Our net revenue has also been adversely affected by the re-burden of the payroll.

Transcription

1 São Paulo, Brazil, May 10, 2016 Restoque Comércio e Confecções de Roupas S.A. ( Company ) (LLIS3), a leading company of premium clothing and apparel industry in Brazil, presents its results for the first quarter of 2016 () according to the international financial reporting standards (IFRS). More details regarding the financial statements can be found at the Company s website ( x

2 São Paulo, Brazil, May 10, 2016 Restoque Comércio e Confecções de Roupas S.A. ( Company ) (LLIS3), a leading company of premium clothing and apparel industry in Brazil, presents its results for the first quarter of 2016 () according to the international financial reporting standards (IFRS). More details regarding the financial statements can be found at the Company s website ( Operating cash flow after investments improved 47.3% Working capital consumption optimized by R$60.0 million Inventory levels recovery and owned stores margin increased in March Earnings Conference Call Date: May 11, 2016 (Wednesday) Time: 11am (Brasilia time) Phone for connection: +55 (11) Access code: Restoque Phone for replay: +55 (11) (code: Restoque) Conference in Portuguese with simultaneous interpretation in English Phone for connection: +55 (11) (846) Access code: Restoque CEO: Paulo José Marques Soares IRO: Rafael Camargo Investor Relations Tel.: +55 (11) The was adversely affected by the low frequency of product novelties in the 4Q15, a quarter in which the introduction of new products had the lowest historical frequency (52% in the number of items YoY), and the strategy to accelerate 2015 remaining products sales during the. To accelerate such product recycling, we have increased the participation of markdown sales, from 40.3% to 46.8%, as well as the average discount in order to promote a higher inventory turnover, strongly affecting our gross margin. This strategy focused on resuming the frequency of novelties, gross margin and the sales performance in the next quarters. Notably, during March, the first month following the markdown, owned stores gross margin increased 1.3p.p. YoY. Also aiming the products recycling, a similar strategy was applied to our discount channels, which reached its lowest historical margin. The channel also faced a significant margin recovery in March. Operational cash flow after investments successfully improved R$ 35.6 million (47.3%) due to investments and working capital optimization. We focused on working capital cycle improvement, the support basis to the novelties frequency recovery, collections attractiveness and the gross margin throughout Thus, the operational cycle was improved in 63 days and the receivables, inventory and supplier accounts reduced cash consumption by R$ 60.0 million YoY. Our net revenue has also been adversely affected by the reburden of the payroll. Rua Othão, n. 405, CEP , São Paulo, SP, Brazil (1) Net revenues adversely affected by the additional INSS discount of 1,5%. (2) Le Lis Blanc s net revenue also includes the net revenue of the Noir brand; (3) It represents all brands of Dudalina (Dudalina, Individual and Base); (4) The Estoque channel refers to the physical stores and website selling previous collections of the Restoque brands.

3 Gross Margin Restoque* Highlights We highlight during the the Company discipline regarding expenses, investments and working capital rationalization, increasing R$ 35.6 million YoY our operational cash flow after investments, even in an adverse scenario. Nonetheless, the Company faced novelties inventory levels below its ideal proportion, causing an adverse impact on sales and gross margin performance. During the 3Q15 a sudden decrease in products purchase and the frequency of product launches, which remained throughout 2S15, strongly impacted company s products renewal during. Therefore, we decided to extend the markdown sales period from its usual 10 days to approximately 2 months, and we have been forced to restrict the introduction of our 2016 Winter Collection to fewer stores (by Feb 16 th only 20% of the stores were supplied with the Winter Collection). As a result, the Preview, which usually occurs during the first week of the year, and the introduction of our 2016 Winter Collection, have been strongly impacted and delayed. Graph 1: Total Inventory change (# Units, Le Lis Blanc) Graph 2: Novelties Inventory change (#Units, Le Lis Blanc Winter Collection) January February March Average January February March Average 8% 11% 14% 11% 34% 27% 21% 27% 55% 53% 52% 54% 58% 55% 48% 54% 2016 Vs Vs Graph 3: Gross Margin Restoque* vs. % New collection 2016 Vs Vs Graph 4: Number of markdown days (#Days) 1Q14 66% 64% 62% 60% 56 58% 56% % 74% 72% 70% 68% 66% 64% Proportion of new collection to total inventory 54% 62%

4 In October 2015, we resumed a strategy to recover the inventory levels of new products and to increase the frequency of products launches. Concomitantly, it was decided to accelerate the markdown sales of the 2015 remaining products during, aiming to renew and improve the quality of our brands collection. This has also led to an increase in the average discounts in our markdown season and in our Outlet channel. We have faced 2 challenges for the inventory levels recovery: (i) the lead time of our supply chain, which stills long, and (ii) the high demands for national suppliers. In this scenario, we faced relevant supply shortages during the first months of 2016 and the Company prevented late inventory arrivals by the season's end, avoiding operational risk. Therefore, the process of inventory recovery, started by the end of 2015, will reach ideal levels throughout the year in a progressive manner, with greater intensity during the second half of We are excited about the introduction of new collections, which, for example, increased gross margins YoY during March 16. The following graph shows the performance of the retail gross margin throughout the months of the. Graph 5: Change of gross margin of owned stores 2016 vs 2015 (p.p.) 1.3% 3.8% 5.3% Jan Feb Mar Regarding wholesales, we are addressing the drop in Dudalina brand performance, which affected results since the 2S15 and was particularly low for Dudalina Woman. We are implementing an action plan for a full closet provider concept, extending product lines, with great potential for sales increase. The Madrid collection, launched by the end of March, is already having a positive impact on sales. Furthermore, it is worth mentioning that we already started, at the end of March, a pilot project for products dedicated to Outlets, which already indicates potential for margin improvements. Thus, we are confident of the correct diagnosis of the 2015 operational problems and the resume of sales growth and margins improvement even in an adverse macro environment. Additionally, we are benefiting from the integration of various departments of Dudalina and Restoque (marketing, finance, human resources, operations and commercial departments), which has been successful in reducing sales, general and administrative expenses (SG&A), excluding depreciation and amortization, by 3.2% YoY. As a consequence of revenues and gross margins decrease, EBITDA reached R$ 38.3 million (50.0%) with a 15.4% margin (10.5 p.p.). 4

5 Operating Summary The table below shows the Company s main operational indicators: Combined Company Change % / Total number of company stores % Total sales area of company stores (m²) 57,862 60, % Average sales area of company stores (m²) 57,760 60, % Sales per Square Meters (R$/m²) 2,876 2, % Average ticket % SSS 2.5% 15.6% n.a (1, 2) Le Lis Blanc Total number of company stores % Total sales area of company stores (m²) 37,054 37, % Average sales area of company stores (m²) 37,054 37, % Sales per Square Meters (R$/m²) 2,785 2, % Average ticket % SSS 2.5% 21.2% n.a Dudalina S.A Total number of company stores % Total sales area of company stores (m²) 4,567 5, % Average sales area of company stores (m²) 4,567 5, % Sales per Square Meters (R$/m²) 4,486 4, % Average ticket % SSS 17.3% 6.2% n.a Bo.Bô Total number of company stores % Total sales area of company stores (m²) 3,252 3, % Average sales area of company stores (m²) 3,217 3, % Sales per Square Meters (R$/m²) 5,329 4, % Average ticket 1,254 1, % SSS 0.2% 9.8% n.a John John Total number of company stores % Total sales area of company stores (m²) 10,689 11, % Average sales area of company stores (m²) 10,689 11, % Sales per Square Meters (R$/m²) 1,915 1, % Average ticket % SSS 15.6% 6.4% n.a Rosa Chá Total number of company stores % Total sales area of company stores (m²) 2,234 3, % Average sales area of company stores (m²) 1,902 3, % Sales per Square Meters (R$/m²) 1,902 2, % Average ticket % SSS 12.7% n.a (1) Since 4Q13, Le Lis Blanc operational information includes the brand Noir, Le Lis. Therefore, from the 113 Le Lis Blanc stores in, there are 36 Noir, Le Lis operations, of which 31 insertions of the brand Noir, Le Lis ( corners ) are at Le Lis Blanc stores, 4 stores with hybrid set up (where the annexed Noir, Le Lis sales area has its own entrance and shop window) and 1 store is independent (standalone). (2) From the total of 37,009 m 2 of sales areas in the Le Lis Blanc stores, 34,882 m 2 refer to the brand Le Lis Blanc, 2,074 m 2 refer to the Noir, Le Lis hybrid stores and to Noir, Le Lis corners at Le Lis Blanc stores and 53 m 2 refer to 1 independent Noir, Le Lis store. 5

6 Stores and Sales Area During the, 4 Dudalina stores were added, repurchasing franchises, and 1 Le Lis Blanc store was closed. The Company maintains its strategy of focusing on stores productivity. Thus, stores openings during 2015 were focused on the Rosa Chá brand, which is being developed, and for 2016, we expect few stores openings and Capex under control. By the end of, the average sales area per store was of 182.5m², with 327.5m 2 as the average area of the Le Lis Blanc brand stores (including Noir, Le Lis), 63.8m² as the average area of the Dudalina stores, 77.2m² as the average area of the Bo.Bô stores, m² as the average area of the John John stores and 117.6m² as the average area of the Rosa Chá stores. Gross revenue (excluding returns) The gross revenue for amounted to R$329.1 million, with a 14.5% decrease in relation to. Graph 6: Combined gross sales by channel (R$ millions) Other Channels Wholesale Owned Stores % % 25.9% % R$ Million Category 2015 (%) Var. (%) Apparel 1, % % Others apparel itens % % Shoes % % Household goods % % Fragrances and makeup % % Exportations and others incomes % % Total Gross revenue (ex. returns) 1, % % 6

7 Own Stores In, gross revenue of own stores decreased 11.7% with 15.6% SSS. This performance is directly related to the decline of new products availability (60%) over the same period Since the 3Q15 there was a decrease in the volume of purchases and novelties launching, which impacted Company's products recycling in. Thus, we chose to extend the markdown period of the usual 10 days to 2 months and we were forced to restrict the launch of Winter Collection 2016 to a smaller number of stores. Since October 2015 we have adopted an inventory recovery strategy, resuming novelties and launches frequency. Simultaneously, we decided to accelerate the products recycling, aiming to renew and improve the quality of the collections. This also led to an increase in the average discounts of the markdown period and outlet channels. By the end of the quarter, a modest novelties inventory level recovery and full price products sales, resulted in a gross margin improvement YoY. We will be focused on strengthening our apparel category, accounting for 88% of our sales in 2015, and we expect a gradual recovery of novelties frequency and quality of our collections, which should be more intense along the 2S16. Multibrand stores In the, gross revenue for the wholesale channel (sales to multibrand stores) decreased 25.9%, going from R$ million to R$ 94.4 million. This decrease was impacted by two segments,(i) Dudalina brand sales and (ii) a strategy change, reducing sales to online discount stores. There was a 33% decrease on sales of Dudalina brand, with 28% in the men division and 40% in women. We believe that the initiatives for the implementation of the Full Closet Provider" concept, with the product portfolio expansion has potential to improve sales. We are excited about the results of the first step implementing this strategy, and the Madrid collection, launched at the end of March, already has a positive impact on sales. Additionally, the wholesale channel of Restoque was negatively impacted by the decision to reduce sales to online discount stores, keeping only sales for online stores focused at full price. This strategy is related to the substantial drop in the inventory levels and the company's decision that this type of sale could negatively affect their brands over time. Therefore, excluding these sales, Restoque obtained a 2% performance compared to Other channels Comprising the Estoque channel (physical and online stores that sell products from past collections), franchises and e commerce, presented a growth of 10.6% in in comparison with. The Estoque stores, aligned to a strategy focused on products recycling, increased its average discount and achieved a 36.0% growth. This strategy aims to allow a better product mix for the channel, with a greater differentiation to the lines offered at retail full price. Furthermore, it is worth mentioning that we already started, at the end of March, a pilot project for products dedicated to Outlets, which already indicates potential for margin improvements. 7

8 Gross Profit Gross profit in was R$ million (24.8%), representing a 52,9% of gross margin (6,1p.p.). Our gross profit was significantly impacted by the decision to reduce volume purchase from the 3Q15, hindering the pace of novelties. This reduction impacted the inventory levels during the 2S15 and the launch of novelties over. Thus, both the Preview, which usually occurs during the first week of the year, as the launch of our winter collection / 2016 were strongly impacted and postponed. It was not possible to anticipate the inventory recovery and resume the traditional frequency of novelties due to the pace our supply chain, which caused shortages on orders arrivals, negatively impacting our supply for the. By the end of, inventory levels of novelties already have a significant improvement, but the company believes it will be a gradual recovery of the novelties launch throughout the year, with greater strength in the second half of Given the lack of new products arrival and low attractiveness of the 2015 collection, we chose to accelerate cash generation, extending the markdown period. This means, for example, that 63% of the Le Lis stores, which usually have a 10 days markdown period, extended it to almost 2 months. Moreover, Dudalina brands sales drop, although concentrated in the Dudalina brand, pressured production costs. We are addressing this through our new strategy of collections for the Dudalina brand, mentioned above, and plant costs rationalization. Graph 7: Evolution of Gross Profit and Gross Margin (in R$ million and %) Gross Margin (%) Gross Profit (R$Millions) % % 52.9% 8

9 Sales, General and Administrative Expenses (SG&A) The sales, general and administrative expenses, excluding depreciation and amortization, amounted to R$94.5 million. The SG&A, compared with the total of R$97.6 million in, decreased 3.2% and represented 38.0% of net revenues (5.0 p.p.). It is worth to mention that this rationalization was achieved even in an inflationary environment. The synergy gains from the Dudalina merger in 4Q14 allowed the consolidation of departments such as finance, marketing and commercial area. Moreover, the Dudalina manufacturing plants were able to start supplying some product lines to Restoque, mainly shirts and jeans, during, which we believe to have great potential for sales and margin improvement. EBITDA and EBITDA Margin As a result of the strong negative impact in gross profit, arising from the markdown participation and lower volume of full price sales, the EBITDA reached R$ 38.3 million EBITDA (50.0%), with a margin of 15.4%. As explained earlier, we are committed to recover our novelties pace, products availability and the quality of our collections. With these initiatives, we expect to improve our gross profit. We believe that our efforts to reduce SG&A combined with to the synergies from the integration with Dudalina will further generate benefits when we regain our sales and gross profit levels. We also highlight our efforts on the Dudalina full closet provider strategy, achieving good results during its first release of women and men lines within the Madrid collection in March. Financial results, amortization and depreciation Financial results went from a R$ 40.2 million expense in to R$ 38.2 million in, an decrease of 5.0%. We are focusing on cash management efficiency and expect a reduction in interest rates that would positively impact our debt, which is largely indexed to CDI. Depreciation and amortization went from R $ 20.4 million in to R$ 27.2 million in. Net Profit (Loss) In, the net loss was R$24.2 million, compared with the profit of R$15.0 million in. Investments During, R$14.2 million were invested, a 26.6% reduction in comparison to R$19.5 million invested in. These investments refer to the maintenance and refurbishments of existing stores and back office, as well as investments in product development and intangibles. The reduction is a result of fewer stores opening and refurbished. We intend to keep the reduced pace of stores opening and focus on productivity improvement of our current stores. 9

10 Cash Flow Operating cash flow improved R$ 30.5 million, +54.6% compared to. This increase was positively impacted by the optimization of the company's operating cycle, reduced by 63 days YoY (+R$ 60.0 million). This improvement is related to inventory (+R$ 22.0 million) and suppliers (+R$ 10.0 million). Additionally, after investments, operating cash flow improved 47.3%, reflecting the reduction of stores opening and refurbished in. Following the seasonality of previous years, the first quarter is responsible for cash consumption. Change R$ / Change % / In thousand of R$ EBITDA 76,603 38,331 (38,272) 50.0% Current Income tax and Social Contribution (4,321) (3,704) Δ Receivable (32,142) (4,124) Δ Inventories (33,532) (11,526) Δ Suppliers (10,672) (655) Δ Others (51,752) (43,682) Adjusted operating cash flow (55,816) (25,360) 30, % Capex (19,465) (14,282) 5, % Adjusted operating cash flow after investments (75,281) (39,642) 35, % Adjusted operating cash flow after investments (75,281) (39,642) 35, % Financial transactions (6,495) (3,229) Financial Investments (1,684) 35,247 Retirement of securities 43,981 Accounting operating cash flow after investments (39,479) (7,624) 31, % Indebtedness Compared to the Net Debt of 4Q15, there was an R$78.4 million increase in.this seasonal increased was reduced compared to due to the decrease of investments and improvements in the operating cycle. In thousand of R$ 4Q15 Cash and cash equivalents 356, , ,902 Loans and financings, shortterm (368,223) (440,077) (499,792) Loans and financings, longterm (670,796) (593,813) (530,620) Net Debt (682,811) (669,089) (747,510) 10

11 About Restoque Restoque is a leading designer and specialty retailer of women s premium fashion apparel and accessories in Brazil. We currently have 7 brands: Le Lis Blanc, Dudalina, Bo.Bô, John John, Individual, Base e Rosa Chá. Our customers are mainly women and men in the higher income brackets, of a broad age group. We develop a wide product line for a variety of occasions and lifestyles, designing our products. We currently sell our products through company stores, online sales and multibrand stores. We project our image through all aspects of our business, including our premium products, the shopping experience in our stores, and our superior customer service. Dudalina gained notoriety by the quality of its shirts, its main product, combining impeccable cut and a differentiated material. Focused in a highincome public, Dudalina is synonymous of high standards and premium products, whose technology was developed over more than 57 years of history Legal Disclaimer The statements hereby made about future events are subject to risks and uncertainties. Such statements are based on beliefs and suppositions of the Management and information to which the Company has presently access. Statements about future events include information on current intentions, beliefs, or expectations of the Company. The exceptions regarding the statements and information about the future also include information about the possible or presumable operational results, as well as statements that have the following words, or similar expressions, before or after them, or included therein: believes, may, will, continues, expects, anticipates, intends, plans, estimates. The statements and information about the future are not guarantee of performance. They involve risks, uncertainties and suppositions because they refer to future events, depending, therefore, on circumstances that may occur or not. The future results and the creation of value to the shareholders may significantly differ from those expressed or suggested by the statements regarding the future. Many factors that will determine these results and values are beyond the Company s control or prevision ability. 11

12 (Consolidated) Balance Sheet Assets In thousand of R$ % of Total 4Q15 % of Total % of Total Change % / Change % / 4Q15 Current assets Cash and cash equivalents 302, , , (25.5) (23.2) Accounts receivable from clients 146, , , (13.6) 2.4 Inventories 333, , , (16.3) 4.3 Recoverable taxes 17, , , Financial derivative instruments 4, , , , ,181.6 Prepaid expenses 12, , , (12.1) 22.7 Other accounts receivable 30, , , (49.0) (1.8) Total current assets 846, , , (11.5) (5.7) Noncurrent assets Longterm assets Judicial deposits 3, , , Tax credits 8, , , Prepaid expenses (100.0) (100.0) Recoverable taxes (63.2) (64.3) Fixed assets 435, , , (6.1) (3.1) Financial Assets 31, (100.0) Financial derivative instruments 17, , (100.0) (100.0) Intangible 1,894, ,890, ,889, (0.3) (0.0) Total noncurrent assets 2,392, ,383, ,361, (1.3) (0.9) Total Assets 3,239, ,178, ,111, (4.0) (2.1) 12

13 (Consolidated) Balance Sheet Liabilities In thousand of R$ % of Total 4Q15 % of Total % of Total Change % / Change % / 4Q15 Current liabilities Loans and financing 279, , , Debenture 88, , , Accounts payable to suppliers 130, , , (0.4) Tax liabilities 25, , , (28.7) Labor liabilities 48, , , (9.7) (2.3) Tax financing and tax incentives 3, , , Dividends payable (100.0) (100.0) Other accounts payable 35, , , (26.0) (17.3) Capital lease Financial derivative instruments Other advances (85.9) Total current liabilities 614, , , Noncurrent liabilities Longterm liabilities Loans and financing 238, , , (14.1) Debenture 432, , , (66.8) 0.2 Provision for contingencies 84, , , (23.7) (20.2) Accounts payable to suppliers (100.0) (100.0) Tax financing and tax incentives 22, , , (24.7) (13.5) Other accounts payable 4, (100.0) (100.0) Capital lease 15, , , (5.9) (2.0) Income tax and social contribution taxes 5, , , (1.4) (0.4) Total noncurrent liabilities 803, , , (21.3) (11.6) Shareholders equity Capital stock 268, , , Capital reserve 1,678, ,679, ,679, (0.0) Treasury shares (137,018) (4.2) (185,319) (5.8) (185,319) (6.0) 35.3 (0.0) Reserve fund from profit 12, (100.0) Retained earnings (19,558) (0.6) (43,766) (1.4) AAC (833) (0.0) (462) (0.0) (528) (0.0) (36.6) 14.4 Total shareholders equity 1,822, ,742, ,718, (5.7) (1.4) Total Liabilities and Shareholders Equity 3,239, ,178, ,111, (4.0) (2.1) 13

14 (Consolidated) Cash Flow In thousand of R$ 1T15 1T16 From operating activities Income before income and social contribution taxes 15,060 (27,954) Reconciliation of income before income and social contribution taxes to net cash provided by operating activities 54,739 48,634 Depreciation and amortization 21,342 28,112 Fixed assets and Intangible w riteoff (11) Non deliverable forw ard expense (23,131) 14,916 Provision for contingencies (438) (16,319) Interest expenses 28,799 33,935 Foreign exchange variation on financings 28,050 (13,907) Foreign exchange variation on financings 369 1,189 Bad debts 1, Stock options plan (232) Interest expense on capital lease Provision for restructuring (2,214) Ajusted Present Value PRODEC 421 Changes in assets and liabilities (132,109) (49,269) Accounts receivable from clients (32,142) (4,124) Inventories (33,532) (11,526) Recoverable taxes (2,375) (5,193) Prepaid expenses (3,457) (1,772) Related parties accounts payable (2,192) 278 Judicial deposits (309) (33) Accounts payable to suppliers (10,672) (655) Tax liabilities (23,108) (15,364) Labor liabilities (3,462) (1,345) Income tax and social contribution tax (3,704) Other accounts payable (20,949) (5,882) Advances Net cash generated from operating activities (62,310) (28,589) From investment activities Increase in fixed assets (11,619) (3,164) Sale of fixed assets 704 Increase in intangible assets (7,846) (11,822) Financial Investments (1,684) 35,247 Retirement of securities 43,981 Net cash used in investment activities 22,832 20,965 From financing activities with shareholders Loans and financing 978 Loans and financing repayments (150,563) (11,828) Paid interests (9,435) (11,677) Treasury shares 2,979 Capital leasing (350) (348) Dividends distribution (2,880) (258) Non deliverable forw ard payment (925) Net cash used in financing activities with shareholders (159,271) (25,037) Increase (decrease) in cash and cash equivalents (198,749) (32,660) Cash and cash equivalents At the beginning of the year 445, ,625 At the end of the year 247, ,965 Increase (decrease) in cash and cash equivalents (198,749) (32,660) 14

15 Consolidated P&L In thousands of R$ % of Net Revenue % of Net Revenue Change % / Net operating revenue 296, , (16.0) COGS (120,380) (40.7) (116,202) (46.7) (3.5) D&A COGS (931) (0.3) (930) (0.4) (0.1) Gross Profit 174, , (24.8) Operating revenues (expenses) Administrative and general expenses (35,691) (12.1) (42,387) (17.0) 18.8 Selling expenses (61,893) (20.9) (52,099) (21.0) (15.8) Depreciation and amortization expenses (20,410) (6.9) (27,182) (10.9) 33.2 Financial Results (40,202) (13.6) (38,172) (15.4) (5.0) Other revenues and expenses (1,512) (0.5) n.a EBT 15, (27,953) (11.2) n.a Taxes (81) (0.0) 3, n.a Net income 14, (24,207) (9.7) n.a EBITDA 76, , (50.0) 15