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Conference call3Q11
Important Disclaimer
Statements regarding the Company’s future business perspectives and projections of operational and financial results aremerely estimates and projections, and as such they are subject to different risks and uncertainties, including, but notlimited to, market conditions, domestic and foreign performance in general and in the Company’s line of business. Theserisks and uncertainties cannot be controlled or sufficiently predicted by the Company management and may significantlyaffect its perspectives, estimates, and projections. Statements on future perspectives, estimates, and projections do notrepresent and should not be construed as a guarantee of performance. The operational information contained herein, aswell as information not directly derived from the financial statements, have not been subject to a special review by theCompany’s independent auditors and may involve premises and estimates adopted by the management.
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3Q11 Highlights
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Net revenues amounted to R$ 188.9 million, growing 18.9% over 3Q10Net RevenueNet Revenue
EBITDA amounted to R$ 35.5 million, growth of 47.5% over 3Q10 and margin of 18.8%EBITDAEBITDA
Gross margin stood at 41.8% in 3Q11, 2.1 p.p. higher than in 3Q10Gross MarginGross Margin
Net income in 3Q11 was R$ 25.9, 63.3% higher than in 3Q10 and margin of 13.7%Net IncomeNet Income
In 3Q11, Arezzo&Co expanded its store network opening 11 points of sale: 8 Arezzo stores and 3 Schutz within the new store conceptExpansionExpansion
The Company continues presenting a strong growth of gross revenues in both third quarter and in the nine months of the year
Company Growth
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Gross Revenues – (R$ million)
Solid performance of all distribution channels, specially for owned stores and multi-brand
Gross Revenues Breakdown by Channel
5(1) Others: reduction of 40.2% in 3Q11 and of 6.2% in 9M11.
Gross Revenues by channel – Domestic Market (R$ million)
SSS Sell-out (Owned Stores)
SSS Sell-in (Franchises)
26.5%
25.8%
0.4%
11.6%
25.8%
34.5%
9.6%
15.6%
103.2 121.0
247.6 300.4 48.7
69.2
132.4
177.1
29.2 34.6
72.5
93.3
3.4 2.0
5.1
4.8
3Q10 3Q11 9M10 9M11
17.2%
18.7%184.6
226.922.9%
21.3%
28.8%
25.8%
457.5
575.5
33.8%
42.1%
Great sales performance for all brands. Arezzo, main brand of the Group, keeps growing over 20% in the year, while Schutz has grown more than 30% both in third quarter and in 9M11
Gross Revenues Breakdown by Brand
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Gross Revenues by brand – Domestic Market (R$ million)
(1) Other brands: Alexandre Birman and Anacapri’ s Domestic market. Gross revenues presented a growth of 81.6% in 3Q11 and of 142.7% in 9M11.
135.7 159.2
329.8 399.5
44.3 59.3
119.4
155.8
4.6 8.4
8.3
20.2
3Q10 3Q11 9M10 9M11
17.3%
34.0%
184.6226.9
22.9%
21.1%
30.5%
457.5
575.525.8%
The Company ended the third quarter with 311 stores and 15.5% of sales area expansion when compared to 3Q10
Distribution Channel Expansion
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Owned Stores and Franchises Expansion
Note: area given in thousand m²(1) Includes 4 Arezzo outlets and 1 Schutz outlet (2) Domestic Market
218 229 253 275
9 17
27 36
12.7 13.9
16.7
19.3
3Q08 3Q09 3Q10 3Q11
+31280311
227246 +34
+19
19.8%
15.5%
10.1%
Gross profit rose by 25.1% in 3Q11 with margin expansion of 2.1 p.p., mainly reflecting the change in distribution channel mix and a higher share of imported handbags in the product mix
Gross Profit
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Gross Profit (R$ million) and Gross Margin (%)
63.1 78.9
163.5
201.1
39.7%41.8% 41.9%
3Q10 3Q11 9M10 9M11
Gross Profit Gross Margin
25.1%
23.0%
41.2%
Significant growth in 3Q11 EBITDA, with margin expansion of 3.6 p.p. over 3Q10
EBITDA
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EBITDA (R$ million) and EBITDA Margin (%)
24.1 35.5
64.5
84.6
15.2%
18.8%
16.3%17.6%
3Q10 3Q11 9M10 9M11
EBITDA EBITDA Margin
47.5%
31.1%
Company’s net income rose by 63.3% in 3Q11, with margin expansion of 3.7 p.p.
Net Income and Net Margin
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Net Income (R$ million) and Net Margin (%)
15.9 25.9
43.0
64.7
10.0%
13.7%
10.8%
13.5%
3Q10 3Q11 9M10 9M11
Net Income Net Margin
63.3%
50.4%
Cash Generation
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Company disbursed R$ 8.0 million of operating cash, aligned with its deliveries calendar
Operating Cash Generation (R$ thousand)
Cash flows from operating activity 3Q10 3Q11 Growth or spread 9M10 9M11 Growth or
spreadIncome before income taxes 21,851 38,854 17,003 59,758 90,520 30,762 Depreciation and amortization 680 1,050 370 1,847 2,890 1,043 Others 499 (1,680) (2,179) 548 (7,943) (8,491)
Decrease (increase) in current assets / liabilities (15,848) (38,949) (23,101) (22,406) (28,200) (5,794)
Trade accounts reveivable (30,203) (51,314) (21,111) (8,461) (27,418) (18,957) Inventories (13,003) (3,983) 9,020 (30,193) (22,820) 7,373 Suppliers 16,350 12,778 (3,572) 14,285 21,306 7,021 Change in other current assets and liabilities 11,008 3,570 (7,438) 1,963 732 (1,231)
Change in other non current assets and liabilities 2,215 (946) (3,161) 4,074 (2,119) (6,193)
Tax and contributions (10,686) (6,363) 4,323 (12,766) (14,703) (1,937)
Net cash generated by operating activities (1,289) (8,034) (6,745) 31,055 40,445 9,391
Capex in 3Q11 was mainly concentrated in the opening of 5 stores, purchase of points of sale for future openings and expansion of existing stores
Capital Expenditure (CAPEX) and Indebtedness
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CAPEX (R$ million) Indebtedness (R$ million)
(1) Others: reduction of 33.3% in 3Q11 over 3Q10 and of 46.2% in 9M11 over 9M10.
Indebtedness 3Q10 2Q11 3Q11
Cash 18,754 199,339 178,999
Total indebtedness 37,457 32,276 35,065 Short term 17,288 12,547 16,270 % da Dívida Total 46% 39% 46%Long term 20,169 19,729 18,795 % da Dívida Total 54% 61% 54%
Net debt 18,703 (167,063) (143,934)
EBITDA LTM 85,567 104,119 115,561 Net debt /EBITDA LTM 0.22x -1.60x -1.25x
Greater National Presence
Strengthening its multi channel distribution strategy, Arezzo&Co has structured GTM-Schutz project for brand’s roll out over the country
Enlarge Schutz national presence leveraged by mono brand stores
Multi brand distribution
Mono brand and multi brand distribution
Big cities
Focus on Shopping Centers
Target audience A/B1
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Mono Brand Stores Strategy
Schutz new project for owned stores and franchises: Emphasizing the products and the campaigns;
Reinforcing the brand with a complete presentation of each collection;
Pilot project: Opening of 2 stores within the new project: Higienópolis Shopping – SP and Barra
Sul Shopping – POA;
Launch of first pilot franchise in the city of Salvador - BA
Schutz – Higienópolis Shopping / São Paulo Schutz – Iguatemi Shopping / Salvador
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Multi Brand Market Analysis
Exemple – “South” Coordinator Smaller regions for sales person, with an
increased team
Regional Coordinator
Consultants in areas with a greater
concentration of stores
Sales representatives in less dense but with
potential growth areas
Incentive for the prospect of new clients
and more frequent visits
Geographical limits (e.g. mountains) and
higher travel costs control
Internal targets: cities covered, number of
clients and sales per customer
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Reach consumers all over the country;
Wide range of models in each collections.
Greater presence and brand’s national visibility;
Sales team optimization: internal team and commissioned sales representatives.
Retail expertise, increasing channel’s relevance;
Schutz owned store in 5 cities: Sao Paulo, Rio de Janeiro, Porto Alegre,
Brasília e Belo Horizonte.
Flexible Distribution Strategy
Arezzo&Co has been consolidating different distribution channels in which has
developed the expertise for its brands portfolio
Owned stores:
Webcommerce:
Expansion of the most representative channel of the Group, now for Schutz brand;
Relationship with local consumers.Franchises:
Multi Brand:
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Expansion Guidance Update – Arezzo&Co
# Owned stores# Franchises
275
3Q11 2011
36
311
267
2010
29
296 87
16
7
291
43
334 47
11
2012
338
54
392
Reinforce our commitment to the opening of 38 stores in 2011;
Existing stores were expanded in 391m² over last nine months, in line with the 1,000m² target until 2012;
We increased in 20 stores the 2012 guidance, specially due to GTM project.
+5%
+7%
+17%
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