Cia. Hering Investor's Day 2016_inglês

1. 1

2. How we evolved in 2016
2
Execution of key activities in one of the biggest recessions in
country's history
Cia. Hering
Day 2015
PRODUCT
& STORE
strategic
fronts
(P&S)
Cia. Hering
Day 2016
Product
Collection
improvements,
mainly from
High Summer on
Product Lifecycle
Management
(PLM)
evolution
Store
Step-up in
Shopping
Experience
Hering Store
Refurbishment
plan
Supply and VM
improvements
DZARM.
franchise
launch
Operation
SAP System
Implementation
Changes in
Engineering
and R&D
Inventories
returning to
normal levels
Channel
Technological
upgrade and
sales stimulus at
webstore
multibrand
diagnosis closure
Company
Evolution in
Governance and
creation of
Strategy
Committee

3. Strategic Fronts 2016-2017
3
Product and Store remain as priority
Initiatives related to
tore
Initiatives related to
roductP & S

4. BRANDS

5. Value proposition construction
5
Delivering consistency and updates in collections is key factor for
consumers and clients (trade)
Branding
Value proposition
Proprietary
style
Promotional
calendar
Shopping
experience
Communication
Mixandpricing
strategy
InnovationConsistency

6. Product Management
6
Product evolution through new development model - Product
Lifecycle Management (PLM)
Design
Follow market trends,
understand the
consumer and sell-out
data, assessing what
works in the store
Innovation and inputs
alternatives
Develop and bring innovation to the
process, introducing new fibers, knit,
generating differentiation and
competitiveness
Cost Efficiency
Look for alternatives in product construction
that make feasible what style requests
(quality, finish, modeling, etc.), ensuring
price and margin strategies
Value
for money

7. Product Management
Organization continues to evolve to better support brand
management structures
7
DZARM.
Rodrigo
Hering
Andrea
Children
Romael
Shared team - creates basis and
generates synergy between brands
Demand
planning
Áureo
Engineering
and purchase
DZARM. HeringChildren
R&D
2016evolutions
Brand
Management
Edson
Merchandising
Collection Planning
Style
Visual
Merchandising
Communication
and Marketing
Brand Management
Pillars
$$$

8. 8
Ongoing Programs
Product evolution through programs focusing on perceived
quality improvement
• Aims to enhance the perceived quality of products, an attribute
already recognized in all Company’s brands
• From the choice of inputs, suppliers training, production process
evaluation, through the delivery the product to final consumer
Study on the consumer profile evolution in partnership with SENAI
(Industrial Learning Center)
Goals:
• How to make products wear even better
• Consistency and standardization of measures
Increased conversion
Repurchase in webstore and in the traditional channel

10. Kids market – Where are we?
10
Brands’ combined strategy yields good results
• Combined strategy in kids market by working with two brands of different and
complementary profiles and styles
• Approach allows brands to coexist, favoring market share gain in all channels
• In multiband, particulary, the strategy generates competitive advantage by offering
a broad portfolio for different occasions of use
Value proposition
To offer differentiated and colorful style for children of classes A and B
To offer casualwear for children of all social classes

11. Kids market - PUC
End of adjustments in value proposition and distribution network
with signs of stabilization
Adjustments promoted in the network distribution,
and store closing getting closer to the end. Renewals at
key POS.
Product evolutions,
aligned with brand’s lifestyle and positioning.
Signs of results stabilization
with better results since this year-end.
11
Launch of
Shop.
Morumbi

12. + 350%
(jan-nov/16)
Kids market - PUC
We will promote relevant actions to reinforce distinguished brand
positioning
Co-branding partnerships, such as Liberty
For the autumn 2017, one of the most traditional English brands
and pioneer in stamping, reinforcing the distinguished brand
positioning.
New partnerships in 2017
including renowned stylist signing collection.
Social media
12
Liberty
and
PUC
campaign
330k followers+ 113%
(jan-nov/16)
96k followers
~170 million impacts
in 2016
Communication

13. Kids market - Hering Kids
Sustained growth through value proposition and expansion
of the store network
13
Company’s best performance and positive SSS in
recent quarters
Good value proposition reflected in product
offering, store experience and communication
Next steps
Grow through combined strategy with PUC
Potential to open stores in the next years
Shop.
Morumbi
SP State
Shop.
Cidade
São Paulo
SP StateHigh
Summer
Collection
2016

14. 400k followers
118k followers
Activation
Children’s
Day
Kids market - Hering Kids
Focus on increasing awareness and connecting with
consumers in 2016
14
Communication and engagement
Marketing mix: Investments in printed media,
online and Pay-TV
~ 185 millions impacts
Activation
‘Mês do
Brincar’
Promotional calendar
Cartoon
Network
Run
SP and RJ
+ 240%
(jan-nov/16)
+ 260%
(jan-nov/16)
Social media

16. Synergy among pillars ensures coherence, consistency
and integration in long-term
Long-term strategy with short-term impact:
 Male line discontinued
 Greater selectivity in the multibrand channel
Brand can come up with new processes, new business
model formats for Cia. Hering
Business plan of own stores focused on brand, product and channel
construction
BRAND
PEOPLE
PROCESSES
DZARM. | Business plan
PRODUTO
CHANNEL
PRODUCT
16

17. 17
DZARM. | Brand
DZARM. is for urban women who want to express all
their power and self-confidence in a Natural way.
We offer a complete portfolio for all occasions, which
reflects the latest trends in cosmopolitan style, with a
great value for money.
Curatorship of current and versatile fashion to keep up
with the intense life of modern women.
Target: young women, Class A/B from 25 to 35 years old.
17

18. DZARM. | Marketing and Communication
18
4 MEDIA PILLARS
Digital Magazines Influencers TRADE (POS)
STRONG GROWTH IN SOCIAL NETWORKS
+ 26% vs 2015.
(642k followers)
+ 128% vs 2015.
(140k followers)
 Focus on Awareness + Differentiation + Conversion
Integrated Communication Plan
 E-commerce as an important platform for the business

19. DZARM. | Product
19
Complete portfolio for all occasions of usage
with great value for money
 Product mix more adjusted to the value proposition
 Total Look – more than 300 products per collection
 Portfolio Structure70:20:10
- Greater focus on key categories: T-shirts; Jeans and 3rd piece
 Increase accessibility
 Portfolio adjustment by increasing intermediate price ranges
 Reinforcement of entry price
 Products connected to commercial calendar
 Average price of R$ 148.0 (sell-out)
 Reduce time to market
- New development process for fast cycle items
- Capsule collection with prompt delivery

20. DZARM. | Channel – Multibrand
Significant drop in revenue due to multibrand closures and greater channel selectivity
20
 High capillarity: presence in more than 3,000 points of sale (-20% customers vs. 2015)
 Channel with complementary role: bring revenue without depreciating brand
Strategy
 Channel Segmentation
 Focus on Qualified Multibrands
 Expand at Boutiques
 Strengthen presence in POS and improve brand experience
 More commercial and accessible portfolio
 Dedicated commercial manager pilot to DZARM. in SP

21. DZARM. | Channel – Franchise Light
1st pilot store recently inaugurated in Alfenas - MG
21
Concept
 Stores ~45 sq. meters, expansion focus in cities with less than
500,000 inhabitants
 Lower set-up cost
 Promising expansion potential

23. We are HERING
We offer a contemporary casual style, with strong recognition in basic,
translated into our proprietary style, generating a unique value
proposition to our consumer.
23
Are we BASIC? Are we FASHION?

24. Collection
Efficiency
Promotional
Calendar
Intensification
Creation Times
reorganization by
specialty
Proprietary Style
2016
PRODUCT FOCUS
Collection development process fundamentals
Expected effects starting from 2017
24

25. FOCO EM PRODUTO
• Value for Money
consistent in all categories
and price ranges
• Collections connected to
commercial strategy in
stores
• Product variety yielding
innovation
Collection Efficiency
PRODUCT FOCUS
25

26. PRODUCT FOCUS
• Product activation at the
point of sale, boosting
conversion
• Storytelling creation for
each moment of each
collection
Promotional Calendar
26

27. PRODUCT FOCUS
• Dedicated teams to men's
and women's collections,
mirrored structure at
development areas
• Specialization generating
consistency and efficiency
across several lines
Teams and processes reorganization
based on PLM model
27

28. Proprietary Style
• In-depth consumer study
• "Hering filter“ set-up
according to our proprietary
style, essentially casual
PRODUCT FOCUS
Nível de Moda regulado para
o estilo Hering,
essencialmente casual
28

29. FIRST
DELIVERIES
2017
Value
for
Money
enhancement
Hering
Proprietary
Style
Consolidation
Jeans
Essential
Complement
to Hering
Style
BASICS’ territory
appropriation,
translating into full
range of products
29

30. MULTIBRAND

31. Market Context
31
Economic difficulties in the last two years have exerted pressure on
the multibrand channel
Net loss of customers
Difficulty in opening new POS
Source: Monthly Trade Survey released by IBGE, sep/16
¹ Data referring to 'Fabrics, Clothing and Shoes’ group
Sales variation of apparel¹ in Brazil
(Brazilian Statistic Bureau – ‘IBGE’)
Source: http://onegociodovarejo.com.br/o-estrago-da-crise-
segundo-cnc-varejo-fechou-1669-mil-lojas-entre-2015-e-2016/
National Trade Confederation data
700k retail stores in the country, with at least
one employee
166.9k closed throughout 2015 and
in the first half of 2016
-5.2%
-6.1%
-8.7%
-11.3%
Nominal Sales Volume

32. Multibrand – Current scenario
Channel’s complexity demands company’s greater sophistication,
creating segmentation opportunities
Annual
sell-in sales
R$800+
million
Points of sale
~18,000
Sales
Representatives
~400
Showrooms
per collection
~150 Orders/year
300,000+
Cities
3,000+
States
27
Main challenges
Sales decline in the channel
Restricted knowledge of customers
Differentiated service-level
Set where to invest in POS execution
Map where to grow
Better serve Qualified Multibrand, avoiding conflicts
Increase showroom effectiveness and adherence to
collections
Evolve management of sales team
of company’s sales
~45%
32
Data referring to the fiscal year of 2015.

33. 2016 Segmentation Study
Different clients, distinct groups, specific policies
Focus in BasicFocus in Discount Regional Networks Qualified MultibrandTraditional Fashion Sophisticated Fashion
33
+ Concept+ Price

34. 2016 Segmentation Study
34
To meet the challenge, it was necessary to elaborate a
segmentation project using several parameters
City Size
Region
Typologies
Customer
Information
Cia. Hering Performance
Consumer profile
GAP Analysis
Segmentation
typologies
Visibilityand
Comprehension

35. 2016 Segmentation Study
35
Different customers, distinct groups, specific policies
- Strategic relevance to Cia Hering +
-Consumptionconcentration+
CitySize
Segment 7
Segment 5
Segment 6Segment 2
Segment 3Segment 1
Segment8
QualifiedMultibrand
Clusterand
classify
Focus in BasicFocus in Discount Regional Networks Qualified MultibrandTraditional Fashion Sophisticated Fashion
+ Concept+ Price
Segment 4
Visibilityand
Comprehension

36. 2016 Segmentation Study – Action plan
36
We shall implement over the next two years a new business model
to the channel, aiming to leverage sales
1. Who demands minimum inventory
2. Who we will invest in VM and
activations (banners, stickers, etc.)
3. Who will have differentiated service-
level
4. Where will we explore more cross-
selling opportunities across all brands
Segment X Y Z W ...
Qualified
Multibrand
Exclusive commercial policy ...
Service-level model ...
POS material ...
Serving priority ...
Immediate stock availability ...
Allocation priority ...
Illustrativeexample:
1.
2.
3.
4.
Action
plan
1. Who should have priority in supply
2. When will we have prompt delivery
3. How the participation in showroom will be
4. How to allocate better company resources
5.
6.
7.
8.
Visibilityand
Comprehension
Clusterand
classify

37. E-COMMERCE

38. E-commerce – Our brands in the online channel
38
Hering.com.brDZARM.com.br PUC.com.br HeringKids.com.brOutletEspacoCiaHering.com.br

39. How did we get here?
39
Building a solid technology foundation
1998
E-commerce
launch
2008
Relaunch
2009
Launch
2010
Launch
2016
Launch
2012
New platform
2015
Unified platform
Latest
5 years
~ 260%
growth
in visits
~ 300%
growth in
unique visits
~ 200%
growth in
revenue
~ 140%
growth in
volume
Business
maturity
Robust and
flexible
platform
Brands’
digital
presence
Investments in
Digital MKT
Unique
communication
across the
channels
Channel with strong growth in recent years

40. How are we?
40
With the consolidated platform, in 2016 we started a new stage in
digital retail
Source: Google Analytics * Until 28th, Nov
Launch of Outlet Espaço Hering.
More investments in digital media,
resulting in traffic increase and revenue
growth.
1st Half 2016
2nd Half 2016
Visits New
Visitors
Recurring
Visitors
+17% +12% +21%
Implemented features:
• Products recommendation in virtual stores and via email
• Personalized campaigns of cart abandonment
• Total look purchase (lookbook)
• Responsive layout to desktop and mobile
• Inclusion of videos in product’s description
• Photos with dressed models
Indicators Jan-Nov/16*

41. E-commerce in 2017
41
Investments already approved must sustain/accelerate the good
sales moment of the channel
To increase
FLOW
• Investments in SEO (Search Engine Optimization) > Improve rank
• Higher investment in digital marketing
• APP Hering/mobile
• Create MKT campaigns by Geolocation
• Understand and integrate the cross-channel consumer behavior
• Investment to improve User experience and User Interface (CRO)
> increase conversion rate and consumer engagement
To increase
CONVERSION
To improve
CONSUMER EXPERIENCE

42. E-commerce: channel consolidation
42
9M15 9M16
1.7% 2.4%
E-commerce sales’ participation
To assure our position as one of the leading brands in Brazil's
e-commerce
+ 70 bp
Online traffic increase
Conversion rate improvement
Expansion of logistics
OmniChannel
as strategy to boost both channel’s and
B&M results
layout redesign for mobile
to meet new projects and channel
growth
advance in integration process
with other channels
Opportunity
5% of sales in the
coming years

43. STORE
EXPERIENCE

44. 44
The store refurbishment cycle is part of the
plan to improve shopping experience

45. 2016 Refurbishment Plan
Designed for a quick conversion of the main POS and revitalization
of the oldest ones
2015: 87 stores in the Evolution Project, 13% of total network
2016: Refurbishment Plan launch, estimated in ~100 stores
30-40% reduction in
investment
¼ of subsidy of the
amount invested
by franchisees
Financing ¾ of
total invested
Reduction in the ‘closed for
renovation’ days
45
Negotiation with suppliers
Savings on items that do not
impact customer
Project adjustments to faster
execution
To be granted upon store
reopening, totaling up to R$
10 mn. Booked in
'Sales Expenses'
Funded by the company,
recorded in balance sheet as
'Other Accounts Receivable'

46. 2016 Refurbishment Plan
Shopping center store: example
46

47. 2016 Refurbishment Plan
Shopping center store: example
47

48. 2016 Refurbishment Plan
Street store: example
48

49. 2016 Refurbishment Plan
Renovated stores: more examples
49
Pq. Dom
Pedro Sh.
Campinas
SP
Itapeti-
ninga
SP
Shop.
Boulevard
BH - MG
Shop.
Iguatemi
Florianóp.
SC
Barra
Shop.
RJ
Catuaí
Shop.
PR

50. 4
states
17
2016 Refurbishment Plan - Results
We executed 100 Hering Store renovations in 2016
Remodeled stores remained closed for
renovations, on average, days
Subsidy granted by the company (R$ mn)
* Estimated
50
3
states
4
states
64
stores
4
states
3
states
Renovation dispersion by state Re-openings per month
100 stores
18 states
8
stores
7
stores
3
stores
18
stores
1.2 1.6
6.0
8.8
1Q16 2Q16 3Q16 4Q16E*Feb Apr Aug Sep Oct DecMay

51. 2016 Refurbishment Plan – Hering Store
We prioritized the conversion of the main POS
In 2016 we executed the most ambitious refurbishment plan in company's
history, which included the renovation of the main points of sale.
We ended 2016 with ~30% of the base in the new project.
From now on, we enter in a normal cycle of renovations with no incentive
program.
51

52. Store Experience – Improvements in VM
The new project presents important evolutions in the
setting and VM
52
Presents trends and advises the consumer on the
look composition, collaborating to raise cross-
selling and average ticket
Greater use of tables, better location for activation and
exhibition of high turnover fashion merchandise.
Opportunity to increase volume and average ticket
Focal
point
Fashion
Enhancement
table
High turnover

53. Store Experience – Improvements in VM
The new project presents important evolutions in the setting
and store VM
53
Highlight in sales area, with high display capacity favoring
self-service. Frontal display addition
Dedicated area to enhance category, with curatorship,
allowing better visualization and interaction
with several variants
Focal
Point
jeans
Focal
point
Basics

54. STORE
OPERATION

55. Supply
55
Essential in creating better shopping experience
Promotes store
organization and mix
standardization
Increase the value
perception
Improves brand
image
Reduces shrinkage

56. Supply
Developments made in 2015 and 2016 supply model prevent
inventories accumulation in the network
56
2015: Inventory adjustment and
markdown strategy revision of past
season items
2016: change in the supply model
Assortment recommendation store by store
Emphasis on greater depth
Purchasing strategy per closet/fixture
Transitory collections = inventories adjustment
* Purchase valued at MSRP
Purchases and sales of Hering Store network
excl. outlets
Fall/16
Winter/16
Spring/16
Fall/16
Winter/16
Spring/16
+ fall leftovers
+ winter leftovers
-0.9%
Biweekly recommendation of basic’s
replenishment
Purchase* Sell-out
R$million

57. Supply
We will evolve in 2017 by evaluating product location in the store since
its conception and by improving basics supply management
57
Increase in the frequency of high-turnover basics replenishment
Resupply controlled by the company
Automated basics
replenishment
Adoption expansion by the network
It will cover from product planning to in-store application
Purchase evolution/
selection of network
assortment

58. Store management - evolutions
58
Supply initiatives combined to others that support franchisees to
manage their operation
Storemanagement
andsupport
Standardizes team and store processes
Records the visit
Scoring system
Management of improvement points
Generates action plans and monitors it
Generates understanding of best practices
Fast improvement of store
experience and VM in the pilot
carried out in the South region
Extended to all Brazil from
Feb 1st on
Example: Store – South region
Training in operation management:
• Live training about Store and
Financial Management to
franchisees and staff
• Development via Portal to store staff,
with around 20 thousand impacted
in 2016
New Business Intelligence - ‘BI’, to
franchisees and staff
Consultant's Electronic Inspection
Report ‘ ‘REV’

59. Outlets
A good alternative for managing past season items
59
7 stores operated by Cia.
Hering
~4% of network’s sell-out
Two-digit of SSS growth in
9M16
It will sell more than 1
million items in 2016
Catarina
Outlet
SP
Outlet
Plus
BH

60. Outlets
60
The space is shared among the Company’s brands, in a structure
with low operational cost

61. Outlets - strategy
The channel can gain even more relevance in the sale of past season
items
Best channel to sell past collections
Greater control in the point of sale experience
Good consumer acceptance. Improved experience (vs. traditional clearance channels)
Better margins for the Company
Channel growth, since current stores meet only 10-15% of the Company’s need
Improve Company’s profitability, with average sales margin increase of markdown items
61
Application
Benefits
Opportunities

62. Store network| Satisfaction Survey
High level of satisfaction of Cia. Hering franchisees network
Source: Instituto da Qualidade – Nov/2016
Research conducted with franchisees of Hering Store, Hering Kids and PUC networks.
62
Willingness to open another store (same
brand) if it were to invest in retail
Willingness to recommend to
whom might invest
Overall Satisfaction
Very
satisfied
Satisfied
Insatisfied
Neither
satisfied, nor
insatisfied
Very
insatisfied
Definitely yes
Definitely no
Probably no
Maybe yes,
maybe no
Definitely no
Definitely yes
Probably no
Maybe yes,
maybe no
Probably yes
Probably yes

63. Management and Operation of store Network
Key Messages
63
Improved store experience as a priority
Store network renovation in progress
Supply initiatives progresses
Support for the franchisee> continuous
investments in systems and training
Outlet presents a good opportunity
Healthy and confident franchisees’ network

64. FINANCIAL
MANAGEMENT

65. Financial Management | Cash Flow
65
Strong cash flow generation this year due to improved working
capital and reduced CapEx
in R$ million
Reduction of R$ 76.8 million
in working capital and lower
investments favored cash
flow generation
Cash flow from
operations

66. Financial Management | Shareholder’s Return
66
Historically payout has grown in line with cash generation
in R$ million
Strong cash generation in 2016 tends to translate into higher payout in the year
Share Buybacks

67. Financial Management | Priorities
We will prioritize operating results normalization and cash
generation
Short-term scenario
4Q16 still presents difficulties in sales due to a difficult consumption environment
Higher invoiced volume of High Summer collection in 3Q16* generates sales
impacts to the channel in 4Q16
2017 Priorities
Sales growth resumption. Focus on Product & Store
• Markdowns reduction, positively affecting gross margin
• Cash generation and conservative capital structure
67
* As detailed in the 3Q16 release reported on 10/27/2016

68. 68
Cia. Hering
www.ciahering.com.br
+55 (11) 3371-4848
Investor Relations
www.ciahering.com.br/ir
ri@hering.com.br
+55 (11) 3371-4867 / 4805