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.
2
4. 4Q10 HIGHLIGHTS
Gross Sales - growth in the quarter (+41.6%) and in 2010 (+40.8%).
Double-digit sales growth for all brands, mainly Hering: (+44.6% in 4Q10 and +44.2% in the year).
Same Store Sales growth in Hering Store chain: (+20.8% in 4Q10 and +24.4% in 2010).
EBITDA of R$ 276.5 million and an EBITDA margin of 27.3% in 2010
Net Profit: growth of 101.6% in 4Q10 and 54.2% in 2010, resulting from better operational performance
and lower tax provision due to investment grants.
Hering Store Chain:
Store openings exceed forecast (+10) in the Hering Store chain, which ended the year with 347
stores.
New guidance for store openings - 418 by the end of 2011
Opening of two Hering Kids pilot stores and the first dzarm flagship store.
4
6. SALES PERFORMANCE
Gross Revenue ( R$ million)
1,235.1
40.8%
21.2
877.0 37.6%
15.4
407.4 40.9% 1,214.0
41.6%
287.7
3.8
861.6
3.0 28.8%
41.7% 403.6
284.7
4Q09 4Q10 12M09 12M10
Domestic Market Foreign Market Total
Gross Sales reached R$ 1.2 billion in 2010, with 41.6% and 40.8% growth in
4Q10 and in the year, respectively,
6
7. SALES PERFORMANCE (cont.)
Domestic Market ( R$ million)
2009 2010
R$ 652.6 +44.2% R$ 941.1
Hering Hering
R$ 58.4 +40.8% R$ 82.2
77% Kids
7%
R$ 78.4 +26.1% R$ 98.8
PUC
8%
R$ 54.2 +27.1% R$ 68.9 dzarm.
Others 6%
2%
Double-digit sales growth in all brands, in 4Q10 and 2010, highlight to the
Hering brand (+44.6% and +44.2%).
7
8. STORES CHAIN EVOLUTION
443
15
365 1
78
311 15
2
22 74
248
209 59 Goal: 325
23
Goal: 273 (+22 stores)
19 44 Goal: 224 (+3 stores)
39 Goal: 172 (+6 stores) 347
(+9 stores) 276
230
151 181
2006 2007 2008 2009 2010
Hering Store Hering Kids PUC dzarm. Foreign - Franchised Total
In the domestic market, we ended 2010 with 347 Hering Stores, 78 PUC, 2
Hering Kids e 1 dzarm. store
8
9. HERING STORE CHAIN PERFORMANCE
SSS growth (+20.80% in 4Q10 and +24.4% in 2010) mainly driven by
increased stores traffic
9
10. GROSS PROFIT AND GROSS MARGIN
50.6%
+1.9 p.p.
48.7% 49.5%
+2.2p.p.
-0.8 p.p.
53.3% 52.6% 47.3%
-0.7 p.p.
52.2% 51.5%
47.3% 501.9
340.9
37.4% 170.5
124.1
4Q09
4T09 4Q10
4T10 12M09 12M10
Gross Profit (R$ Million) Gross Margin (%) Cash Gross Margin (%)
Gross margin expansion of 2.2 p.p. in 2010, with a 0.7 p.p. decrease in 4Q10
due to higher AVP and advanced yarn purchase.
10
11. EBITDA AND EBITDA MARGIN
27.3%
+5.9 p.p.
21.4%
31.1%
26.4% +4.7 p.p.
79.0% 276.5
154.5
63.9% 102.9
62.8
4Q09
4T09 4Q10
4T10 12M09 12M10
EBITDA (R$ Million) EBITDA Margin (%)
Strong EBITDA growth and EBITDA margin expansion in 4Q10 as well as in
2010.
11
12. EBITDA MARGIN
EBITDA Margin - 4Q Variation EBITDA Margin - Annual Variation
0.0%
1.3%
0.1% 0.1% 0.8% 1.1% 0.3% 1.2% 3.9%
0.5% 4.6% 0.1%
31,1% 27.3%
26.4% 21.4%
Mg Deduction Tax AVP Net Gross SG&A Others Mg EBITDA Mg Deductions Tax AVP Net Gross SG&A Others EBITDA Mg
EBITDA Incentives Margin (ex Dilution EBITDA 2009 Incentives Margin (ex Dilution 2010
4Q09 TI and ded) 4Q10 TI and ede)
Significant EBITDA margin expansion due to the high operating leverage of our
business model.
12
13. NET PROFIT
19.1% +1.8 p.p. 20.9%
+ 9.4 p.p.
30.5%
21.0%
54.2% 212.0
137.5
101.6% 100.8
50.0
4Q09
4T09 4Q10
4T10 12M09 12M10
Net Profit (R$ Million) Net Margin (%)
Net profit growth due to better operating performance, adjustment to
present value (AVP) and establishment of investment grants
13
14. CAPEX
By Activity ( R$ million)
71.0
12.1
8.1
127.5%
31.2
9.3
129.1% 48.6
17.6
2.7 4.8
7.7 2.6
0.5
11.6 14.4
1.4
3.8
4T09
4Q09 4T10
4Q10 12M09 12M10
Industry IT Other Stores
Capex in 2010 totaled R$ 71.0 million of which R$ 48.6 million was aimed at
the industrial area and R$ 12.1 million was invested in stores.
14
.
15. CASH FLOW
Free cash flow decrease due to higher capex, restocking and advanced yarn
purchase.
15
16. INDEBTEDNESS
Net Debt ( R$ million) Short Term x Long Term
4.6
3.5
0.1 (0.2) (0.2) Short
(0.7) Term
51.6% Long
201.3 184.6 Term
48.4%
11.0
(33.4) (25.1) Gross Debt = R$ 53.9 million
(61.9)
2005 2006 2007 2008 2009 2010
Net Debt/ EBITDA*
* Last 12 months EBITDA
In 2010 the R$ 23.7 million debt reduction was a result of the Company’s
strategy on concentrating its financing in operations with lower interest rates
and longer maturity. 16
18. OUTLOOKS
We remain confident about growth prospects for 2011.
Hering brand continues to be the company’s main growth platform:
HS chain - stores openings and growth in same-store sales concept.
New guidance for HS openings, + 71 stores in 2011, reaching 418 stores.
Share increase in the multibrand channel mainly though specialization.
Children’s market – opening of two more Hering Kids pilot stores.
With dzarm. we will continue to execute the brand strategy by launching collections in the
jeans casual concept, supported by marketing campaigns associating young celebrities to the
brand.
The company decided to rethink the current online business format in order to better
explore the potential of the channel.
Rising cotton prices might affect the gross margins in the coming quarters, however we
believe we will be able to sustain EBITDA margins at 2010 levels.
18
19. INVESTOR RELATIONS TEAM
Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Karina Koerich – IR Manager
Admar A. Topazio Junior – IR Analyst
Tel. +55 (47) 3321-3469
E-mail: ri@hering.com.br
Website: www.ciahering.com.br/ir
