Cia. Hering - 2Q16 Results

1. 2Q16 Results
Conference Call
July 29th, 2016 – 11:00 am (BrT)
10:00 am (NY)/ 3:00 pm (London)

2. 2Q16 Results
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.
• Financial Performance
• Outlook
• Q&A
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3. FINANCIAL PERFORMANCE
GROSS REVENUES AND BREAKDOWN BY BRAND
R$ MILLION
GROSS REVENUES BREAKDOWN PER CHANNEL
DOMESTIC MARKET EX-OTHER REVENUES
2Q16, R$ MILLION – CHANGE 2Q16 X 2Q15
Gross Revenue of R$ 430.6 million in 2Q16, impacted by weaker performance
of both franchise and multibrand and better sales to final costumer.
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2Q16 2Q15 Change 1S16 1S15 Change
430.6 442.9 -2.8% 797.6 848.7 -6.0%
317.0 330.2 -4.0% 591.6 632.8 -6.5%
53.9 51.7 4.3% 99.4 96.5 2.9%
29.3 32.0 -8.5% 55.2 64.3 -14.1%
18.4 24.2 -24.0% 32.7 45.1 -27.5%
13.8 12.3 12.7% 22.9 21.5 6.3%International
Market

4. HERING STORE NETWORK
GROSS SALES
SELL-OUT, R$ MILLION
Gross revenues of R$ 359.1 million (-6.5%), reflecting SSS
performance, impacted by consumer traffic reduction at the
stores and lower number of visits.
¹ Stores opened in the last twelve months net from closings.
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STORE REFURBISHMENT PLAN
• Nearly 100 stores planned for the year
• 18 remodeled stores in the first half
Hering Store Franca – SP State
Owned stores better performance compared to franchise
network, favored by:
• best execution and supply strategy in owned store;
• lower markdown in franchise, favoring channel profitability
(inventory adjustment campaign in 2015).
SSS DYNAMICS

5. FINANCIAL PERFORMANCE
EBITDA of R$ 61.4 million (-7.8%) explained by
sales retraction and operational deleveraging.
Gross margin decline (-200 bp) due to sales decrease
insufficient to dilute fixed costs.
GROSS PROFIT
R$ MILLION
EBITDA
R$ MILLION
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6. FINANCIAL PERFORMANCE
NET INCOME
R$ MILLION
CAPEX
R$ MILLION
Operating income decline offset by financial income
of R$ 10.5 mm (+53.2% vs 2Q15), higher Company's average
cash and Income Tax and Social Contribution benefits.
Lower investments in Industrial Plants after the launch of
manufacturing plant and DC expansion and modernization in Goiás
and in IT after the conclusion of SAP implementation.
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7. FINANCIAL PERFORMANCE
Cash flow of R$ 85.0 million, R$ 68.6 million higher than 2Q15, as a result of a reduction in working capital
needs, notably in inventories and suppliers, Capex decrease and lower income tax and social contribution.
CASH FLOWS
R$ MILLION
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Cash Flow - Consolidated 2Q16 2Q15 Chg. 1S16 1S15 Chg.
EBITDA 61,376 66,557 (5,181) 97,867 113,698 (15,831)
No cash items (1,546) 3,027 (4,573) 2,066 15,074 (13,008)
AVP (Adjustment to Present Value) - Clients and Suppliers 5,145 4,498 647 10,857 9,473 1,384
Current Income tax and Social Contribution 2,150 (3,549) 5,699 (1,645) (11,187) 9,542
Working Capital Capex 22,010 (24,906) 46,916 84,778 11 84,767
(Increase) decrease in trade accounts receivable (30,480) (23,508) (6,972) 92,722 93,506 (784)
Decrease (increase) in inventories 22,948 10,111 12,837 12,570 (31,231) 43,801
Increase (decrease) in accounts payable to suppliers 24,581 (3,318) 27,899 (12,748) (26,273) 13,525
(Decrease) in taxes payable (10,045) (10,614) 569 (16,625) (27,966) 11,341
Refurbishment Project 2016 - Franchisee Financing 185 - 185 (2,495) - (2,495)
Others 14,821 2,423 12,398 11,354 (8,025) 19,379
CapEx (4,121) (29,184) 25,063 (9,955) (43,143) 33,188
Free Cash Flow 85,014 16,443 68,571 183,968 83,926 100,042

8. OUTLOOK
• Recessionary macroeconomic scenario should still affect the company's performance in the short term.
However, expectations on economic recovery from the year-end on may favor business environment
• Challenges in revenue growth
• Protege Goiás Fund– additional expense of R$ 4.5 – 5.0 million per quarter
• Product and Store (“P&S”) fronts, remain priority in the year:
• Product: collections of 2nd half already show improvements, supported by point of sale and communication strategy
• Stores: shopping experience supported by Stores Refurbishment and VM and supply fronts
• Strong free cash flow generation in the year, good profitability levels and comfortable financial position
despite economic environment difficulties – resilient business model.
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9. Fabio Hering – CEO
Frederico Oldani – CFO and IRO
Bruno Salem Brasil – IR Manager
Caroline Luccarini – IR Analyst
www.ciahering.com.br/ir
+55 (11) 3371 – 4867/4805
ri@hering.com.br
INVESTOR RELATIONS TEAM