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. Highlights
MAIN INDICATORS
• 2009 total gross revenue: +39.4%, of which +44.5% in the domestic
market;
• EBITDA of R$ 154 MM and EBITDA Margin of 21.4% in 2009 (+4.0 p.p.);
• Hering Store Same-store sales: + 27.2% in 2009 and +32.6% in the 4Q09;
• Hering brand sales +50.6%, PUC +18.1% and dzarm. +34.9% in the 4Q09.
OTHER HIGHLIGHTS
• Opening of 46 Hering Stores in 2009, 3 over the forecasted;
• Opening of15 PUC Stores, 10 in the 4Q09 (4 over the forecasted);
• Dzarm. repositiong plan execution shows its results with a 34.9% sales
growth in the 4Q09;
• The hybrid production model assured to attend production volumes over
4
the forecasted.
6. Sales Performance
Gross Revenue (R$ million)
39.4%
877.0
15.4
53.3%
629.2
33.0
44.5%
861.6
43.4%
287.7
200.6 42.6%
3.0 596.2
5.2
284.7
195.5
45.7%
4Q08 4Q09 2008 2009
Foreign Market Domestic Market Total
With na expressive 43.4% growth in the 4Q09, the gross revenue
reached R$ 877.0 million in 2009 (+39.4%).
6
7. Sales Performance (cont.)
Domestic Market (R$ million)
2008 2009
+50.1%
R$ 473.8 R$ 711.0
+26.5% 83% 9%
R$ 61.9 R$ 78.4
6%
+14.0%
R$ 47.6 R$ 54.2
Highlight for the double digit growth of the three brands, specially
for Hering which represented 83% of the sales.
8. Distribution network- Hering Store and PUC
Evolution of the Distribution Network
416
Goal: 70
365 (+ 4 stores) 15
Goal: 57
311 (+ 2 stores)
15 76
248 22 74
209 59 Goal: 273
23 Goal: 224 (+ 3 stores)
19 Goal: 172 (+ 6 stores)
44 (+ 9 stores)
39 325
276
230
181
151
2006 2007 2008 2009 2010*
Abroad PUC Hering Store Total
* estimated
In 2009, we opened 46 Hering Stores and 15 PUC Stores, reaching
350 stores in Brasil; 7 over the forecasted (+3 HS and +4 PUC).
8
9. Hering Store Network Performance
Hering Store Performance 4Q08 4Q09 Chg. 2008 2009 Chg.
Number of Stores 230 276 20.0% 230 276 20.0%
Franchise 193 236 22.3% 193 236 22.3%
Own 37 40 8.1% 37 40 8.1%
Sales (R$ thousand) (1) 169,028 257,956 52.6% 438,844 645,999 47.2%
Franchise 133,983 204,088 52.3% 352,371 512,777 45.5%
Own 35,045 53,868 53.7% 86,473 133,222 54.1%
Same Store Sales growth (2) 29.1% 32.6% 3.5 p.p. 32.4% 27.2% -5.2 p.p.
Sales Area (m²) 29,791 35,415 18.9% 29,791 35,415 18.9%
Sales (R$ per m²) 5,776 7,368 27.6% 16,256 19,864 22.2%
Check-Outs 2,040,928 3,001,915 47.1% 5,225,865 7,391,080 41.4%
Units 4,760,440 6,925,219 45.5% 12,222,332 16,851,285 37.9%
Average Sales Ticket (R$) 82.82 85.93 3.8% 83.98 87.40 4.1%
(1)
The amounts reffered to the sales to final costumers. (sell out concept)
(2)
Compared to the same period of the previous year
Highlight fot the SSS, +32.6% in the 4T09 and +27.2 in 2009, boosted
mainly by the traffic increase in the stores.
9
11. Gross Profit and Gross Margin
Gross Profit (R$ million) and Gross Margin (%)
48.6% +0.6 p.p.
48.0% 47.3% +1.1 p.p.
53.1% +2.8 p.p.
46.3%
52.1% +1.1 p.p.
51.0%
50.3%
340.9
238.5
123.8
83.2
4T08
4Q08 4T09
4Q09 2008 2009
Gross Profit Gross Margin Gross Margin Cash
Highlight for the Gross Margin Cash, excluding depreciation, which
reached 53.1% in the 4Q09 and 48.6% in 2009.
11
12. EBITDA and EBITDA Margin
EBITDA (R$ million) and EBITDA Margin (%) – Comparable Basis
+4.0 p.p. 21.4%
17.4%
+4.3 p.p. 26.2%
21.9%
154.0
89.6
62.2
35.8
4Q08 4Q09 2008 2009
Comparable EBITDA Comparable EBITDA Margin
EBITDA reached R$ 154 million in 2009, with +71.9% growth in
comparable basis, and EBITDA Margin of 21.4% (+4.0 p.p.).
12
13. EBITDA and EBITDA Margin (cont.)
EBITDA (R$ million) and EBITDA Margin (%) – Annual Variation
3.3%
23.5 3.1%
14.6 20.2 2.7%
2.0%
35.3 21.4%
154.0 20.5%
15.8
17.4%
105.4
89.6
EBITDA Non EBITDA Sales Deduction - Incentives CPV Dilution EBITDA EBITDA Non Margem Deduction - Incentives CPV Dilution EBITDA
2008 Recurring 2008 - Base Growth Taxes and and and 2009 Margin 2008 Recurring EBITDA 2008 Taxes and and and Margin 2009
Result 2008 Comparavel AVP Subventions Operating Result 2008 - Base AVP Subventions Operating
Exp. Comparavel Exp.
Expansion of EBITDA and EBITDA Margin are explained mainly by (i)
sales growth and (ii) dilution of cost of goods sold and expenses.
13
14. Net Profit
Net Profit (R$ million) and Net Margin (%)
+8.6 p.p. 15.9%
140.0
20.4%
120.0
7.3%
100.0
+14.7 p.p.
80.0
60.0
5.7% 114.6
203.7%
40.0
417.9%
48.4
20.0
37.7
9.3
0.0
4Q08 4Q09 2008 2009
Net Profit Net Margin
Besides the EBITDA growth, the net profit was affected by the non
recurring gain of R$ 24.8 million (Derivatives rev) and R$ 6.6 million
(REFIS). 14
15. CapEx
By activity (R$ million)
35.8 12.8%
31.2
6.1
1.2 4.8
2.7
15.5
10.5 26.7% 14.4
7.7
1.2
0.4 1.4
6.6 1.9 13.0
9.3
3.8 0.5
2.2
4Q08 4Q09 2008 2009
Stores Industry IT Other
In 2009, we invested R$ 31.2 million, mainly on production, logistics
and store openings (3 HS and 1 PUC).
15
16. Cash Flow
Free Cash Flow (R$ million)
Cash Flow - Consolidated 4Q08 4Q09 Chg. 2008 2009 Chg.
EBITDA 51,534 62,209 10,675 105,358 154,013 48,655
No cash items 3,940 24,813 20,873 4,594 26,757 22,163
Current IR&CS -10,971 -8,690 2,281 -22,798 -22,584 214
Cash Flow Capex -67,627 -54,394 13,233 -110,014 -45,213 64,801
Increase in trade accounts receivable -34,341 -42,751 -8,410 -52,241 -45,710 6,531
Increase in inventories 8,871 15,820 6,949 -19,337 -14,010 5,327
(Decrease) in deffered taxes - REFIS - 31,773 31,773 0 31,773 31,773
Increase (decrease) in accounts payable to suppliers -16,102 -3,295 12,807 -12,477 36,372 48,849
Increase (decrease) in taxes payable -7,373 -34,434 -27,061 -13,437 -67,856 -54,419
Others -18,682 -21,507 -2,825 -12,522 14,218 26,740
CapEx -10,463 -7,670 2,793 -35,773 -31,189 4,584
Free Cash Flow -33,587 16,268 49,855 -58,633 81,784 140,417
In this year, the Free Cash Flow reached R$ 81.8 million, due to the
EBITDA growth and the better working capital management.
16
17. Indebteness
Indebteness Evolution Short Term x Long Term
Long
201.3 Term
184.6
52%
4,6x Short
3,5x
Term
0,1x 48%
-0,2x
-0,7x
11.0 -25.1
-33.4
2005 2006 2007 2008 2009
Total Debt = R$ 77.6 million
Net Debt (R$ million) Net Debt/Ebitda*
* Last 12 months EBITDA
The management is focused on low leverage and new financing with
lower interest rate and longer terms.
17
19. New Expansion Plan - Hering Store Network
Expansion Plan – 2011 and 2012
Location selection premises:
• Cities with > 100 thousand inhabitants
• Total and Retail Consumption Potential - IPC
+38 (Target) and POF (IBGE)
+42 • Actual and forecasted Shopping centers
analysis;
• Benchmark with other franchise networks
405 • Evaluation of the Operational Potential
367
325
276
230
151 181
2006 2007 2008 2009 2010* 2011* 2012* 80 locations were selected which
* estimated presented greater potential
The new expansion plan, consistenly elaborated, renew the
perspectives for the Hering Store network growth.
19
20. Outlooks
Hering
• Hering Store Network: New expansion plan- 405 stores by 2012;
• Products with High Perceived Value and the concept “Retail is detail”;
• Continuity of the marketing campaign “eu uso Hering desde sempre”;
• Actions with the Hering Store Card and the Hering Webstore .
Research in the children market to evaluate the opportunities to better explore
the potential of the PUC and Hering Kids brands;
Continuity of the reposition plan for dzarm.: casual jeans concept, marketing
campaign and distribution channel qualification.
20
21. Investor Relation Team
Fabio Hering – CEO and IR Director
Frederico de Aguiar Oldani – Finance Director
Karina Koerich – IR Manager
Gracila Camargo Lopes – 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
