3. DISCLAIMER
This presentation contains Company’s business plan.
forward-looking statements Such forward-looking
regarding the prospects of statements depend,
the business, estimates for substantially, on changes in
operating and financial market conditions,
results, and those regarding government regulations,
Cia. Hering's growth competitive pressures, the
prospects. These are merely performance of the Brazilian
projections and, as such, are economy and the industry,
based exclusively on the among other factors and
expectations of Cia. Hering risks disclosed in Cia.
management concerning Hering’s filed disclosure
the future of the business documents and are,
and its continued access to therefore, subject to change
capital to fund the without prior notice.
5. 2Q10 Highlights
MAIN INDICATORS
Gross Revenue grew 46,5% totaling R$ 306.7 million
Sales increased over 35% for the three brands
+ 21.7% same-store sales in the Hering Store chain
same-
EBITDA Margin of 27.4% reaching an EBITDA of R$ 69.3 million (+113.2%)
Net profit with 290.1% growth totaling R$ 42.6 million.
.
OTHER HIGHLIGHTS
Opening of 14 Hering Stores and 2 PUC Stores
Same store sales of 15.4% in the PUC store chain
CapEx’s Review for 2010: from R$ 58.7 million to R$ 86.7 million
Dividend Payment and Interest on Equity approval in the 2H10 amounting R$
27.1 million 5
7. Sales Performance
Gross Revenue (R$ million)
42.8% 540.4
9.9
378.5 17.2%
46.5%
306.7
8.4
43.4%
209.3 30.7% 4.6 530.6
3.5 370.0
302.1
46.8%
205.8
2Q09 2Q10 1H09 1H10
Domestic Market Foreign Market Total
In the 2Q10, the Gross Revenue grew 46.5% reaching R$ 306.7
46.5%,
million and the domestic market was responsible for 98.5% for Cia.
Hering sales. 7
8. Sales Performance (cont.)
Domestic Market (R$ million)
2Q09 2Q10
+48.7%
R$ 171.6 R$ 255.1 Hering
84%
+36.3% PUC
7%
R$ 16.9 R$ 23.0 dzarm.
6%
Other
2%
+42.9%
R$ 12.6 + R$ 18.0
+
Over 35% growth for the three brands: Hering (48.7%), PUC
brands:
(36.3%) and dzarm (42.9%), of which Hering accounted for 84% of
the total sales. 8
9. Distribution Chain – Hering Store and PUC
Store Chain Evolution
420
382 15
329 15 80
22 75
63
292 325
244
* estimated
2Q09 2Q10 2010*
Total Hering Store Total PUC Foreign - Franchised
48 Hering Stores and 12 PUC Stores were opened compared to the
2Q09, and the Company maintains the forecast to end 2010 with
325 HS and 80 PUC. 9
10. Hering Store Chain Performance
Hering Store Performance 2Q09 2Q10 Chg. 1H09 1H10 Chg.
Number of Stores 244 292 19.7% 244 292 19.7%
Franchise 205 251 22.4% 205 251 22.4%
Owned 39 41 5.1% 39 41 5.1%
Sales (R$ thousand) (1) 162,989 227,161 39.4% 259,352 364,524 40.6%
Franchise 130,884 185,827 42.0% 207,208 294,797 42.3%
Owned 32,105 41,334 28.7% 52,143 69,726 33.7%
Same Store Sales growth (2) 29.3% 21.7% -7.6 p.p. 25.3% 23.5% -1.8 p.p.
Sales Area (m²) 31,275 37,168 18.8% 31,275 37,168 18.8%
Sales (R$ per m²) 5,301 6,186 16.7% 8,537 10,064 17.9%
Check-
Check-Outs 1,607,123 2,244,418 39.7% 2,880,353 4,030,106 39.9%
Units 3,598,040 4,881,751 35.7% 6,494,812 8,867,474 36.5%
Check-
Units per Check-Out 2.24 2.18 -2.7% 2.25 2.20 -2.2%
Average Sales Price (R$) 45.30 46.53 2.7% 39.93 41.11 3.0%
Average Sales Ticket (R$) 101.42 101.21 -0.2% 90.04 90.45 0.5%
(1)
The amounts referred to the sales to final costumers. (sell out concept)
(2)
Compared to the same period of the previous year
The SSS of the Hering Store chain reached +21.7% in the 2Q10,
mainly boosted by the increase in the store traffic (+39.7%).
10
11. Gross Profit and Gross Margin
Gross Profit (R$ million) and Gross Margin (%)
49.8% +4.8 p.p.
47.9% +4.5 p.p.
49.9% 45.0%
46.3% 48.2% 43.4%
+3.6 p.p.
60.3%
+3.3 p.p. 44.9%
59.3%
214.2
121.8 133.6
76.5
2Q09 2Q10 1H09 1H10
Gross Margin Gross Margin Cash
The Gross Profit Cash (without depreciation) rose 3.6 p.p.
compared to the 2Q09 and reached 49.9% in this quarter.
11
12. EBITDA and EBITDA Margin
EBITDA (R$ million) and EBITDA Margin (%)
27.4% +8.3 p.p. 26.0% +8.7 p.p.
19.1% 17.3%
118.4%
113.2%
116.5
69.3
53.3
32.5
2Q09 2Q10 1H09 1H10
EBITDA Margin
The EBITDA reached R$ 69.3 million, with 113.2% growth in the 2Q10 and
million,
an EBITDA Margin of 27.4% (+8.3 p.p.)
p.p.)
12
13. EBITDA and EBITDA Margin (cont.)
EBITDA (R$ million) and EBITDA Margin (%) – Quarter Variation
11.0
6.6 4.4%
1.3 5.3 2.6%
0.3% 1.7%
15.1
69.3
27.4%
19.1%
32.5
Mg EBITDA Deduction Tax Net Gross SG&A Mg EBITDA
EBITDA Sales Deduction Tax Net Gross SG&A EBITDA
2Q09 Growth Incentives Margin (ex Dilution 1Q10
2Q09 Incentives Margin (ex Dilution 1Q10
TI and ded) TI and ded)
The EBITDA and the EBITDA Margin increased were mainly due to the
(i) sales growth; (ii) the dilution of fixed costs and operational
growth;
expenses; iii) cost of good sold optimization and; iv) tax incentives
incentives. 13
14. Net Profit
Net Profit (R$ million) and Net Margin (%)
16.2% 2.2 p.p.
16.8% 10.4 p.p. 14.0%
6.4%
67.9%
290.1%
72.5
42.6 43.2
10.9
2Q09 2Q10 1H09 1H10
Net Margin
The Net Profit growth was positively affected by the negative impact of
the exchange variation on deferred taxes in 2Q09 If this effect was not
2Q09.
considered, the Net Profit growth in the 2Q10 would have been 62.8%.
14
15. CapEx
By Activity (R$ million) CapEx Revision for 2010
From R$ 58.7 to R$ 86.7 million
208.1%
34.8
Capex Capex 2010
23.5 8.2 2010 reviewed
388.4%
0.9 Stores 20.0 27.4
3.5
7.5 11.3 Industry 28.1 48.2
4.8 0.7 IT/Others 10.6 11.1
2.8
22.1 Total 58.7 86.7
4.7 0.3
2.4 12.5 In R$ Million
0.1 2.0
1.3 4.3
1.1
2Q09 2Q10 1H09 1H10
Industry IT Other Stores
In this quarter R$ 23.5 million was invested and due to the growth
over the estimates Cia. Hering’s CapEx for 2010 was revised in order
estimates,
to meet the market demands. 15
16. Cash Flow
thousand)
Cash Flow (R$ thousand )
Cash Flow - Consolidated 2Q09 2Q10 Chg. 1H09 1H10 Chg.
EBITDA 32.493 69.287 36.794 53.339 116.513 63.174
No cash items 159 251 92 315 537 222
Current IR&CS (7.944) (23.134) (15.190) (10.709) (31.709) (21.000)
Cash Flow Capex (15.890) (9.610) 6.280 4.991 16.979 11.988
Increase in trade accounts receivable (24.069) (47.376) (23.307) (13.048) (17.760) (4.712)
Decrease (increase) in inventories 1.716 896 (820) (15.475) (10.777) 4.698
Increase in accounts payable to suppliers 9.628 15.639 6.011 23.219 26.920 3.701
Increase (decrease) in taxes payable (6.293) 10.250 16.543 873 12.478 11.605
Others 3.128 10.981 7.853 9.422 6.118 (3.304)
CapEx (4.810) (23.488) (18.678) (11.326) (33.581) (22.255)
Free Cash Flow 4.008 13.306 9.298 36.610 68.739 32.129
The free cash flow reached R$ 13.3 million in the 2Q10 due to the
EBITDA growth, as well as the less need of investments in working
growth,
capital. 16
17. Indebtedness
Net Debt (R$ million) Short Term x Long Term
4.6 3.5
-0.7 0.1 -0.2 -0.3
Long
Term,
Short 80.7%
201.3 184.6 Term,
19.3%
-33.4 11.0 -25.1
-72.4
2005 2006 2007 2008 2009 2Q10
Debt=
Gross Debt= R$ 49.3 million
Net Debt / EBITDA*
* Last 12 months EBITDA
Cia. Hering ended the 2Q10 with R$ 72.4 of Net Cash and the lower
Cash,
amount (compared to the R$ 77. 2 million in the 2Q09) was due to the
May,
payment of dividends amouting R$ 19.7 million on May, 2010. 17
18. Shareholder Remuneration
Dividends
Payment of R$ 19.7 million on May 3, 2010, of which R$ 0,36 per
share.
share
The Company’s Board of Directors at a meeting held on July 28, 2010
approved the distribution of dividends in the amount of R$ 17.6 million
(R$ 0.325 per share) and Payment of Interest on Equity in the amount
of R$ 9.5 million (R$ 0,175 per share) totaling R$ 27.1 million (R$
share),
0.50 per share) to be paid in the 3Q10.
share),
18
20. Outlooks
Hering
• Chain expansion: to end 2010 with 325 stores and open 80 more until 2012
• Total sales growth as well as the SSS in the store chain
• Campaign “I am / I wear Hering” with new approach
• Actions with the Hering Store Card and Hering Webstore
Webstore.
Children Market with opportunities to be explored.
• Launch of the flagship pilot store project for Hering Kids and Hering Kids + PUC
• Growth in the multibrand retail sales as well as same clients sales
sales.
• brands:
Assortment and Price Adjustment for the brands : Hering Kids (Value &
Moderate) and PUC (Better & Premium).
dzarm.
dzarm .
• Continuity of repositioning plan: casual jeans concept
plan:
• Marketing Campaign with celebrities .
celebrities.
20
21. INVESTOR RELATION TEAM
Fabio Hering - President
Frederico Oldani – Finance and IR Director
Karina Koerich – IR Manager
Gracila Camargo Lopes – IR Analyst
Admar A. Topazio Junior – IR Analyst
Tel. +55 (47) 3321-3469
E-mail: ri@heringnet.com.br
Website: www.ciahering.com.br/ir
FIRB – Financial Investor Relations Brasil
Tel. +55 (11) 3897-6857
E-mail: ligia.montagnani@firb.com
