2Q12 Results

Conference Call July 20th, 2012

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.

AGENDA

Highlights

2Q12 Operating

Performance

Outlook

4

2Q12 Highlights

Gross Revenue of R$ 460.7 million, up 8.9%;

Sales growth below Company´s expectations, with the exception of the performance of

Hering Kids and PUC brands (+52.7% and 20.8%, respectively);

EBITDA of R$ 110.0 million, with EBITDA margin of 28.7%;

Net Income of R$ 85.2 million (+10.1%).

Hering Store Chain:

27 additional stores in 2Q12 and 89 since 2Q11, with a network of 464 stores at the

end of 2Q12

Total sales of R$ 350.3 million (+11.8% overall growth and -3.9% SSS growth);

AGENDA

Highlights

2Q12 Operating

Performance

Outlook

6

SALES PERFORMANCE

Gross Sales reached R$ 460.7 million in 2Q12 (+8.9%) and the Hering Kids and PUC

brands posted double digit growth.

Domestic Market (R$ million)

R$ 319.7 R$ 334.7

R$ 35.1

R$ 28.3

+4.7%

R$ 28.9 R$ 44.1 +52.7%

+20.8%

+3.9%

2Q11 2Q12

Gross Revenue (R$ million)

R$ 29.1

R$ 27.2 417.1 453.8

751.5 840.0

5.8 6.9

9.9

12.4

422.9 460.7

761,4

852,5

8.9%

12.0%

8.8%

11.8%

18.0%

25.1%

2Q11 2Q12 1H11 1H12

Domestic Market Foreign Market

7

STORES CHAIN EVOLUTION

In 2Q12, the Hering Store chain increased by 27 stores and the Company remains

confident in reaching the guidance for the year, considering the advanced stage of

openings and stores underway.

2T11 1T12 2T12

375 437 464

3

5 5

77

76 76

1

1 1

16

16 16

472

562 535

Total Hering Store Hering Kids PUC dzarm. Foreign - Franchised

Hering Store Chain Performance 2Q11 2Q12 Chg. 1H11 1H12 Chg.

Number of Stores 375 464 23.7% 375 464 23.7%

Franchise 330 416 26.1% 330 416 26.1%

Owned 45 48 6.7% 45 48 6.7%

Sales (R$ thousand) (1) 313,449 350,345 11.8% 515,955 594,497 15.2%

Franchise 262,818 301,486 14.7% 428,775 506,632 18.2%

Owned 50,631 48,858 -3.5% 87,180 87,865 0.8%

Same Store Sales growth (2) 16.3% -3.9% -20.2 p.p 19.0% -0.8% -19.8 p.p

Sales Area (m²) 48,665 62,334 28.1% 48,665 62,334 28.1%

Sales (R$ per m²) 6,573 5,731 -12.8% 11,070 9,947 -10.1%

Check-Outs 2,829,678 3,095,931 9.4% 5,246,321 5,869,135 11.9%

Units 5,898,040 6,553,929 11.1% 11,137,172 12,585,356 13.0%

Units per Check-Out 2.08 2.12 1.6% 2.12 2.14 1.0%

Average Sales Price (R$) 53.14 53.46 0.6% 46.33 47.24 2.0%

Average Sales Ticket (R$) 110.77 113.16 2.2% 98.35 101.29 3.0%(1) The amounts referred to the sales to final costumers. (sell out concept)(2) Compared to the same period of the previous year

8

HERING STORE CHAIN PERFORMANCE

Total sales of Hering chain increased 11.8% in 2Q12 due to stores openings, given the

drop of -3.9% in SSS.

9

GROSS PROFIT AND EBITDA

Greater promotional activity due to lower than expected sales caused a 2.0

p.p.contraction in gross margin. In spite of that, strict expenses control and profit

sharing reversion led to an increase in EBITDA margin by 0.6 p.p.

Gross Profit and Gross Margin EBITDA and EBITDA Margin

163.7 173.1

293.3 324.9

5.7%

10.8%

47.2%

45.2%

46.9% 45.8%

48.1%

46.3%

48.0% 47.0%

2Q11 2Q12 1H11 1H12

Gross Profit Gross Margin Cash Gross Margin

-1.8 p.p.

-2.0 p.p.

-1.0 p.p.

-1.2 p.p.

97.6 110.0

171.9

200.0

28.1%

28.7%

27.5%

28.2%

12.8%

16.4%

2Q11 2Q12 1H11 1H12

EBITDA EBITDA Margin

+0.6 p.p.

+0.7 p.p.

10

NET PROFIT AND CAPEX

Net profit growth, as a result of EBITDA growth and lower tax rate due to investment

subvention, even with the effect of non recurring gains in 2Q11.

Capex (R$ million)

77.3 85.2

128.4

155.4

22.3% 22.2%

20.5%

21.9%

10.1%

21.0%

2Q11 2Q12 1H11 1H12

Net Income Net Margin

Net Profit (R$ million)

0.0 p.p. +1.3 p.p.

4.3 6.2

8.3 8.5 1.3

4.4 1.5

8.2

0.1

0.5 0.3

1.1

4.1

1.2 5.6

1.9

9.8

12.3

15.7

19.7

25.4%

25.5%

2Q11 2Q12 1H11 1H12

Industry IT Other Stores

11

CASH FLOW

Increase of R$ 50.6 million in free cash flow, mostly due to EBITDA growth and lower

investments and working capital needs, with reduction in inventories.

Cash Flow - Consolidated (R$ thousand) 2Q11 2Q12 Chg. 1H11 1H12 Chg.

EBITDA 97,550 110,008 12,458 171,856 199,983 28,127

Non cash items 674 953 279 1,039 1,899 860

Current Income tax and Social Contribution (26,900) (25,329) 1,571 (41,839) (44,549) (2,710)

Working Capital Investment (21,380) 17,484 38,864 (39,318) 2,999 42,317

(Increase) decrease in trade accounts receivable (47,156) (38,824) 8,332 (29,597) 5,266 34,863

Decrease (increase) in inventories 7,116 34,086 26,970 (6,665) 9,468 16,133

Increase (decrease) in accounts payable to suppliers 3,463 (964) (4,427) (9,355) 3,893 13,248

Increase (decrease) in taxes payable 9,049 18,782 9,733 11,561 (14,899) (26,460)

Others 6,148 4,404 (1,744) (5,262) (729) 4,533

CapEx (9,801) (12,348) (2,547) (15,671) (19,721) (4,050)

Free Cash Flow 40,143 90,768 50,625 76,067 140,611 64,544

Reconciliation from accounting Cash flow to adjusted Cash flow (R$ thousand) 2Q11 2Q12 Chg. 1H11 1H12 Chg.

CFS - Cash provided by operating activities (accounting) 59,691 111,084 51,393 105,495 182,494 76,999

Adjustment – Financial items allocated to operating cash (9,747) (7,968) 1,779 (13,757) (22,162) (8,405)

Unrealized exchange and monetary variation (1,201) (1,220) (19) (2,549) (2,112) 437

Financial Result (9,691) (7,429) 2,262 (13,613) (21,530) (7,917)

Interest paid on loans 1,145 681 (464) 2,405 1,480 (925)

CFS - Cash flow from investing activities (9,801) (12,348) (2,547) (15,671) (19,721) (4,050)

Free Cash Flow 40,143 90,768 50,625 76,067 140,611 64,544

Gross Debt = R$ 27.9 million

12

INDEBTEDNESS

* LTM EBITDA

Net Debt/ EBITDA*

Cia. Hering closed 2Q12 with a net cash position of R$ 207.3 million and reduced its

debt by R$ 2.4 million.

Net Debt (R$ million) Short Term x Long Term

Short Term

98.4% Long Term 1.6%

4.6

3.5

(0.7) 0.1

(0.2) (0.2) (0.6)

(0.5)

2005 2006 2007 2008 2009 2010 2011 2Q12

201.3 184.6

(33.4)

11.0

(25.1) (61.9) (229.8) (207.3)

AGENDA

Highlights

2Q12 Operating

Performance

Outlook

OUTLOOK

14

Challenges faced in 1H12 might continue to influence negatively in the short run

Measures are already being taken in order to offer a more assertive product mix

in addition to further marketing investments

Hering brand still with high growth potential, despite not in the same pace of

recent past

Children’s market:

Share increase in the multibrand channel with Hering Kids and PUC brands

Expansion of the Hering Kids format – opening of 20 stores, concentrated

in 4Q12

Continuous adjustments in PUC chain, with discontinuation / relocation of a

few other operations.

Maintenance of the dzarm. strategy, combined with investments in marketing and

flagship stores

Rise of dollar and the possibility of additional promotional actions may pressure

results in 2H12

INVESTOR RELATIONS TEAM

Fabio Hering – CEO

Frederico Oldani – CFO and IRO

Patrícia Salem – IR Manager

Tel. +55 (11) 3371-4867

E-mail: ri@hering.com.br

Website: www.ciahering.com.br/ri