2. DISCLAIMER
This presentation contains forward-looking statements regarding the prospects of
the business, estimates for operating and financial results, and those regarding
Cia. Hering's growth prospects. These are merely projections and, as such, are
based exclusively on the expectations of Cia. Hering management concerning the
future of the business and its continued access to capital to fund the Company’s
business Plan. Such forward-looking statements depend, substantially, on changes
in market conditions, government regulations, competitive pressures, the
performance of the Brazilian economy and the industry, among other factors and
risks disclosed in Cia. Hering’s filed disclosure documents and are, therefore,
subject to change without prior notice.
4. 3Q12 Highlights
Gross Revenue of R$ 388.4 million, up 0.5%;
Sales growth of +2.1% in the Hering brand, +4.1% in Hering Kids, +10.5% in PUC and
-3.6% in dzarm.;
EBITDA of R$ 74.4 million, with EBITDA margin of 23.0%;
Net Income of R$ 54.6 million.
Hering Store Chain:
16 additional stores in 3Q12 and 88 since 3Q11, with a network of 480 stores at the
end of 3Q12
Total sales of R$ 303.0 million (+17.8% overall growth and +1% SSS growth);
4
6. SALES PERFORMANCE
Gross Revenue (R$ million) Domestic Market (R$ million)
8.1% 1,240.9
1,148.0
19.9
18.2
8.1%
3Q11 3Q12
R$ 275.0 +2.1% R$ 280.9
9.6%
0.5% 1,221.0 R$ 31.3 +4.1% R$ 32.6
1,129.8
386.6 388.4 R$ 33.3 +10.5% R$ 36.8
0.7%
8.2 7.5
-9.0% R$ 24.1 -3.6% R$ 23.2
378.4 380.9
3T11 3T12 9M11 9M12
Domestic Market Foreign Market
Gross Sales reached R$ 388.4 million in 3Q12 (+0.5%), still reflecting a challenging
scenario and difficulties experienced in the migration to the new distribution center.
6
7. STORES CHAIN EVOLUTION
535 581
17
472 16 1
1
77
16 76
1 6
5
76
4
464 480
392
3Q11 2Q11 3Q12
Hering Store Hering Kids PUC dzarm. Foreign - Franchised Total
In 3Q12, the Hering Store chain increased by 16 stores and the Company updates the
guidance for the year to 87 new stores, considering the advanced stage of openings
and the continuous interest of our franchisees in opening new stores.
7
8. HERING STORE CHAIN PERFORMANCE
Hering Store Chain Performance 3Q11 3Q12 Chg. 9M11 9M12 Chg.
Number of Stores 392 480 22.4% 392 480 22.4%
Franchise 347 431 24.2% 347 431 24.2%
Owned 45 49 8.9% 45 49 8.9%
(1)
Sales (R$ thousand) 257,321 303,015 17.8% 773,276 897,512 16.1%
Franchise 216,537 258,997 19.6% 645,312 765,628 18.6%
Owned 40,784 44,019 7.9% 127,964 131,884 3.1%
Same Store Sales growth (2) 9.0% 1.0% -8.0 p.p 15.6% -0.2% -15.8 p.p
Sales Area (m²) 51,812 65,205 25.8% 51,812 65,205 25.8%
Sales (R$ per m²) 5,091 4,716 -7.4% 16,161 14,663 -9.3%
Check-Outs 2,626,868 3,113,672 18.5% 7,873,189 8,982,807 14.1%
Units 5,610,529 6,814,849 21.5% 16,747,701 19,400,205 15.8%
Units per Check-Out 2.14 2.19 2.5% 2.13 2.16 1.5%
Average Sales Price (R$) 45.86 44.46 -3.1% 46.17 46.26 0.2%
Average Sales Ticket (R$) 97.96 97.32 -0.7% 98.22 99.91 1.7%
(1)
The amounts referred to the sales to final costumers. (sell out concept)
(2)
Compared to the same period of the previous year
Total sales of Hering Store chain grew 17.8% in 3Q12 due to stores openings, while
same store sales posted an increase of 1%.
8
9. GROSS PROFIT AND EBITDA
Gross Profit and Gross Margin EBITDA and EBITDA Margin
49.3% 27.7% 27.6% -1.0 p.p.
48.4% 26.6%
-4.2 p.p. -2.0 p.p. -4.7 p.p.
46.4% 23.0%
48.1% 45.1% 47.4% -2.2 p.p.
-4.3 p.p.
45.2%
4.3%
43.9%
5.3%
260.7 274.4
447.7 467.1
-16.2%
154.4 -7.9% 142.2 88.8 74.4
3Q11 3Q12 9M12 9M11 3Q11 3Q12 9M11 9M12
Gross Profit Gross Margin Cash Gross Margin EBITDA EBITDA Margin
Greater promotional activity discounts and sales performance below expectations
caused a 4.3 p.p. contraction in gross margin that, combined with higher marketing
expenses, led to a decrease in EBITDA margin by 4.7 p.p.
9
10. NET PROFIT AND CAPEX
Net Profit (R$ million) Capex (R$ million)
19.9% 20.3% 0.0 p.p. 20.3% 39.6
-3.0 p.p.
16.9% 3.4
37.0% 1.5
28.9
13.6
9.3% 7.2
19.9 0.5
50.8% 1.5
210.0 0.3 6.1
192.1 13.2 5.4
-14.2%
1.7
0.2 21.1
4.5 15.1
12.7
63.7 54.6 6.8
3Q11 3Q12 9M11 9M12 3Q11 3Q12 9M11 9M12
Net Income Net Margin Industry IT Other Stores
Weaker operating result causing a decrease in EBITDA and EBITDA margin, partly offset
by higher net financial income, resulted in net margin decline of 3.0 p.p.
10
11. CASH FLOW
Cash Flow - Consolidated (R$ thousand) 3Q11 3Q12 Chg. 9M11 9M12 Chg.
EBITDA 88,800 74,431 (14,369) 260,656 274,414 13,758
Non cash items 603 815 212 1,642 2,556 914
Current Income tax and Social Contribution (23,187) (18,022) 5,165 (65,026) (62,571) 2,455
Working Capital Investment 2,010 48,779 46,769 (37,308) 51,936 89,244
Decrease in trade accounts receivable 34,599 33,835 (764) 5,002 39,101 34,099
Decrease (increase) in inventories (26,047) (10,459) 15,588 (32,712) 3,158 35,870
Increase (decrease) in accounts payable to suppliers (1,675) 20,610 22,285 (11,030) 24,503 35,533
Increase (decrease) in taxes payable 4,466 (1,748) (6,214) 16,027 (16,647) (32,674)
Others (9,333) 6,541 15,874 (14,595) 1,821 16,416
CapEx (13,224) (19,875) (6,651) (28,895) (39,596) (10,701)
Free Cash Flow 55,002 86,128 31,126 131,069 226,739 95,670
Reconciliation from accounting Cash flow to adjusted Cash flow (R$ thousand) 3Q11 3Q12 Chg. 9M11 9M12 Chg.
CFS - Cash provided by operating activities (accounting) 74,217 113,636 39,419 179,712 296,130 116,418
Adjustment – Financial items allocated to operating cash (5,991) (7,633) (1,642) (19,748) (29,795) (10,047)
Unrealized exchange and monetary variation (1,164) (151) 1,013 (3,713) (2,263) 1,450
Financial Result (5,890) (8,082) (2,192) (19,503) (29,612) (10,109)
Interest paid on loans 1,063 600 (463) 3,468 2,080 (1,388)
CFS - Cash flow from investing activities (13,224) (19,875) (6,651) (28,895) (39,596) (10,701)
Free Cash Flow 55,002 86,128 31,126 131,069 226,739 95,670
Increase of R$ 31.1 million in free cash flow, mostly due to lower investments in
working capital, associated with lower level of growth and reduction in inventories of
finished goods versus previous year.
11
12. INDEBTEDNESS
Net Debt (R$ million) Short Term x Long Term
4.6
3.5
Short
0.1 Term
(0.2) (0.2) 98.8%
(0.7) (0.5) (0.7) Long
Term
201.3 184.6 1.2%
11.0
(33.4) (25.1)
(61.9) (207.3) (301.0)
2005 2006 2007 2008 2009 2010 2011 3Q12
Gross Debt = R$ 25.8 million
Net Debt/ EBITDA*
* LTM EBITDA
Cia. Hering closed 3Q12 with a net cash position of R$ 301.0 million and reduced its
debt by R$ 2.1 million.
12
14. OUTLOOK
Market factors as well as internal factors led to a performance below expectations, both
in terms of sales and results throughout past quarters
Actions pursued by the management together with signs of improvement in the
macroeconomic environment tend to normalize sales performance of our brands
High summer showroom has shown increase in demand from both the franchised chain and
the multi-brand retail
Hering brand maintains high growth potential, although not in the same levels from past
years:
Stores openings (update in guidance to 87 in 2012) and SSS growth in Hering Store network
(improvement in product mix offering, visual merchandising actions and increase in stores traffic)
Multibrand retail channel: continuous market share increase in existing clients through distribution
specialization.
Children’s market :
Share increase in the multibrand channel with Hering Kids and PUC brands
Expansion of the Hering Kids format – opening of 20 stores in 2012
Continuous adjustments in PUC chain, with discontinuation / relocation of a few other
operations
Maintenance of the dzarm. strategy, combined with investments in marketing and flagship
stores
Resumption of good performance in online sales, post period of investments and
adjustments 14
15. INVESTOR RELATIONS TEAM
Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Patrícia Salem – IR Manager
Tel. +55 (11) 3371-4867
E-mail: ri@hering.com.br
Website: www.ciahering.com.br/ri
