Cia. Hering´s 2Q14 results conference call presentation

1. 2Q14 Results
Conference Call
July 25, 2014

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.

3. AGENDA
2Q14 Results
Outlook
Q&A

4. 4
2Q14 OVERVIEW
Gross Revenues (R$ million) Gross Revenues per Channel (R$ million)
Gross revenues of R$ 501.1 million (-3.9%), mainly due to the
macroeconomic scenario and the negative impact of the World Cup on the
apparel retail, besides unfavorable climate in the South and Southeast regions.
2Q13 2Q14
R$ 380.3
R$ 41.7
R$ 29.4
R$ 356.7
R$ 44.1
R$ 29.6
-6.2%
R$ 54.3 R$ 54.5
+0.3%
+5.7%
+0.9%
International
Market R$ 7.9 R$ 10.6+33.0%
R$ 521.2 R$ 501.1-3.9%
257.2 258.1
187.6 161.1
6.7
7.4
54.3
58.3
2Q13 2Q14
Multibrand Retail Franchise Webstore Own Stores
2.6%
+10.9%
+7.3%
0.4%
-14.1

5. 5
1Q14 OVERVIEW
Hering Store network (Sell-out R$ million)
 Temporary price reduction in the basics line,
with consequently increase in its turnover
 Preparation of the stores network for receiving
the new basics
 Punctual promotions in both Autumn and
Winter collections’ items
3.1% sales retraction in the Hering Store network due to the drop in same-store
sales, partially compensated by the expansion in the number of stores.
387.1 387.1 387.1 375.1
+67 Stores -9.9%
2Q13 Expansion SSS 2Q14
-3.1%

6. 6
GROSS PROFIT AND EBITDA
EBITDA impacted by lower sales, higher promotional activity and increase in expenses as
a consequence of the organizational structure changes of the Company.
Gross Profit and Gross Margin EBITDA and EBITDA Margin
200.6
179.9
-10.3%
46.0%
42.9%
47.0%
44.1%
2Q13 2Q14
Gross Profit Gross Margin Cash Gross Margin
116.7
96.9
26.8%
23.1%
-16.9%
2Q13 2Q14
EBITDA EBITDA Margin

7. 7
NET INCOME AND CAPEX
16.5% drop in net income in the quarter, in line with EBTIDA. Investments in IT and
stores, in line with the annual plan.
Net Income (R$ million) Capex (R$ million)
88.8
74.2
20.4%
17.7%
-16.5%
2Q13 2Q14
Net Income Net Margin
2.2
8.15.7
9.3
0.2
1.5
8.5
2.9
16.6
21.8
31.3%
2Q13 2Q14
Stores IT Others Industry

8. 8
CASH FLOW
Cash Flow - Consolidated 2Q13 2Q14 Chg.
EBITDA 116,656 96,894 (19,762)
Non-cash items 2,513 2,655 142
Current Income tax and Social Contribution (32,386) (20,942) 11,444
Working Capital Capex 13,280 32,802 19,522
(Increase) decrease in trade accounts receivable (30,396) (8,403) 21,993
(Increase) decrease in inventories 18,802 32,349 13,547
Increase (decrease) in accounts payable to suppliers (2,565) 11,632 14,197
Increase (decrease) in taxes payable 7,219 (8,881) (16,100)
Others 20,220 6,105 (14,115)
CapEx (16,643) (21,840) (5,197)
Free Cash Flow 83,420 89,569 6,149
R$ 27.5 million Free Cash Flow:
• Positive impact from the lower need of working capital, mainly due to
adjustments in inventory levels.
• Partially oposed by lower operational result and higher invesment level.

9. AGENDA
2Q14 Results
Outlook
Q&A

10. Hering
 New collection planning, with improvements in
product assortment
 Relaunching of the basics (re-modeled and new
products)
10
BUSINESS OUTLOOK
 dzarm.’s new bussiness plan
 Business plan finished with changes in fashion, price
and target consumer, to be announced throughout the
year.
 Challenging scenario remains throughout the year
 Operating results still under pressure
 The actions expected for the upcoming quarters make us better prepared to handle adversities and get
back on the growth track.

11. AGENDA
2Q14 Results
Outlook
Q&A

12. INVESTOR RELATIONS TEAM
Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Bruno Salem Brasil – IR Manager
Daniel Popovich – IR Analyst
Tel. +55 (11) 3371-4867
E-mail: ri@hering.com.br
Website: www.ciahering.com.br/ir