may 2012 - institutional presentation - may, 2012
DESCRIPTION
TRANSCRIPT
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| Apresentação do Roadshow
1
As of March 31, 2012 May, 2012
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 Disclaimer
Statements regarding the Company’s future business perspectives and projections of operational and
financial results are merely estimates and projections, and as such they are subject to different risks and
uncertainties, including, but not limited to, market conditions, domestic and foreign performance in general
and in the Company’s line of business.
These risks and uncertainties cannot be controlled or sufficiently predicted by the Company management
and may significantly affect its perspectives, estimates, and projections. Statements on future
perspectives, estimates, and projections do not represent and should not be construed as a guarantee of
performance. The operational information contained herein, as well as information not directly derived from
the financial statements, have not been subject to a special review by the Company’s independent
auditors and may involve premises and estimates adopted by the management.
2
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| Company overview
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .1 Platform of brands of reference
Arezzo&Co is the leading Company in the footwear and accessories sector through its platform of Top of Mind brands
1
4
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .2 Company overview
Arezzo&Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generation
1
Leading company in
the footwear and
accessories sector
with presence in all
Brazilian states
Controlling
shareholders are the
reference in the sector
Development of
collections with
efficient supply chain
Asset light: high
operational efficiency
Strong cash
generation and high
growth
7.8 million pairs of shoes(1)
499 thousand handbags(1)
c.2,515 points of sale
11.1% market share(2)
39 years of experience in
the sector
Wide recognition
~11,500 models created
per year
Lead time of 40 days
7 to 9 launches per year
86% outsourced production
ROIC of 32.5% in 1Q12
1,952 employees
Net revenues CAGR:
29.3% (2007- 1Q12)
Net income CAGR: 38.2%
(2007- 1Q12)
Increased operating
leverage
Notes:
1. LTM as of March, 2012.
2. Refers to the Brazilian women footwear market (source: Euromonitor, IBGE and Company estimates) . Estimated for 2010. 5
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
Founded in 1972
Focused on brand and
product
Consolidation of
industrial business model
located in Minas Gerais
1.5 mm pairs per year
and 2,000 employees
Focus on retail
R&D and production
outsourcing on Vale dos Sinos -
RS
Franchises expansion
Specific brands for each
segment
Expansion of distribution
channels
Efficient supply chain
First store
Fast Fashion
concept
Launch of the first
design with
national success
+
Schutz launch
Launch of new
brands
Merger
Commercial operations
centralized in São Paulo
Strategic Partnership
(November 2007)
Industry Reference Foundation and structuring Industrial Era Corporate Era Retail Era
2012 70’s 80’s 90’s 00’s
Opening of the first
shoe factory
Opening of the flagship
store at Oscar Freire
.3 Successful track record of
entrepreneurship
The right changes at the right time accelerated the Company's development
1
Consolidate
leadership
position
Initial Public Offering
(February 2011)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .4 Shareholder structure1
Notes:
1. Arezzo&Co capital stock is composed of 88,542,410 common shares, all nominative, book-entry shares with no par value.
Shareholder structure as of March, 2012.
7
Post-offering
52.6% 47.1%
Birman family Management Others
0.2%
1
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
8
.5 Culture & Management:
Arezzo towards 2154
Code of Ethics
“Our behavior is a positive example for all activities and internal or external interactions; and we treat everyone with respect, equality and cooperation”
“We properly protect the confidentiality of our information, documents, trademarks, intellectual property and cherish the proper use of our assets”
“The Arezzo Group’s interests prevail over personal or third party interests and guide any decision-making in the company”
“We act with fairness in our relationships with suppliers, franchisees and customers, eliminating any situation that may generate expectations of bias in
the context of receipt of gifts and invitations”
“Our suppliers are evaluated and contracted based on clear criteria and in line with our ethical standards and conduct”
“We are committed to ensure a responsible environmental stewardship by ensuring and establishing high standards for the purposes of protecting the
environment and conserving its resources”
“We have a socially responsible conduct and do not use any resources for unethical or illegal purposes, or that violates loca l or international laws”
“It is our duty to report any breach of the Code of Ethics irrespective of the public involved”
2010
2154
Meritocratic culture based on best practices makes Arezzo a company prepared to reach 2154
1
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .6 Strong platform of brands
Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segments
1 Trendy
New
Easy to wear
Eclectic
Fashion
Up to date
Bold
Provocative
16 - 60 years old 18 - 40 years old
R$ 285.00/pair
R$ 589.1 million R$ 249.8 million
Pop
Flat shoes
Affordable
Colorful
12 - 60 years old
R$ 99.00/pair
R$ 23.9 million
Design
Exclusivity
Identity
Seduction
R$ 960.00/pair
R$ 8.3 million
20 - 45 years old
65,7% 27.8% 2.7% 0.9%
Brands
profile
Female
target
market
Sales
Volume3
% Gross
Revenues4
Retail price
point
Foundation 1972 1995 2008 2009
O
8
MB
18
O
1
O
18
F
290
MB
877
Notes:
1. Points of sales (1Q12 LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports
2. % of each brand gross revenues (2011 LTM)
3. (1Q12 LTM) gross revenues, does not include other revenues (not generated by the 4 brands)
4. % total (1Q12 LTM) gross revenues 9
R$ 180.00/pair
MB
783
O
19
F
2
MB
1,509
Dis
trib
uti
on
ch
an
ne
l1 POS 1
%
gross
rev.2
73% 12% 14% 1% 65% 26% 41%
EX
-
1%
EX
-
8%
EX
-
14% 7% 79% 59%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .7 Multiple distribution channels
1
10
429
242
170
56²
897
Flexible platform through three distribution channels with differentiated strategies, maximizing the Company's profitability
Gross Revenue Breakdown – (R$ mn)¹
Gross Revenues per Channel
46 owned stores
being 5 Flagship
stores
Reach about
1.200 cities and
2,500 multi-
brands
292 franchises in
more than 160
cities
Broad distribution
in every Brazilian
state
Franchises Multi-brands Owned stores Others Total
Notes:
1. (1Q12 LTM) gross revenues
2. Considers external market and other revenues in the domestic market
48% 27% 19% 6% 100%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| Business model
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
Management
BRANDS OF REFERENCE
Customer focus: we are at the forefront of Brazilian women fashion and design
Multi-channel Sourcing & Logistics Communication &
Marketing
SEASONED
MANAGEMENT
TEAM WITH
PERFORMANCE
BASED INCENTIVES
NATIONWIDE
DISTRIBUTION
STRATEGY
EFFICIENT
SUPPLY CHAIN
SOLID MARKETING
AND
COMMUNICATION
PROGRAM
ABILITY TO
INNOVATE
R&D
1 2 3 4 5
12
Unique business model in Brazil
2
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .1 Ability to Innovate
We produce 7 to 9 collections per year 2 I. Research
Creation: 11,500 SKUs / year
II. Development III. Sourcing IV. Delivery
Arezzo&Co fulfills the various aspirations of women, delivering on average 5 new models per day, allowing for consistent desire-driven purchases
Available for selection: 63% of SKUs created /
year
13
Stores: 52% of SKUs created / year
Creation
Launch
Orders
Production
Delivery
Normal sale
Discount sale
Winter I Winter II Winter III Summer I Summer II Summer III Summer IV
Activities JAN FEV MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .2 Broad media plan
2
14
The brand has an integrated and expressive communication strategy, from the
creation of campaigns to the point of sales
Strong presence in printed media
150 inserts in printed media in 300 pages in 2011 (45 million readers) 78 exhibition in fashion editorials in 1Q12
Digital communication
Presence in eletronic media and television
+1000 exhibition on TV e 620 exhibition in cinema in 2011 + 40 million impact
Demi Moore
Seasonal showroom in Los Angeles near the
Red Carpet
Season
CRM – VIP sales
In-store events – PA
Stylists Fashion Advisors
Celebrity Endorsement Marketing Events
115 k Facebook fans: leader in
interactions
30 k monthly access to Schutz‟s Blog
549k accesses to site/month
Average navigation time: 8 minutes
51 k Twitter followers : category leader
Gisele Bündchen Blake Lively
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .2 Communication & marketing program
reflected in every aspect of the stores
Stores constantly modified to incorporate the concept of each new collection, creating desire-driven purchases
2
All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection
Flagship stores Store layout & visual merchandising
15
POS materials (catalogs, packaging, among others)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .2 Atmosphere of stores: differentiated
concepts for each brand 2
16
Summer – Flagship Oscar Freire
Winter – Flagship Oscar Freire Video Wall
Closet Essential
Niches and lighting
Jaquets and accessories
Campaigns and marketing actions
Preeminence for products
Differentiated products
Visual merchandising:
Updates at low cost investment
Brings relevant information from
each collection to stores’ level
3 main updates per year
Chameleon project: constant
modification to incorporate the new
collection’s concept
Exposure of a large variety of
products
Selling area inventory: lower
necessity of area for storage
Atmosphere of a jewelry store
Private shop experience
Focus on exclusivity, design and
highly selected materials
Wall display
Combos
Storage
Each theme is disposed in different niches
Acessories
Sophisticated lighting
Distinguished storefront Special collections
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .3 Flexible production process…
2
17
Arezzo’s size allows for large scale purchases from each
supplier
Production speed, flexibility and scalability to ensure Arezzo&Co‟s expected growth based on asset light model
Gains of scale
Joint purchases Certification and auditing of suppliers
In-house certification and auditing ensure quality and
punctuality (ISO 9001 certification in 2008) Negotiation of raw material jointly with local suppliers
Consolidation and improvement of distribution in national
scale
Reception: 100,000 units / day
Storage: 100,000 units / day
Picking: 150,000 units / day
Replacement of milky run strategy
1
2
3
4
5
Distribution: 200,000 units / day 4
Sourcing Model
Owned factory with capacity to produce 1.2 million pairs
annually and strong relationship with Vale dos Sinos
production cluster as the outsourcing represents 86% of total
production
New Distribution Center
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .4 ...leveraged by owned stores…
Capturing value from the chain while developing retail know how and brands‟ visibility
2 Greater brand awareness coupled with operational efficiencies Flagship Stores
18
Clustering higher productivity stores in main areas (mainly SP and RJ) improving
operational efficiency and profitability:
Direct costumers interaction develops retail competences which are also reflected
at franchised stores
Flagship stores ensure greater visibility and reinforce brand image
Arezzo – Ipanema / RJ
Schutz – Iguatemi / SP
Arezzo – Cid. Jardim / SP
R$ 3,292 M
R$ 5,249 M
Ow
ned
Fra
nchis
e
Annual Average
Sales per Store
2011
Total sales area and # of stores (sq m)
Schutz – Oscar Freire / SP
610
21
29
45 46
# stores
88% 91%81%
77%
80% 80%
12%9%
19%
23%
20% 20%
2007 2008 2009 2010 2011 1Q12
Flagship
Standard Store
1,0441,369
2,067
2,967
4,686 4,754
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
Intense retail training
Ongoing support: average of 6 stores/ consultant and
average of 22 visits per store/ year
Strong relationship with and ongoing support to franchisee
IT integration with our franchises amount to more than 80%
As mono-brand stores, franchises reinforce the branding in
each city they are located
2
4 or more
franchises
1 franchise
2 franchises
3 franchises
46%
10%
28%
16%
19
.4 …with efficient management of the
franchise network...
Model allows rapid expansion with little invested capital by Arezzo&Co and high profitability to franchisees
Successful Partnership: “Win – Win” Franchise Concentration per Operator
Average payback of 39 months2
100% of on-time payments
96% satisfaction of franchises1
Excellency in Franchising Award in the last 8 years (ABF)
Best Franchise in Brazil (2005) and in the sector for 7 years since 2004
(# of Franchisees by # of Franchises)
Notes: FY2011 data
1. 96% of the current franchisees indicated they would be interested in opening a
franchise if they did not already have one
2. Annual sales of R$ 2,330 thousand + average initial investment of R$ 600 thousand
+ working capital of R$ 414 thousand
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .4 ...and of the multi-brand stores
2
Multi-brand stores
20
Multi-brand stores‟ Gross Revenue¹ (R$ mn) Improved distribution and brand visibility
Greater brand capillarity
Presence in over 1,200 cities
Rapid expansion at low investment and risk
Main Focus: share of wallet
Owner’s loyalty
Important sales channel for smaller cities
Sales team optimization: internal team and commissioned
sales representatives
Multi-brand stores widen the distribution capillarity and the brands‟ visibility, resulting in a strong retail footprint
Notes:
1. Domestic market only
# Store 1,782
2,177
234
2011
56
1Q12
Gross Revenue1
(R$ mn) 188
2010 1Q11
47
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .4 Large capillarity and scale of store
chain
Mono-brand store chain with high capillarity, reaching more than 160 cities and well-positioned among the retail companies
2
21
Size and average sales per mono-brand stores - 2011
Brand Average size
(m2)
Net Revenue/ m2
(R$ 000s)
Total
Stores 1,2
61 354 328
133 244 432
1,904 9 167
1,031 7 336
2.513 8 145
263 17 104
5
290 franchises +
18 owned stores +
4 outlets +
877 multi-brand clients
2 franchises +
19 owned stores +
1 outlet +
1,509 multi-brand clients
Points of sale (1Q12)
TOTAL
8 owned stores
783 multi-brand clients
1 owned store +
18 multi-brand clients
292 franchises +
40 owned stores +
5 outlets +
2.177 multi-brand clients
= 2,515 points of sales
Source: IBGE, Companies’ Reports; number of stores according to latest data provided by the Companies Notes: 1. Considers only monobrand stores of Arezzo and Schutz; 2. For Hering, considers only Hering Store chain stores; 3. 2008 data; 4. Net Revenue (assuming that sales taxes and deduction = 30% of gross revenues); 5. Considers Arezzo + Schutz, except for outlets, handbags’ stores and Schutz franchise;
GDP³: 18%
A&C¹: 17%
GDP³: 55%
A&C¹: 57%
GDP³: 15%
A&C¹: 15%
GDP³: 7%
A&C¹: 7%
GDP³: 5%
A&C¹: 4%
57 sq m
85 sq m
80 sq m
Points of sale – average size : new stores are increasing
network average size
2010 2011 new stores 2012 new stores
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
Arezzo and Ana Capri Schutz and Alexandre
Birman Industrial Supply Chain Strategy and IT Financial
Alexandre Birman Cisso Klaus Marcio Jung Thiago Borges Kurt Richter
HR
Raquel Carneiro
Marco Coelho
Internal Auditing
Anderson Birman
Claudia Narciso
.5 Seasoned and professional
management team 2 Anderson Birman
Years
at Arezzo
39
16
4
13
10
7
8
29
2
Years of
experience
39
16
12
23
31
27
46
40
12
Name
Title
Anderson Birman
CEO
Alexandre Birman
COO
Thiago Borges
CFO and Investor Relations Officer
Claudia Narciso
Director – R&D
Kurt Ritchter Director – Strategy and IT
Marcio Jung
Director – Supply Chain
Cisso Klaus
Director – Industrial
Marco Coelho
Director – Internal Auditing
Raquel Carneiro
Director – HR
Highly qualified management team
22
Stock option plan for key executives
Performance based compensation package for all employees
Independent business units for each brand but unified officers (Industrial, Logistics, Financial and HR) for the whole company
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .6 Corporate governance
Board is composed by 8 members being 4 appointed by controlling shareholders 2
Name Experience Name Experience
Title Title
Anderson Birman Chairman of the Board
Arezzo’s CEO since its foundation, with over 39 years of
experience in the industry
Alexandre Birman Vice-Chairman of the Board
Arezzo’s COO and founder of Schutz, with 16 years of
experience in the industry
Pedro Faria Board Member
Tarpon’s partner since 2003, member of the Board of Directors of
Direcional Engenharia, Omega Energia Renovável, Cremer and
Comgás
Eduardo Mufarej Board Member
Tarpon’s partner since 2004, member of the Board of Directors of
Tarpon, Omega Energia Renovável and Coteminas
José Murilo Carvalho Board Member
President of the Attorney’s Association of Minas Gerais,
Board Member of the Brazilian Bar Association
José Bolonha Board Member
Founder and CEO of “Ethos Desenvolvimento Humano e
Organizacional“; Board member of the Inter-American Economic
and Social Council (UN, WHO)
Guilherme A. Ferreira Independent Board Member
CEO of Bahema Participações, board member of Pão de
Açúcar, Banco Signatura Lazard, Eternit, Tavex and Rio
Bravo Investimentos
23
Artur N. Grynbaum Independent Board Member
CEO of Grupo Boticário (largest franchise company in Brazil) and
Vice-President at Abihpec (Brazilian Association of Industries in the
field of Personal Hygiene, Perfumes, and Cosmetics )
Ana Luiza Franco* (Coordinator)
Audit Committee
Pedro Faria (Coordinator)
José Bolonha (Coordinator)
Committees
Strategy Committee People Committee
Board of directors
Members:
Jose Murilo and Guilherme A. Ferreira
Members:
Anderson Birman, Alexandre Birman, Guilherme A.
Ferreira and Arthur N. Grynbaum
Members:
Pedro Faria and Alexandre Birman
*Mrs Franco is former partner at Machado Meyer Law firm in Brazil
and currently acts as member for corporate risk and audit
committees in various relevant companies in the country.
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| Market Overview
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .1 Social upward mobility driving internal
consumption
Income growth and job creation lead to rapid social upward mobility and increasing internal consumption
3
25
2003
44 (24%)
29 (15%)
40 (20%)
16 (8%)
47 (27%)
49 (28%)
+18 mi (2003-14E)
+47 mi (2003-14E)
2014E 2009
31 (16%) 20 (11%) 13 (8%)
66 (37%)
95(50%)
113 (56%)
...Resulting in a significant rise of consumer goods consumption, including Footwear and Apparel
(Consumption growth as a result of the upward mobility in social classes; indexed 100 = class D/E)
Source: IBGE, FGV, LCA, Bain & Co., BCG, Roland Berger
Classes A/B: monthly income above R$4,808 | Class C: monthly income between R$1,115 and R$4,408 | Class D: monthly income between R$768 and R$1,115 | Class E: monthly income below R$768
Class
D/E Class
C Class
B Class
A
Food, Drinks and
Cigarettes
Electronics
and Furniture
Footwear and
Apparel
Prescription/OTC drugs
Hygiene and
Personal Care
5.4x
10.1x
12.6x
9.3x
11.2x
Footwear and
apparel have
the largest
growth
potential
3.3x
4.4x
5.4x
4.3x
5.3x
1.7x
1.9x
2.3x
1.9x
2.3x
1.0x
1.0x
1.0x
1.0x
1.0x
Class C
Class A/B
Class D
Class E
Brazil experiences an accelerated process of social upward migration... (Millions of people)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
26
.2 Brazilian footwear market overview
3
+4% +6%
Footwear market (R$ bn) +8%
2007 2008 2009 2010
29.7 31.0 32.9
35.4
8.6 9.0 9.5 10.3
2007 2008 2009 2010
Total footwear Women footwear
4.7%
8.1% 8.6%
11.1%
Arezzo&Co has a significant stake of the the women footwear market and has consistently increased its market share
Arezzo&Co‟s market share1
Source: IBOPE Inteligência (Pyxis), Satra, World Bank, ABICALÇADOS, IEMI, MTE, MDIC, / SECEX, IBGE
Note: 1. Based on Euromonitor research and IBOPE Inteligência (Pyxis). Estimated market share, which includes both Arezzo and Schutz
37%
29%
17%
13%
4%
Others
SportsMen
Kids
Women
footwear
Income Class
17%
44%33%
6%
Class B
Class AClass D/E
Class C
Footwear consumption (2009)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .3 Global Industry
Note:
DDP: delivered duty paid
FOB: free on board
BRAZIL
Lead time: 40 days
Production (pairs): 894 mi
Cost (without taxes ): US$
19/pair
Cost (w/ taxes ): US$ 29/pair
ITALY
Lead time: 70 days
Production (pairs): 202 mi
Cost (FOB): US$ 26/pair
Cost (DDP): US$ 38/pair INDIA
Lead time: 160 days
Production (pairs): 2.000 mi
Cost (FOB): US$ 15/pair
Cost (DDP): US$ 23/pair
CHINA
Lead time: 120 to 150 days
Production (pairs): 10.000 mi
Cost (FOB): US$ 16/pair
Cost (DDP): US$ 40/pair
VIETNA
Lead time: 120 to 150 days
Production (pairs): 682 mi
Cost (FOB): US$ 15/pair
Cost (DDP): US$ 23/pair
Brazil is a major shoe producer with a competitive cost of women leather
shoes for the domestic market
3
Source: Abilcalçados, Assintecal, Arezzo&Co 27
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
28
.4 Brazilian footwear industry Overview
3 Brazilian Shoes Production (2010)
South Region South
Region
Vale dos
Sinos
(RS)
Production - # pairs (million) 302 ~187
Export - # pairs (million) 32 ~20
Export - (million USD) 733 ~455
Jobs (thousand) 130 ~81
Companies 3.400 ~2.000
Southeast Region Southeast
Region
Production - # pairs (million) 189
Export - # pairs (million) 9
Export - (million USD) 152
Jobs (thousand) 90
Companies 4.000
Northeast Region Northeast
Region
Production - # pairs (million) 399
Export - # pairs (million) 102
Export - (million USD) 595
Jobs (thousand) 126
Companies 627
Main producer
States
Expertise in the production of women leather shoes
894 million
pairs
Other producer regions:
Expertise in the production of sports shoes Expertise in the production of men leather shoes
Arezzo&Co mainly sources its products in the South of Brazil, the world‟s
largest footwear manufacturer cluster, specialized in women leather shoes
Source: Abilcalçados, Assintecal, Arezzo&Co
Other 66
7% Sports 88
10%
Leather 253
28%
Rubber 487
55%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| Value Drivers Update
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .1 Solid growth fundamentals
4 Key drivers of growth
30
SG&A as % of Net Revenue and Gross Margin
Store area
Revenue growth post-expansion
99%¹ AFTER
BEFORE
70m2
34m2
¹ Comparison between the sales of Schutz store at Morumbi Shopping:
Results from August/10 to March/11 and August/11 to March/12
37.7%
40.5% 40.5% 41.5%
27.0% 26.2%24.3%
24.7%
2008 2009 2010 2011
Gross margin SG&A (% of net revenue)
Store productivity increase and additional upsides
Expand distribution footprint
Store openings in 2011 – 38 out of 38
Store openings in 2012E – increase from 40 to 58
Same store expansion in 2011 and 2012 – 615 out of 1000 sq m already expanded
Store remodeling: Schutz new store format significantly improving sales productivity
Same store sales of 11.4% (sell out - owned stores) and 11.3% (sell in – franchises)
IT integration between our franchises: about 80% of our stores network in the same platform
Gross margin expansion: 100bps in 2011
Ebitda margin expansion: 60bps in 2011
Net income CAGR reached 47% (2005-2011) and net margin rose by 7p.p. in the same period
Increase operational efficiencies and margins
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .2 What‟s new for 2012
4
GTM Arezzo
Expanding Footprint
Key drivers of growth
Opening of 58 stores in 2012:
• 11 owned stores
• 47 franchises
Webcommerce: Schutz and Anacapri started marketing a wide range of models to Brazil
31
Brand assessment:
• Reevaluation of Arezzo’s current distribution and supply model in Brazil
• Solid planning of brand growth for the next years
Consistent sales growth since 2010
Focus on new store format
Widening distribution platform for franchises
Anacapri Consolidation
Alexandre Birman Internationalization
Concentration on brand’s strengthening
Structuring brand’s internationalization out of NY
2010
2,6
21,6
1,9 4,1
2011 1Q11 1Q12
Anacapri Gross
Revenue
(R$ million)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
| 1Q12 Financial Highlights 05
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232 .1 Operational and financial highlights
5 Gross Revenues per Channel (R$ mn) – Domestic Market
33
Notes:
1. Others: increase of 97.0 % in 1Q12 and of 65.4% in 2011.
SSS Sell-out (Owned Stores)
SSS Sell-in (Franchises)
11.0%
9.0%
12.1%
6.5%
88.5 97.6
358.7 420.0
47.4 55.7
188.4
234.0
26.9 44.5
110.0
152.2
1.8 3.5
5.4
9.0
1Q11 1Q12 2010 2011
10.2%
65.5%
164.6
201.3
22.3%
17.1%
38.4%
23.1%
662.5
815.2
24.2%
17.5%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
267 292 208 227 242 267 289
29 46
6 10 21 29
45
17.6
11.7 13.3 14.9
17.6
21.4
1Q11 1Q12 2007 2008 2009 2010 2011
Owned Stores Franchises Total Area
296 +42
23.2%
+38
13.2% 12.5%
17.7%
338
263
+23 214
237 296
+26 +33
21,6
334
21.9%
5
34
.2 Operational and financial highlights
Key highlights
Strong Gross Revenue growth, especially in the Schutz brand that increased by 36.7% in 1Q12 comparing to 1Q11
1Q12 ended with 338 store chain and Sales area expansion of 23% year-over-year
1Q12 Net Revenue increased by 16.4% year-over-year
Number of Stores (R$ mn) and Total Area (sq m - „000)
CAGR 07-12 (1Q12 LTM) : 29.3%
Net Revenues (R$ mn)
Area CAGR 07- 12 (1T12): 16.6%
138.6 161.4
193.8
367.1 412.1
571.5
678.9
1Q11 1Q12 2007 2008 2009 2010 2011
16.4%
89.4%
12.3%
38.7%
18.8%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
20.7
14.7
60.5
95.5
117.7 15.0%
14.7%
16.7% 17.3%
1Q11 1Q12 2009 2010 2011
5 Gross Profit (R$ mn) and Gross Margin (%)
35
.3 Operational and financial highlights
Adjusted¹ Net Income (R$ mn) and Net Margin (%)
Adjusted¹ EBITDA (R$ mn) and EBITDA Margin (%)
40.5%
14.7
10.9
48.7
64.5
91.6 10.6%
10.0%
11.8%
11.3%
13.5%
1Q11 1Q12 2009 2010 2011
5.3
16.1
16.1
22.7
14.0%
56.4 67.2
166.8
231.6
281.4
40.7% 41.6% 41.5%
1Q11 1Q12 2009 2010 2011
40.5%
8.0
Notes:
1. Adjusted by R$ 8.0 million non-recurring expense related to the termination of
the commercial agreement entered into with the former supply agent
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
36
5 .4 Operational and financial highlights
Cash Conversion Cycle (R$ thousand)
Cash Flows From Operating Activities (R$ thousand)
Capex (R$ million)
¹ Days of COGs
² Days of Net Revenues
Sumary of investments 1Q11 1Q12 Growth or
spread (%) 2010 2011
Growth or
spread (%)
Total Capex 3,738 17,337 363.8% 15,513 30,239 94.9%
Stores - expansion and reforming 2,206 13,578 515.5% 8,018 23,352 191.2%
Corporate 1,313 3,553 170.6% 5,772 6,082 5.4%
Others 219 206 -5.9% 1,723 805 -53.3%
Cash flows from operating activies 1Q11 1Q12Growth or
spread2010 2011
Growth or
spread
Income before income taxes 21,321 15,636 (5,685) 89,289 125,452 36,163
Depreciation and amortization 879 1,417 538 2,670 4,058 1,388
Others (1,868) (4,129) (2,261) 1,735 (10,475) (12,210)
Decrease (increase) in current assets / liabilities (12,068) 9,975 22,043 (48,404) (47,302) 1,102 -
Trade accounts reveivable (18,366) 5,994 24,360 (29,170) (47,118) (17,948)
Inventories (15,723) (8,579) 7,144 (27,657) (8,518) 19,139
Suppliers 22,157 18,840 (3,317) (330) 8,542 8,872
Change in other current assets and liabilities (136) (6,280) (6,144) 8,753 (208) (8,961)
Change in other non current assets and liabilities (263) (700) (437) (291) (147) 144
Tax and contributions (2,366) - 2,366 (24,542) (28,548) (4,006)
Net cash generated by operating activities 5,635 22,199 16,564 20,457 43,038 22,581
#days (R$'000) #days (R$'000)
106 164,520 99 183,568 -7
Inventory¹ 66 64,585 59 66,099 -7
Accounts Receivable² 92 150,836 90 173,595 -2
(-) Accounts Payable¹ 52 50,901 50 56,126 -2
Cash Conversion Cycle1Q11 1Q12 Change
(in days)
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
37
5 .4 Operational and financial highlights
Indebtedness (R$ thousand)
Indebtedness totaled R$30.8 million in 1Q12 versus
R$38.7 million in 4Q11
Long-term debt relevance stood at 54.4% in 1Q12 versus
46.0% in 4Q11
Indebtedness policy remained conservative, with low
weighted-average cost of Company's total debt
Indebtedness 1Q11 4Q11 1Q12
Cash 187,293 173,550 166,741
Total indebtedness 33,586 38,659 30,844
Short term 12,813 20,885 14,059
As % of total debt 38.1% 54.0% 45.6%
Long term 20,773 17,774 16,785
As % of total debt 61.9% 46.0% 54.4%
Net debt (153,707) (134,891) (135,897)
EBITDA LTM 98,930 117,729 111,662
Net debt /EBITDA LTM -1.6x -1.1x -1.2x
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
38
Appendix
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
39
.1 Key performance indicators
A Main financial Indicators 1Q11 1Q12
Growth or
spread (%) 2010 2011
Growth or
spread (%)
Net revenue 138,595 161,361 16.4% 571,525 678,907 18.8%
(-) COGS (82,150) (94,188) 14.7% (339,884) (397,483) 16.9%
Gross profit 56,445 67,173 19.0% 231,641 281,424 21.5%
Gross margin 40.7% 41.6% 0.9 p.p. 40.5% 41.5% 1.0 p.p.
(-) SG&A (36,589) (53,922) 47.4% (138,821) (167,754) 20.8%
% of Revenues 26.4% 33.4% 7.0 p.p. 24.3% 24.7% 0.4 p.p.
(-) Selling expenses (25,164) (34,257) 36.1% (95,437) (119,469) 25.2%
(-) Owned stores (9,483) (15,499) 63.4% (35,551) (46,573) 31.0%
(-) Sales, logistics and supply (15,681) (18,758) 19.6% (59,886) (72,896) 21.7%
(-) General and administrative expenses (10,904) (11,599) 6.4% (44,169) (45,895) 3.9%
(-) Other (expenses) and revenues¹ 358 (6,649) -1959.7% 3,455 1,668 -51.7%
(-) Depreciation and amortization (879) (1,417) 61.2% (2,670) (4,058) 52.0%
EBITDA 20,735 14,668 -29.3% 95,490 117,729 23.3%
EBITDA margin 15.0% 9.1% -5.9 p.p. 16.7% 17.3% 0.6 p.p.
Net income 14,728 10,852 -26.3% 64,534 91,613 42.0%
Net margin 10.6% 6.7% -3.9 p.p. 11.3% 13.5% 2.2 p.p.
Working capital² - % of revenues 25.8% 25.2% -0.6 p.p. 24.8% 28.2% 3.4 p.p.
Invested capital³ - % of revenues 28.5% 32.9% 4.4 p.p. 28.0% 29.6% 1.6 p.p.
Total debt 33,586 30,844 -8.2% 46,769 38,659 -17.3%
Net debt (153,707) (135,897) -11.6% 33,765 (134,891) n/a
Net debt/EBITDA LTM -1.6 X -1.2 X n/a 0.4 X -1.1 X n/a
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
40
.2 Balance Sheet - IFRS
A Assets 1Q11 4Q11 1Q12 Liabilities 1Q11 4Q11 1Q12
Current assets 419,920 432,376 426,413 Current liabilities 103,256 102,318 103,212
Cash and cash equivalents 6,809 15,528 6,213 Loans and financing 12,813 20,885 14,059
Short-term investments 180,484 158,022 160,528 Trade accounts payable 50,901 37,286 56,126
Trade accounts receivables 150,836 179,589 173,595 Dividends and interest on equity capital payable 11,964 14,327 6,117
Inventories 64,585 57,384 66,099 Other liabilities 27,578 29,820 26,910
Taxes recoverable 8,889 10,191 9,734
Other receivables 8,317 11,662 10,244 Non-current liabilities 30,069 24,263 23,138
Loans and financing 20,773 17,774 16,785
Non current assets 60,977 78,252 94,836 Related parties 2,079 905 879
Long-term assets 22,025 16,818 17,896 Other liabilities 7,217 5,584 5,474
Financial investments 96 79 88
Taxes recoverable 3,774 358 350 Equity 347,572 384,047 394,899
Deferred income and social contribution taxes 14,440 10,012 10,473 Capital 40,917 40,917 105,917
Other receivables 3,715 6,369 6,985 Capital reserve 238,086 237,723 172,723
Investments - - - Income reserves 37,779 105,407 105,407
Property, plant and equipment 22,134 30,293 37,627 Proposed additional dividends 16,062 - -
Intangible assets 16,818 31,141 39,313 Retained Earnings 14,728 - 10,852
Total assets 480,897 510,628 521,249 Total liabilities and shareholders‟ equity 480,897 510,628 521,249
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
41
.3 Income Statement - IFRS
A Income statement - IFRS 1Q11 1Q12
Growth or
spread (%) 2010 2011
Growth or
spread (%)
Net operating revenue 138,595 161,361 16.4% 571,525 678,907 18.8%
Cost of sales and services (82,150) (94,188) 14.7% (339,884) (397,483) 16.9%
Gross profit 56,445 67,173 19.0% 231,641 281,424 21.5%
Operating income (expenses): (36,589) (53,922) 47.4% (138,821) (167,753) 20.8%
Selling (25,524) (35,007) 37.2% (96,597) (121,224) 25.5%
Administrative and general (11,423) (12,266) 7.4% (45,679) (48,197) 5.5%
Other operating income, net 358 (6,649) -1957.3% 3,455 1,668 -51.7%
Income before financial results 19,856 13,251 -33.3% 92,820 113,671 22.5%
Financial income (expenses) 1,465 2,385 62.8% (3,531) 11,781 -433.6%
Income before income taxes 21,321 15,636 -26.7% 89,289 125,452 40.5%
Income and social contribution taxes (6,593) (4,784) -27.4% (24,755) (33,839) 36.7%
Current (1,967) (5,245) 166.6% (19,507) (24,598) 26.1%
Deferred (4,626) 461 -110.0% (5,248) (9,241) 76.1%
Net income for the year 14,728 10,852 -26.3% 64,534 91,613 42.0%
Income per share 0.17375 0.12256 -29.5% 0.8247 1.0453 26.7%
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
42
.4 Cash Flow Statement - IFRS
A Cash Flow Statement - IFRS 1Q11 1Q12 2010 2011
Cash flows from operating activities
Income before income and social contribution taxes 21,321 15,636 89,289 125,452
Adjustments to reconcile to net cash generated by operating activities (989) (2,712) 4,405 (6,417)
Depreciation and amortization 879 1,417 2,670 4,058
Financial Investments (3,091) (3,861) - (14,948)
Interest and FX variation 589 (522) 2,031 4,002
Other 634 254 (296) 471
Decrease (increase) in assets (36,649) (1,325) (57,730) (62,093)
Trade accounts receivable (18,366) 5,994 (29,170) (47,118)
Inventories (15,723) (8,579) (27,657) (8,518)
Taxes recoverable (871) 465 (4,063) 1,244
Variation in other current assets (1,359) 1,313 3,113 (5,200)
Judicial deposits (330) (518) 47 (2,501)
(Decrease) increase in liabilities 24,318 10,600 9,035 14,644
Trade accounts payable 22,157 18,840 (330) 8,542
Labor liabilities 1,057 (2,831) 2,843 (1,602)
Tax and social liabilities 205 (5,615) 7,719 7,665
Change in other liabilities 899 206 (1,197) 39
Paid incomes and social contribution taxes (2,366) - (24,542) (28,548)
Net cash generated by operating activities 5,635 22,199 20,457 43,038
Net cash used in investing activities (176,131) (15,986) (12,891) (168,294)
Net cash used in financing activities with third parties (13,772) (7,293) 5,399 (12,112)
Net cash used in financing activities with shareholders 183,073 (8,235) (43,952) 144,892
Increase (decrease) in cash and cash equivalents (1,195) (9,315) (30,987) 7,524
Increase (decrease) in cash and cash equivalents (1,195) (9,315) (30,987) 7,524
R:152
G:216
B:218
R:80
G:179
B:207
R:216
G:181
B:163
R:177
G:181
B:121
R:119
G:119
B:119
R:217
G:217
B:217
R:160
G:160
B:160
R:208
G:240
B:232
43
IR Contacts
Thiago Borges
Daniel Maia
Phone: +55 11 2132-4300
www.arezzoco.com.br
CFO and IR Officer
IR Manager