Gross Margin from the Retailing Operation was practically stable in 3Q08, slipping slightly from 46.1% in 3Q07 to 45.9%, due to poorer sales and erratic winter temperatures. For the accumulated nine-month period between January and September, Gross Margin from the Retailing Operation was 47.1% against 46.3% in the same period of the previous year, thanks to year on year improvements sales for the first two quarters of Selling, General and Administrative Expenses Selling Expenses were up by 16.2% from R$ 98.4 million in 3Q07 to R$ million in 3Q08. As a percentage of Net Revenue from Merchandise Sales, Selling Expenses posted an increase from 24.9% to 25.5%. In 9M08, Selling Expenses increased by 20.8% from R$ million to R$ million, equivalent to 25.8% of Net Revenue from Merchandise Sales, versus 24.9% in the same period in These variations are largely a reflection of a weaker sales performance as well as an increase in some fixed expenses. General and Administrative Expenses posted an increase of 21.5%, amounting to R$ 48.5 million in 3Q08, against R$ 39.9 million in the same period of This item as a percentage of Net Revenue from Merchandise Sales increased from 10.1% to 10.8%. In 9M08, General and Administrative Expenses were R$ million, against R$ million in 9M07 and equal to a growth of 18.8% in the period. As a percentage of Net Revenue from Merchandise Sales, this item was equivalent to 9.8% in 9M08 against 9.6% in 9M07. These changes are in large part due to increases in logistics costs due to higher inventory, as well as greater investments to capture and activate store cards through call center. RESULTS FROM FINANCIAL SERVICES The Financial Services Result was R$ 26.8 million in 3Q08. This was 50.4% higher than the same period for the preceding year. In 9M08, the Financial Services Result recorded an increase of 33.1%, reaching R$ 61.3 million and representing 29.3% of the Company s EBITDA. These increases are due principally to the better result for Personal Loan operations with a reduction in provisions and losses, as well as revenues generated from insurance policies, which the Company began selling in 4Q07. Lojas Renner loan portfolio, totaled R$ 83.9 million in September 2008 including interest income (R$ 61.2 million adjusted to present value). The Company granted R$ 22.2 million in loans in the quarter under review (for 9M08, this figure reached R$ 68.5 million). Customer acceptance of credit products, both Saque Rápido (Quick Withdrawal) and also Personal Loans (pre-approved installment payments in carnet format and check guarantees) continues positive. The average ticket for these operations is in the region of R$ (principal), average term being nine months with interest rates of up to 11.99% p.m. Earnings Release Page 5 de 15

6 Credit Losses, Net of Recoveries, on purchases paid with the Renner Card, represented 4.7% of Net Revenues from Merchandise Sales in 3Q08. This increase in relation to the 3.9% for 3Q07 reflects a higher participation of interest bearing credit sales an increase from 13.6% to 14.8% in 3Q08. In 9M08 Credit Losses on purchases paid with the Renner Card were 4.5% and in line with levels reported since 4Q07. As to Personal Loans, the provisions for losses on credits are constituted on the basis of the risk classification of the operations similar to the classification criteria for credit operations laid down by the Central Bank of Brazil, and in line with the same policy adopted by the financial institutions. Provisions are based on a classification of risk stipulated by the Central Bank. At the highest level of risk, this considers the entire amount including the portion still not due, and not merely the amount overdue (Dragging Method, where customer debt with different installments of different contracts, distributed across the portfolio is transferred to a worst case overdue classification, consolidated and accrued). The percentage charged gradually increases as payment delay increases with the outstanding amount in excess of 180 days being 100% accrued. Expenses with Provisions and Losses on Personal Loans, Net of Recoveries in 3Q08 reported R$ 5.1 million against R$ 8.3 million in 3Q07. In 9M08, expenses from provisions and losses were R$ 17.5 million as opposed to R$ 21.4 million in 9M07. This reduction in expenses stems from the use of better quality techniques in the granting of credit, following the implementation of new systems and risk management tools in the second semester 2007, as well as improved effectiveness in the recovery and collection of overdue payments. Result from Financial Services Breakdown 3Q08 3Q07 9M08 9M07 Revenues Recovery of Past Due Receivables (Related to Merchandise Sales) Additional Revenues Generated by Interest-bearing Plan Personal Loans and Other Financial Services Credit Losses, Net of Recoveries (26.4) (23.7) (78.5) (67.2) Merchandise Sales (9.9) (9.1) (31.2) (29.9) Additional Losses Generated by Interest-bearing Plan (11.4) (6.3) (29.8) (15.9) Personal Loans (5.1) (8.3) (17.5) (21.4) Operating Expenses (Renner Card & Financial Services) (9.1) (7.1) (27.4) (19.1) Total % of EBITDA 40.3% 25.4% 29.3% 25.0% Result from Financial Services 3Q08 3Q07 9M08 9M07 Renner Card (Related to Merchandise Sales) Financial Services (0+8, Personal Loans and Other Financial Services) Operating Expenses (Renner Card & Financial Services) (9.1) (7.1) (27.4) (19.1) Total Earnings Release Page 6 de 15

7 The Financial Services Result is made up of the following items: Revenues: this item reports revenues arising from the collection of delayed credit payments associated to the retailing operation (in up to five installments and partially with respect to sale of merchandise under the 0+8 installment plans), as well as revenues generated from the intermediation of credit sales under the 0+8 installments with interest plan, from Personal Loans, Capitalization Bonds (annuities) and from Insurance Policies, net of taxes and funding costs. Credit Losses, Net of Recoveries: this item records the provision for losses on credits associated with the retailing operation (in up to five installments and partially with respect to sale of merchandise under the 0+8 installment plan) as well as additional losses generated from the intermediation of credit sales under the 0+8 installments with interest plan. In both cases, losses registered in this way are deducted from recoveries of losses written off in previous periods. Losses generated from the intermediation of Personal Loans are also booked to this item. Operating Expenses: this item accounts those expenses related to the financial services, including all costs arising from this business as well as all collection expenses incurred with Financial Services and the Renner Card, both with respect to the 0+5 installment and the 0+8 installment with interest plans. EBITDA EBITDA Reconciliation 16.0% in 9M07. 3Q08 3Q07 9M08 9M07 Net Income (+) Income & SC Taxes and Statutory Participation (+) Non Operating Income (+) Financial (Income) Expenses, Net (+) Depreciation and Amortization EBITDA EBITDA Margin (over Net Revenues from Merchandise Sales) 14.8% 17.7% 15.6% 16.0% (+) Non-recurring Items 2.6 (9.4) 4.6 (5.5) Ajusted EBITDA Ajusted EBITDA Margin (over Net Revenues from Merchandise Sales) 15.4% 15.3% 15.9% 15.6% EBITDA for 3Q08 posted R$ 66.5 million, the EBITDA Margin on Net Revenue from Merchandise Sales reaching 14.8% in the quarter against 17.7% in 3Q07 (13.0% if calculated on Total Net Revenue, against 15.8% for the preceding year). In 9M08, EBITDA was R$ million, the EBITDA Margin reaching 15.6% on Net Revenue from Merchandise Sales (13.8% if calculated as a percentage of the Company s total Net Revenue) against Excluding non-recurring items from EBITDA for 2007 of a positive R$ 9.4 million (reversal of contingencies of a civil nature) and for 2008 (related to the acquisition of Leader, and the donations to the Lojas Renner Institute, amounting to R$ 2.6 million in 3Q08), EBITDA would have grown 14.0% from R$ 60.6 million to R$ 69.1 million and the margin would have risen from 15.3% to 15.4% in 3Q08. The same effects would apply in the 9M08 period with EBITDA growing by 19.3% and the Margin rising from 15.6% to 15.9% in 9M07 and 9M08, respectively. Earnings Release Page 7 de 15

8 FINANCIAL RESULT The 3Q08 Net Financial Result was a negative R$ 4.6 million, against a negative R$ 3.0 million in 3Q07. In 9M08, the Net Financial Result was a negative R$ 10.0 million against a negative R$ 10.3 million in the same period in These results in large part reflect higher funding costs of delinquent customers and financial expenses linked to loans and the financing of investments, which were offset by the abolishing of the CPMF tax in Financial Result 3Q08 3Q07 9M08 9M07 Financial Revenues Financial Expenses (2.6) (4.1) (10.7) (13.6) CPMF (Tax over financial transactions) 0.0 (2.7) (0.2) (8.6) Other Operating Expenses (2.6) (1.4) (10.5) (5.0) Cost of Financing Delinquent Customers, Net (7.2) (3.5) (15.3) (9.4) Financial Result (4.6) (3.0) (10.0) (10.3) NET INCOME In the light of the foregoing factors, the Company reported third quarter Net Income of R$ 31.5 million. Calculated on Net Revenue from Merchandise Sales, the Net Margin was 7.0% (6.2% if calculated on the Company s total Net Revenue). In 9M08, Net Income was R$ million equivalent to a Net Margin of 7.8%. NET CASH Cash, Cash Equivalents and Debt Sep.08 Jun.08 Sep.07 Cash, Cash Equivalents and Bank Investments Total Loans and Financing (159.7) (165.4) (129.7) Net Cash (1.8) Cash, Cash Equivalents and Bank Investments at the end of September amounted to R$ million, a reduction of 24.9% compared with R$ million in June Compared with September 2007, Cash, Cash Equivalents and Bank Investments posted a reduction of 39.7%. These reductions are mainly due to the greater share of imported goods as a proportion of total purchasing implying advanced payment, a greater allocation of cash to fixed assets and the payment of higher dividends than in the preceding fiscal year. As of September , Lojas Renner s Total Loans and Financing stood at R$ million. This amount incorporates the raising of long-term funding worth R$ 29.7 million and representing the first installment of a line of credit negotiated with the Banco do Nordeste. Earnings Release Page 8 de 15

9 CAPITAL EXPENDITURES CAPEX 3Q08 3Q07 9M08 9M07 New Stores Remodeling of Installations IT Equipment and Systems Others Total Lojas Renner s Investments in fixed assets amounted to R$ 36.7 million in 3Q08. Of this value, R$ 21.0 million was allocated to the opening and pre-inaugural preparation of new stores. A further R$ 9.7 million was spent on remodeling installations and another R$ 3.5 million on systems and IT equipment updates. Other investments totaled R$ 2.5 million in 3Q08. In 9M08, total investments were R$ 85.2 million, R$ 51.7 million dedicated to new stores, R$ 17.3 million for remodeling and R$ 6.1 million for upgrading systems and IT equipment. In line with the Company s expansion strategy, two new stores were opened during 3Q08 bringing a total of 103 stores into operation. The unveiling of a further seven stores is planned before the end of the year, bringing the Company s nationwide network up to 110 units by December Depreciation and Amortization expenses increased by 26.5% from R$ 12.6 million in 3Q07 to R$ 16.0 million in 3Q08, a reflection of heavier investments in fixed assets in line with the plan to expand the store network. Depreciation and Amortization in 9M08 totaled R$ 45.9 million against R$ 36.4 million in 9M07, a growth of 25.9%. Stores Inaugurated in 9M08 City Locattion Date 1- São Paulo - SP Bourbon Shopping Pompéia March 2- Juiz de Fora - MG Independência Shopping April 3- Taboão da Serra - SP Shopping Center Taboão April 4- Maringá - PR Aspen Park Shopping Center April 5- São João do Meriti - RJ Shopping Grande Rio May 6- Curitiba - PR Palladium Shopping Center May 7- Taubaté - SP Taubaté Shopping Center August 8- São José dos Pinhais - PR Shopping São José September Earnings Release Page 9 de 15

10 Stores to be Inaugurated in 4Q08 City Locattion Date 9- Aparecida de Goiânia - GO Buriti Shopping October 10- Campinas - SP Campinas Shopping Center October 11- Porto Velho - RO Porto Velho Shopping October 12- Duque de Caxias - RJ Caxias Shopping November 13- Porto Alegre - RS Barra Shopping Sul November 14- Anápolis - GO Brasil Park Shopping November 15- Vila Velha - ES Shopping Praia da Costa November RENNER CARD The Renner Card accounted for 63.6% of sales during 3Q08 against 67.8% in the same period a year earlier. In 9M08, customer purchases using the Renner Card amounted to 63.6% against 68.0% in 9M07. This reduced share of the total sales is largely due to the significant number of store rollouts since Such openings imply a larger number of new customers who initially opt to settle their purchases using other forms of payment, thus diluting transactions using the Renner Card. The average ticket for purchases using the store card increased to R$ in 3Q08, against R$ in 3Q07, 7.0% higher. In 9M08, the average ticket registered a growth of 6.7%, increasing to R$ versus R$ in 9M07. The 0+8 interest-bearing installment plan reported an increase in the share of total sales accounting for 14.8% in 3Q08 against 13.6% in 3Q07. The alternative 0+5 interest-free installment plan accounted for 48.8% of total sales in 3Q08 against 54.2% in the same period for In the first nine months of 2008, the interest bearing credit line repayable in 8 installments accounted for 14.9% and the interest-free plan, 48.7%. In 3Q08, Lojas Renner issued thousand new cards, reaching the 13.1 million mark in September The Company issued a total of 1.1 million new cards in 9M08. Earnings Release Page 10 de 15

11 UPCOMING EVENTS Conference Call on 3Q08 Results In Portuguese In English Date: October , Friday Date: October , Friday Time: 11h (Brasília) / 9:00 a.m. (US-ET) Time: 2:00 p.m. (Brasília)/ 12:00 p.m. (US-ET) Telephone:+55(11) or Phone: +1 (412) Toll Free: (800) (US and Canada) Toll Free: (UK) Toll Free: (Brazil) Code: # Code: Lojas Renner Replay:+55 (11) Replay: :+1 (412) or +1 (877) Replay Code: 866 Replay Code: # WEBCAST: Should you have any questions, please call us on WEBCAST: INVESTOR RELATIONS CONTACTS José Carlos Hruby Chief Financial and IR Officer Tel. +55 (51) ri_lojasrenner@lojasrenner.com.br Diva Freire Investor Relations Analyst Tel. +55 (51) dfreire@lojasrenner.com.br Paula Picinini Investor Relations Manager Tel. +55 (51) ppicinini@lojasrenner.com.br Kátia Ramires Investor Relations Analyst Tel. +55 (51) kramires@lojasrenner.com.br Get to know the new website: Earnings Release Page 11 de 15

12 ABOUT LOJAS RENNER Lojas Renner is the second largest department store chain merchandising apparel in Brazil, currently with 103 stores, 96 of them installed in shopping malls and a further 7 stand-alone stores in downtown city areas, located in the South, Southeast, Midwest, North and Northeast of Brazil. The Company develops and sells quality women s, men s, teen and children s apparel, footwear and underwear through 11 private brands, of which six represent the Lifestyle concept, each brand targeting a specific style and way of dressing. Lojas Renner also sells fashion accessories and cosmetics through two proprietary brands while offering third-party branded merchandise in certain product categories. The Company s principal target customers are women between the ages of 18 and 39 who are in the middle and upper-middle levels of the Brazilian purchasing power spectrum. Lojas Renner offers its customers fashionable, high quality merchandise at competitive prices in a shopping environment, which is practical and agreeable. The Lifestyle concept of merchandising makes it easier for the customers to combine individual items of apparel into a complete outfit with a consistent style according to each one of the brands. Lojas Renner seeks to maintain its merchandise continuously fresh by always introducing new designs, to keep pace with and help to shape the style preferences of its customers. The mission of each one of the employees is not merely to satisfy but to enchant our customers by exceeding their expectations. Lojas Renner also offers financial services, such as sales financed under a 0+8 interest-bearing credit plan, personal loans and capitalization bonds (annuities). Since October 2007, the Company has also initiated sales of insurance policies through the store network. FORWARD LOOKING STATEMENTS 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. These 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. Earnings Release Page 12 de 15

13 INCOME STATEMENT Income Statement (in R$ '000) 3Q08 3Q07 Var % 9M08 9M07 Var % Gross Operating Revenue 660, , % 1,966,394 1,685, % Sale of Goods 595, , % 1,789,315 1,545, % Financial Products/Services 65,749 51, % 177, , % Deductions (149,591) (139,124) 7.5% (456,480) (402,947) 13.3% Taxes on Sales of Goods (146,178) (136,436) 7.1% (446,651) (395,785) 12.9% Taxes Over Financial Products/Services (3,413) (2,688) 27.0% (9,829) (7,162) 37.2% Net Operating Revenues 511, , % 1,509,914 1,282, % Cost of Sales (242,872) (213,222) 13.9% (710,577) (617,935) 15.0% Costs of Goods Sold (242,872) (213,222) 13.9% (710,577) (617,935) 15.0% Gross Profit 268, , % 799, , % Operating Income (Expenses) (222,584) (176,420) 26.2% (646,116) (526,697) 22.7% Selling (114,347) (98,384) 16.2% (346,312) (286,643) 20.8% General and Administrative (48,463) (39,875) 21.5% (131,452) (110,649) 18.8% Management Compensation (1,157) (959) 20.6% (3,317) (3,605) -8.0% Taxes (3,382) (3,039) 11.3% (10,366) (8,854) 17.1% Losses on Receivables, Net (26,464) (23,773) 11.3% (78,502) (67,206) 16.8% Financial Products/Services (9,061) (7,056) 28.4% (27,436) (19,169) 43.1% Depreciation and Amortization (15,975) (12,625) 26.5% (45,869) (36,428) 25.9% Other Operating Income , % 7,097 16, % Financial Income, Net (4,620) (2,982) 54.9% (9,959) (10,295) -3.3% Operating Income 45,914 54, % 153, , % Non Operating Income (193) (2,085) -90.7% (258) (2,543) -89.9% Income Before Income, Soc. Cont. Taxes and Compensations under Bylaws 45,721 52, % 152, , % Income and Social Contribution Taxes (14,213) (16,454) -13.6% (47,717) (42,210) 13.0% Net Income for the Period 31,508 35, % 105,246 93, % Earnings per Share % % Number of shares (in thousands) 121, , , ,582 Earnings Release Page 13 de 15

14 BALANCE SHEET Balance Sheet (in R$ '000) Assets Sep.08 Jun.08 Sep.07 TOTAL ASSETS 1,199,471 1,243,715 1,166,322 Current Assets 780, , ,907 Cash & Cash Equivalents 15,316 20,460 50,350 Short Term Investments 142, , ,412 Trade Accounts Receivable 331, , ,379 Inventories 231, , ,013 Recoverable Taxes 14,872 14,597 17,775 Other Accounts Receivable 7,768 9,250 7,293 Deferred Income and Social Contribution Taxes 33,481 37,510 32,606 Prepaid Expenses 4,147 2,892 2,079 Not Current Assets 418, , ,415 Long-Term Assets 44,383 42,626 40,638 Judicial Deposits 12,141 11,173 2,417 Recoverable Taxes 11,328 10,655 14,253 Other Accounts Receivable 8,553 8,397 7,396 Deferred Income and Social Contribution Taxes 12,361 12,401 16,572 Permanent Assets 374, , ,777 Investments Property, Plant and Equipment - Net 324, , ,146 Intangible - Net 49,544 47,796 39,568 Liabilities and Shareholders' Equity Sep.08 Jun.08 Sep.07 TOTAL LIABILITIES 1,199,471 1,243,715 1,166,322 Current Liabilities 427, , ,983 Loans and Financing 130, , ,693 Suppliers 156, , ,222 Taxes and Contributions Payable 48,551 66,734 48,360 Accrued Salaries and Vacations Payable 35,508 31,580 33,894 Rentals Payable 13,694 13,915 11,437 Liabilities Under Bylaws Reserve for Civil and Labor Risks 13,074 13,163 8,819 Other Accounts Payable 29,957 57,392 57,421 Not Current Liabilities 83,547 75,839 39,319 Long-Term Liabilities 83,547 75,839 39,319 Loans and Financing 29,740 29,740 - Taxes and Contributions Payable 21,837 17,835 7,732 Reserve for Tax and Civil Risks 20,845 19,974 21,087 Other Accounts Payable 11,125 8,290 10,500 Shareholders' Equity 688, , ,020 Capital 399, , ,820 Capital Reserves 118, , ,165 Profit Reserves 64,943 64,943 25,981 Retained Earnings 105,246 73,738 93,054 Earnings Release Page 14 de 15

15 CASH FLOW Statement of Cash Flows (in R$ '000) 3Q08 3Q07 9M08 9M07 Cash Flow from Operating Activities Net Income for the Period 31,508 35, ,246 93,054 Adjust to Reconcile Net Income to Net Cash Provided from Operating Activities Depreciation and Amortization 15,946 12,596 45,782 36,341 Amortization of Goodwill Result on From Sale or Write-Off of Permanent Assets 198 2, ,585 Accrued Interest, Net of Interest Paid (24,082) 8,547 (27,840) 11,127 Accrued Interest, Net of Interest Received 3,182 (1,686) 5,564 1,955 Changes in Assets and Liabilities (Increase) decrease in Trade Accounts Receivable 40,169 (1,397) 157,929 50,741 (Increase) in Inventories (30,066) (31,567) (80,693) (35,991) (Increase) decrease in Other Current Assets (48) (3,361) (2,481) 7,918 Decrease in Deferred Income and Social Contribution Taxes 4,069 6,882 12,114 2,201 (Increase) in Long-Term Assets (1,797) (666) (4,566) (2,892) Increase (decrease) in Suppliers (35,768) 41,077 (103,310) (20,050) Increase (decrease) in Accrued Salaries and Vacations 3,928 5,436 (5,642) (4,593) (Decrease) in Taxes Payable (14,181) (8,156) (69,092) (81,150) (Decrease) in Other Liabilities (24,600) (4,006) (31,084) (5,365) Increase (decrease) in Rent Payable (221) 680 (2,098) (1,717) (Decrease) in Liabilities Established by Bylaws (7) (1) (5,368) (4,326) Increase (decrease) in Reserve for Tax, Civil and Labor Risks 782 (21,235) 3,274 3,215 Trading Securities / Redemption of Trading Securities 44,114 (10,001) 86,518 39,723 Net Cash Generated (Used in) Operating Activities 13,155 31,112 84,676 92,863 Cash Flow from Investing Activities Purchases of Property, Plant and Equipment and Intangible Assets (36,712) (16,797) (85,201) (52,549) Proceeds from Disposal of Permanent Assets Net Cash (Used in) Investing Activities (36,696) (16,795) (85,127) (52,356) Cash Flow from Financing Activities Borrowings 130,000 51, , ,407 Repayments of Loans (111,603) (36,789) (258,242) (117,207) Interest on Capital and Dividends Paid - - (112,044) (49,470) Net Cash Provided (Used in) by Financing Activities 18,397 14,958 (46,022) (24,270) Increase (decrease) in Cash Equivalents (5,144) 29,275 (46,473) 16,237 At the Beggining of the Period 20,460 21,075 61,789 34,113 At the End of the Period 15,316 50,350 15,316 50,350 Supplementary Cash Flow Disclosure Cash (Paid) Received During the Period: Interest and Other Financial Expenses, Net (38,027) (3,422) (65,440) (24,088) Financial Income (Temporary Cash Investments and Other) 9,325 8,987 27,641 24,920 Income and Social Contribution Taxes (17,114) (17,666) (46,037) (80,349) Earnings Release Page 15 de 15