2Q17 RESULTS. Conference Call: Aug/11th :00 (BZ) / 13:00 (ET) Dial-in: Portuguese: +55 (11) English: +1 (646)

Transcription

1 2Q17 RESULTS Conference Call: Aug/11th :00 (BZ) / 13:00 (ET) Dial-in: Portuguese: +55 (11) English: +1 (646) Access Code: Marisa Webcast: Investor relations team: Adalberto Santos Karina Lozano Lara Razza dri@marisa.com.br

2 São Paulo, August 10th, 2017 Marisa Lojas SA ( Marisa or Company ) (BM&FBOVESPA: AMAR3; Bloomberg: AMAR3:BZ), the largest women apparel and lingerie retailer in Brazil, announces today the results of the 2 nd quarter of 2017 (2Q17). Unless otherwise indicated, information is based on consolidated figures in millions of Reais, according to International Financial Reporting Standards (IFRS). Comparisons refer to 2Q17 over 2Q16. Marisa announces 2Q17 results. Highlights: Retail gross profit of R$ million, increase of 2.5% y/y; Highest retail gross margin over the past 6 years, at 53.5% expansion of 7.7 bps; Net retail revenue decreased -12.3% y/y with same-store-sales of -13.5%, impacted by the calendar effect of winter sale; Retail SG&A increased 5.5% y/y. On a comparable basis, SG&A would have fallen 4.6%; Marisa cards participation in sales increased 60 bps 100bps year to date; Closure of one Marisa store. Operating and Financial Highlights (R$ million, except if otherwise noticed) 2Q16 2Q17 Chg. (%) 6M16 6M17 Chg. (%) Operating Highlights Number of Stores - end of period % % Sales Area ('000m²) - end of period % % Sales Area ('000m²) - average % % Private Label Card (**) Eligible Accounts ('000 accounts) 10,211 10, % 10,211 10, % Active Accounts ('000 accounts) 2,003 1, % 2,003 1, % Co-Branded Card (**) Eligible Accounts ('000 accounts) 1,217 1, % 1,217 1, % Active Accounts ('000 accounts) % % Share of Total Retail with Marisa Cards 44.2% 44.8% 0.6 p.p. 43.2% 44.2% 1.0 p.p. Private Label Card 40.3% 41.2% 0.9 p.p. 39.3% 40.5% 1.2 p.p. Co-Branded Card 3.8% 3.6% -0.2 p.p. 3.9% 3.6% -0.3 p.p. Financial Highlights RETAIL NET REVENUES % 1, % SSS(*) 3.2% -13.5% -1.4% -8.5% Retail Gross Profit % % Gross Margin 45.8% 53.5% 7.7 p.p. 48.7% 52.5% 3.8 p.p. Retail SG&A (261.1) (275.6) 5.5% (512.0) (539.6) 5.4% Retail EBITDA % % Retail EBITDA Margin 4.8% 2.0% -2.9 p.p. 2.1% 3.5% 1.4 p.p. FPS EBITDA % % Total EBITDA % % % of Retail Rev. 9.7% 7.7% -2.0 p.p. 10.4% 14.4% 4.0 p.p. Net Profit (18.4) (24.4) 32.5% (35.6) (9.6) -72.9% Net Margin -2.9% -4.5% -1.5 p.p. -3.3% -1.0% 2.3 p.p. Notes: *) Stores with more than 13 months of operation. **) Eligible Accounts: total number of social security numbers (CPFs) registered, excluding, cancelled and blocked. In the case of Private Label as well as Co-branded (within Marisa), Active Accounts are those that shopped in Marisa within the past six months. On average, each Private Label Account contains 1.12 active cards (considering the card holder has additional cards), whilst 1.14 in the case of Co- Branded.Accounts. 2Q17 Results page 2

3 Management s comments In the second quarter of 2017 we remain focused on implementing TransforMAR initiatives - started in the second half of which objective is to eliminate, in a structural way, important gaps identified in our operation. We are also evolving in the execution, learning and consistency of the company's new go-to-market strategy, which seeks to increase the synchronism of all actions in the company's commercial calendar. On the retail side, the top line remained weak, similar to the 1Q17 performance. We noticed in this quarter that the same price dispute in stores located in more popular regions happened also in mall stores, with many small and medium retailers anticipating their winter sales to the second half of June a move not followed by Marisa, who kept the margin preservation strategy. It is worth noting that the margin improvement happened in all months of the quarter, even in the face of the most competitive scenario. The investments in marketing, now carried out in synchronism with the other promotional actions of the retail and of FPS, continued reinforced. In order to maintain consistency in our communication strategy with our clients, this quarter we launched another national media campaign. This campaign, in honor of Mother's Day, starred Tania Khalill and her daughters, with the proposal to highlight the characteristic of complicity between the Marisa brand and our costumer. In Financial Products and Services (FPS), also aligned with the new go-to-market strategy, we continue to gain participation of the Marisa Cards in our sales. Such instrument is an important lever not only to improve our profitability, but also to strengthen the relationship with our clients. On the other hand, the implementation phase of the TransforMAR Program continues at an advanced pace, already presenting important results on some of its fronts. In addition to additional gains in the efficiency of FPS area and SG&A, initiatives related to the revision of our organizational structure of the Commercial and Operations areas were implemented and are already beginning to bring the first results. Surveys and pilots have allowed us to better understand the behavior and preference of our customers, so we can adjust our products, stores and communication model in an assertive way. Finally, we continue to advance in the adjustment of the company's leadership team, especially with the entry of the new Operations Director, Marcelo Pimentel, who has more than 20 years of retail experience - with emphasis on store operations and processes. These changes, coupled with the improvements in governance and the efficiency gains achieved in the last two years, should leave Marisa ready to leverage its results as soon as the resumption of sales begins. Subsequent events As announced to the market on July 21, 2017, the Company contracted a R$ 80,000,000 (eighty million reais) loan. This fund-raising, with Banco Santander, has a rate of % of the CDI and will be amortized semiannually from January 2019, with maturity of the last installment in January The net resources obtained through this funding will be used to reinforce cash and extend the Company's debt profile. 2Q17 Results page 3

4 Retail Retail P&L (R$mn) 2Q16 2Q17 Chg. (%) 6M16 6M17 Chg. (%) GROSS REVENUE % 1, , % Taxes on Sales (232.6) (187.5) -19.4% (399.7) (343.5) -14.1% % taxes/gross revenues -27.1% -25.5% 1.6 p.p % -25.6% 1.4 p.p. NET REVENUE % 1, % S.S.S. 3.2% -13.5% -1.4% -8.5% CoGS (338.5) (254.7) -24.8% (553.7) (473.7) -14.4% GROSS PROFIT % % Gross margin 45.8% 53.5% 7.7 p.p. 48.7% 52.5% 3.8 p.p. OpEx (261.1) (275.6) 5.5% (512.0) (539.6) 5.4% - Selling Expenses (220.3) (221.8) 0.6% (434.9) (440.9) 1.4% - G&A Expenses (40.7) (53.8) 32.1% (77.1) (98.8) 28.0% Other Operating Expenses/Reven 5.5 (6.4) n.m n.m. RETAIL EBITDA % % n.m. - non-meaningful NET SALES: Net retail revenue decreased by 12.3% compared to 2Q16. In the SSS concept, the drop was 13.5%. If adjusted for the effect of the winter sales - which in 2016 started in June - the drop in "same stores" would be 6.4%, sales performance similar to 1Q17. This reduction continues to be mainly due to the lower number of items sold, derived from the lower flow of customers. As previously mentioned, there was also an aggressive competition action, not only in street stores, but also in shopping malls. GROSS PROFIT AND MARGIN: Despite the calendar effect of winter sales, gross margin expansion, of 7.7bps, more than offset the drop in sales, resulting in the expansion of gross profit of 2.5%, reaching R$ 293 million. Such variation is partially reflected - in the order of 3.2pp - of the aforementioned calendar effect, and also reflects the maintenance of inventory health. It should be noted that the growth in the stock balance in June/17 (31%) is, for the most part, also a reflection of the calendar effect, associated to specific adjustments in some categories where small coverage imbalances were detected. Despite this increase, quality and aging remain at adequate levels. Gross Profit (R$ mn) and Margin % 53.5% 48.8% 48.7% 48.9% 45.8% Q13 2Q14 2Q15 2Q16 2Q17 SELLING EXPENSES: grew 0.6%, reaching R$ 220 million, nominally stable in the last 3 years. Excluding the higher level of marketing expenses made in 2Q17, in the incremental amount of R$ 11.5 million, selling expenses would have been reduced in nominal terms by 4.3% in relation to 2Q16. This reduction is the combination of efforts to several efficiency gains initiatives under the TransforMAR Program, especially those related to the better management of employee staff in stores and the renegotiation of rents. Selling Expenses (R$ mn) Q13 2Q14 2Q15 2Q16 2Q17 2Q17 Results page 4

5 GENERAL AND ADMINISTRATIVE EXPENSES: reached R$ 54 million, an increase of 32% over 2Q16. This growth is mainly related to the non-recurring expenses incurred in the restructuring of the company in the amount of R$ 15mm, made under the TransforMAR Program. If excluded, G&A would have reported a reduction of 4.9%. General and Administrative Expenses (R$ mn) Q13 2Q14 2Q15 2Q16 2Q17 Combined, the Company's SG&A grew by 5.5% in 2Q17, reaching R$ million. With the adjustments of the non-comparable items mentioned above (investments in marketing and restructuring expenses) SG&A would have been reduced by 4.6% in relation to 2Q16. This result reflects once again the continued efforts of the management to adapt the operating structure to a more challenging scenario, without compromising the necessary investments for the recovery of sales and resumption of growth. OTHER OPERATIONAL REVENUES/EXPENSES: The variation in this group of accounts - essentially consisting of losses and provisions for contingencies in general - was amplified due to the combination of two different events occurred in 2Q16 and 2Q17. In 2Q16, the group of accounts was strongly and positively impacted by reversals due to the increase in Marisa's success rate in court proceedings - result of (+) R$ 5.5 million. Already in this quarter, the impact was negative, due to the higher constitutions of provisions due to the increase in number of lawsuits result of (-) R$ 6.4 million. RETAIL EBITDA: Retail EBITDA was positive by R$ 10.7 million, compared to an EBITDA of R$ 30.1 million in 2Q16. In addition to the calendar effect of the winter sales, 2Q17 was also impacted by the non-recurring general and administrative expenses, as well as a greater investment in marketing, in addition to the variation of provisions for contingencies. On a more comparable basis, that is, excluding non-recurring G&A expenses in 2Q17, in addition to the changes in "Other Revenues and Expenses" in both periods, retail EBITDA would have grown 30% in relation to 2Q16 - already absorbing the largest investment in marketing. 2Q17 Results page 5

6 Financial Products and Services Financial Product Services (R$ mm) 2Q16 2Q17 Chg. (%) 6M16 6M17 Chg. (%) Private Label Card Interest Revenues, net of Funding costs % % Financial Services Revenue % % Net Loss from Recovery (53.5) (63.9) 19.4% (89.1) (83.8) -6.0% Contribution Margin - Private Label % % Personal Loans Interest Revenues, net of Funding costs % % Net Loss from Recovery (9.9) (4.1) -58.9% (22.1) (11.8) -46.5% Contribution Margin - Personal Loans % % Contribution Margin - Co-Branded % % OpEx (71.3) (74.6) 4.5% (123.7) (143.9) 16.4% FPS EBITDA % % PRIVATE LABEL CARD: Net interest revenue rose 4.7%, mainly due to the continuous increase of the Private Label penetration on the Company's sales 40.3%, compared to 41.2% in 2Q16. The higher share of sales with interest 0+8 product in recent quarters also contributed to the increase. Financial services revenue increased by 5.2% in the period, mainly as a result of the recognition of deferred revenue as a result of the renewal of the partnership with Assurant Seguradora - see the announcement to the market in March 2017 Net Losses grew by 19.4% in relation to 2Q16 due to two factors. The first, related to the greater penetration of the product 0+8 in the sales of previous quarters. The second, refers to the lower credit recovery - around R $ 3.4 million - derived from the sale of the portfolio over 360 days in 1Q17. Excluding this effect, the losses would have increased by 13%. However, prospective default indicators do not indicate any further deterioration in the portfolio. Portfolio losses Private Label EFICC Private Label 11.6% 11.4% 9.7% 12.0% 9% 8.7% 6% 38.4% 44.1% 43.4% 38.3% 40.5% 2Q13 2Q14 2Q15 2Q16 2Q17 % Overdue / Receivables Net Loss / Receivables 3% jan feb mar apr may jun jul aug sep oct nov dec PERSONAL LOANS: Net Interest Revenue increased by 10.8% compared to 2Q16, to R$ 35.9 million. The increase in net revenues derives mainly from the better composition of the portfolio, as a result of a healthier and more assertive credit concession, primarily for Marisa Card customers. Net Losses fell 58.9% in relation to 2Q16, mainly impacted by the sale of the receivables portfolio over 360 days, in the amount of 2Q17 Results page 6

7 R$ 5.8 million, in the period. Excluding this effect, however, losses in 2Q17 would continue at the same level as in the previous year. Also in the case of the Personal Loan, the prospective indicators do not indicate future deterioration - EFICC in the lowest historical indexes. Portfolio losses Personal Loans EFICC Personal Loans 11.6% 9.0% 6.3% 6.8% 2.7% 32.9% 37.0% 23.6% 28.3% 25.9% 2Q13 2Q14 2Q15 2Q16 2Q17 % Overdue / Receivables Net Loss / Receivables 10% 8% 6% 4% jan feb mar apr may jun jul aug sep oct nov dec CO-BRANDED CARD: The Contribution of the product remained stable at R$ 24.1 million, indicating a certain stability of the operation, in addition to maintaining the health of the portfolio. OPERATING COSTS AND EXPENSES: Recurring expenses reached R$ 74.6 million, an increase of 4.5% over 2Q16, also due to the greater investments in marketing, as well as expenses related to the TransforMAR Program. FPS EBITDA: The consolidated EBITDA of the FPS operation increased by 3.2% in relation to 2Q16, reaching R $ 31.6 million. Receivables Receivables account (R$ mn) jun-16 mar-17 jun-17 Private Label - gross receivables Not Yet Due: % Not yet due over portfolio 61.7% 58.8% 59.5% Overdue: % Overdue over portfolio 38.3% 41.2% 40.5% Allowance for Losses (56.8) (45.4) (67.9) Personal loans - gross receivables Not Yet Due: % Not yet due over portfolio 63.0% 73.3% 74.1% Overdue: % Overdue over portfolio 37.0% 26.7% 25.9% Allowance for losses (50.1) (33.7) (34.9) Private Label receivables closed Jun/17 at R$ million, down 3% from Jun/16. Despite the increase in the participation of Marisa Card, the drop in the portfolio is a result of a lower level of retail sales. The portfolio's past due portion, as a percentage of the total portfolio, reached 40.5% in Jun/17 against 38.3% in Jun/16. This increase was mainly due to a higher penetration of sales of the 0+8 product in previous quarters. The receivables portfolio related to the Personal Loans ended Jun/17 at R$ million, 1.7% higher than the Jun/16 balance sheet. The composition of this portfolio, however, is much healthier, since the share of current receivables jumped from 63% in Jun/16 to 74.1% in Jun/17. Other receivables Adjustment to Present Value (6.5) (4.8) (4.7) Receivables account, net Q17 Results page 7

8 Net Debt and Financial Result The Company closed 2Q17 with net debt of R$ million, 1.5% lower than 2Q16, mainly due to evasive amortizations between periods, in the amount of R$ 181 mn. The Net Financial Result was a negative R$ 30.7 million, 14% below the 2Q16. The main reduction was in interest expenses and monetary correction, affected both by the reduction in interest rates and by the aforementioned amortizations.. The company's leverage remained at comfortable levels, both on the balance sheet point of view and in relation to the EBITDA, remaining at 2.5x level. Net Debt (R$ million) 2Q16 2Q17 Net Debt Gross Debt (A) Short term debt Long term debt Cash and equivalents (B) Net debt (A) Shareholder equity (B) 1, ,000.8 Total Capital (A+B) 1, ,527.6 Financial Leverage Gross debt / (Gross debt + Equity) 48% 45% Net debt / (Net debt + Equity) 33% 34% Net debt / EBITDA LTM (x) 2.0x 2.5x Financial Expenses & Revenues - R$ mn 2Q16 2Q17 Financial Expenses (A) (51.7) (39.3) Interest & monetary correction exp. (29.0) (16.8) Adjustment to Present Value (11.3) (14.4) Financial Instruments & other (11.4) (8.1) Financial Revenues (B) Interest Income Other Total (35.8) (30.7) Average Cost (% cdi) Loans and Financing 111.9% Cash and cash equivalents 93.3% Cash Flow CASH FLOW (R$ million) 6M16 6M17 EBITDA 112, ,777 - Income Tax 12,104 (28,315) GROSS CASH FLOW 124, ,462 Working Capital (30,368) (169,515) Investments (60,543) (23,831) CASH FROM OPERATIONS 33,199 (77,884) In 2Q17, the Company obtained its operational cash generation affected by the greater allocation of resources in working capital, derived primarily from the larger inventory balance. The increase in inventories derives from the postponement of winter sales, but also has its effect enhanced by punctual realignments in the inventories of some key categories. Despite higher cash consumption in 2Q17, the Company ended the quarter with a Net Debt/EBITDA ratio of 2.5x, a level considered comfortable to the industry. Equity 241 1,285 Debt (133,239) (66,699) Increase (decrease) in Cash and Cash (99,799) (143,298) Initial Cash Balance 551, ,058 Final Cash Balance 451, ,760 Net Debt 534, ,827 Net Debt/EBITDA L12M 2.0x 2.5x 2Q17 Results page 8

9 EXHIBITS Consolidated Operating Income CONSOLIDATED 2Q16 2Q17 Chg. (%) 6M16 6M17 Chg. (%) GROSS REVENUE 1,017, , % 1,798,623 1,684, % Retail - Gross Revenue 856, , % 1,478,003 1,340, % FPS - Gross Revenue 160, , % 320, , % Taxes on Sales (235,955) (194,294) -17.7% (408,732) (356,993) -12.7% Retail - Taxes on Sales (232,554) (187,484) -19.4% (399,670) (343,459) -14.1% FPS - Taxes on Sales (3,401) (6,810) 100.2% (9,062) (13,534) 49.3% NET REVENUE 781, , % 1,389,891 1,327, % Retail - Net Revenue 624, , % 1,078, , % FPS - Net Revenue 157, , % 311, , % CoGS (448,304) (370,253) -17.4% (760,142) (665,207) -12.5% Retail - CoGS (338,452) (254,659) -24.8% (553,664) (473,725) -14.4% FPS - CoGS (109,852) (115,594) 5.2% (206,478) (191,482) -7.3% GROSS PROFIT 333, , % 629, , % Retail - Gross Profit 285, , % 524, , % FPS - Gross Profit 47,457 48, % 105, , % OpEx (275,255) (289,880) 5.3% (537,673) (565,779) 5.2% Retail - Sales Expenses (220,348) (221,752) 0.6% (434,892) (440,873) 1.4% Retail - G&A Expenses (40,738) (53,800) 32.1% (77,125) (98,757) 28.0% FPS - G&A Expenses (14,169) (14,328) 1.1% (25,656) (26,149) 1.9% Other Operating Expenses/Revenues 2,831 (9,395) n.m. 19,930 47,644 n.m. Retail - Other Operating Expenses/Revenues 5,528 (6,430) n.m. 9,666 51,381 n.m. FPS - Other Operating Expenses/Revenues (2,697) (2,965) 9.9% 10,264 (3,737) n.m. EBITDA 60,676 42, % 112, , % Retail - EBITDA 30,085 10, % 22,318 34, % FPS - EBITDA 30,591 31, % 89, , % - D&A (43,990) (38,629) -12.2% (86,727) (77,977) -10.1% - Financeial Expenses, net (35,771) (30,682) -14.2% (70,835) (64,463) -9.0% Net Profit before Taxes (19,085) (27,150) 42.3% (45,556) 1,337 n.m. - Income Tax 680 2,771 n.m. 9,970 (10,970) n.m. Net Profit (18,405) (24,379) 32.5% (35,586) (9,633) -72.9% n.m. - non-meaningful 2Q17 Results page 9

10 Balance Sheet Balance Sheet ASSETS (R$ million) Jun-16 Jun-17 Chg. (%) CURRENT ASSETS 1,732,357 1,559, % Cash and cash equivalents 451, , % Securities 225 3, % Accounts receivables 749, , % Inventories 333, , % Recoverable Taxes 85,429 44, % Income Tax & Social Contribution 17,043 66, % Other Credits 94,576 85, % NONCURRENT ASSETS Def. Income and social c. taxes 318, , % Recoverable taxes 1,812 2, % Judicial deposits 74, , % Securities 15,931 27, % Related parties - 1,502 n.a Investments 17,549 17, % PP&E 434, , % Intangible assets 148, , % Total Noncurrent Assets 1,011,881 1,048, % TOTAL ASSETS 2,744,238 2,607, % LIABILITIES (R$ million) Jun-16 Jun-17 Chg. (%) CURRENT ASSETS 799,974 1,120, % Accounts payable 240, , % Accounts payable - 15,541 n.a Loans and Financing 280, , % Accrued payroll and related changes 74,124 79, % Taxes payables 56,223 36, % Financial Instruments 64,034 30, % Rentals payable 17,606 22, % Income Tax & Social Contribution 9,261 19, % Deferred revenues 2,815 22, % Other payables 54,654 68, % NONCURRENT ASSETS 874, , % Loans and financing 706, , % Provisions for judicial contingencies 135,171 94, % Deferred revenues 33,074 86, % SHAREHOLDER EQUITY 1,069,897 1,006, % Paid in Capital 899, , % Earnings reserve 240, , % Stock Option reserve 9,237 2, % Other comprehensive income (8,472) (2,802) -66.9% Accrued profits (71,349) (9,632) -86.5% TOTAL LIABILITIES AND SHAREHOLDER EQUITY 2,744,238 2,607, % 2Q17 Results page 10

11 Indirect Cash Flow CASH FLOW FROM OPERATING ACTIVITIES 6M16 6M17 Net Loss in the period (35,585) (9,632) Adjusts in order to reconcile: Depreciation and amortization 86,727 77,977 Net book value of fixed asset disposal 2,124 10,021 Provision for deliquency (8,957) 19,093 Provision for inventories (21,707) (14,814) Stock option plan 135 1,285 Financial instruments 71,936 2,744 Financial charges and exchange variation on financing, loans and tax liabilities 14,137 44,077 Deferred income tax and social contribution (46,915) (45,174) Deferred income amortization (19,657) (4,339) Provision for litigation and lawsuits 40,448 (61,051) Changes in Operating Assets Receivables 90,310 10,405 Inventories 17,933 (84,512) Securities (3,032) (228) Recoverable taxes (22,197) (10,032) Related parties 7, Escrow deposits (18,419) (23,524) Other receivables (55,137) (22,861) Changes in Operating Liabilities Suppliers 35,204 26,036 Suppliers w/ agreement - (962) Taxes payable (21,999) 16,326 Salaries, provisions and social charges 6,264 4,294 Related parties (2,301) (6,604) Litigation and lawsuits paid (1,973) (8,304) Rent payable (4,923) (1,408) Deferred income - 75,000 Other ayables 1,390 (1,007) Cash from operating activities 111,060 (7,167) Income tax and social contribution paid (24,855) (52,738) Net cash generation from operating activities 86,205 (59,905) CASH FROM INVESTING ACTIVITIES (60,543) (23,830) Acquisition of fixed assets (44,040) (9,283) Acquisition of intangible assets (16,503) (14,547) CASH FROM FINANCING ACTIVITIES (125,460) (59,561) New Financing - third parties 70,888 13,360 Amortization (145,703) (37,701) Interest paid (50,644) (35,219) CASH AND EQUIVALENTS GENERATION (99,798) (143,296) At the beginning of the period 551, ,058 At the end of the period 451, ,761 2Q17 Results page 11