2Q18 Results | 4Q18 Information contained in this document may - - PowerPoint PPT Presentation

2Q18

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Results | 4Q18

Important Disclaimer

Information contained in this document may include forward-looking statements and reflect Management’s current view and estimates of the evolution of the macroeconomic environment, industry conditions, Company’s performance and financial

• results. Any

statements, expectations, capabilities, plans and assumptions contained in this document, which do not describe historical facts, such as information about declaration of dividend payment, future direction of operations, implementation

• f

relevant

• perating

and financial strategies, investment program and factors or trends affecting the financial condition, liquidity or results of operations, are forward-looking statements, as set forth in the “U.S. Private Securities Litigation Reform Act of 1995”, and involve several risks and uncertainties. There is no guarantee that these results will occur. Forward-looking statements are based on several factors and expectations, including economic and market conditions, industry competitiveness and

• perational factors. Any changes in such expectations and factors

may cause actual results to differ from current expectations.

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4Q18 Highlights

Net revenue in 4Q18 reached R$ 412.2 million, a 13.4% increase against 4Q17. Arezzo&Co recorded a 180bps increase in ROIC, reaching a level of 29.2%. EBITDA for 4Q18 totaled R$ 64.1 million with a net margin of 15.6% and a 17.7% increase against 4Q17. Same-Store-Sales growth of 3.6% in the quarter. In 4Q18, Net Income totaled R$ 42.2 million (net margin of 10.2%).

Net Revenue EBITDA ROIC Net Income SSS

Results | 4Q18

In 4Q18, Gross Profit totaled R$ 194.7 million (gross margin of 47.2%), a 14.8% increase against 4Q17;

Gross Profit

Arezzo&Co opened 36 stores (net) in the quarter and ended 4Q18 with 5.5% in store area growth in the last twelve months.

Sales Area

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Company Growth

GROSS REVENUE / DOMESTIC AND FOREIGN MARKET (R$ MILLION)

THE COMPANY REACHED A GROSS REVENUE OF R$ 505.5 MILLION IN THE 4Q18, A 12.8% GROWTH COMPARED TO THE 4Q17, WITH HIGHLIGHT TO THE EXTERNAL MARKET WITH GROWTH OF 28.5%, REPRESENTING 10.4% OF TOTAL REVENUE. US OPERATION INCREASED BY 65.5% IN REAIS IN THE PERIOD AND 40.8% IN DOLLAR.

Results | 4Q18

407,4 453,1 1.524,4 1.678,9 40,8 52,4 154,5 186,9 448,2 505,5 1.678,9 1.865,8 4Q17 4Q18 2017 2018 Domestic Market Foreign Market 10,1% 21,0% 11,1% 11,2% 28,5% 12,8%

236,6 259,6 873,8 950,7 107,5 107,7 451,4 443,5 50,1 65,4 157,3 219,6 13,2 20,4 41,9 65,2 407,4 453,1 1.524,4 1.678,9 4Q17 4Q18 2017 2018 Arezzo Schutz Anacapri Others 11,2%

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Gross Revenue by Brand | Domestic Market

GROSS REVENUE BREAKDOWN BY BRAND / DOMESTIC MARKET (R$ MILLION)

IN 4Q18, THE HIGHLIGHT GOES TO ANACAPRI AND AREZZO BRANDS WITH 30.5% AND 9.7% GROWTH RESPECTIVELY.

• 1. OTHERS: INCREASE OF 54.5% IN 4Q18 (INCLUDES ONLY

Results | 4Q18

10,1% 55,5% 39,6%

• 1,8%

8,8% 30,5% 0,2% 9,7% 11,2% 54,5%

210,3 244,3 748,1 831,4 91,5 87,7 298,7 298,7 67,4 75,7 343,7 384,3 35,9 45,0 129,0 162,6 2,4 0,5 4,9 1,9 407,4 453,1 1.524,4 1.678,9 4Q17 4Q18 2017 2018 Others Web Commerce Multibrand Owned Stores Franchises 25,4% 16,2%

• 4,1%

10,1%

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Gross Revenue by Channel | Domestic Market

GROSS REVENUE BY CHANNEL / DOMESTIC MARKET (R$ MILLION)

Results | 4Q18

1.2% 2.8%

SSS SELL-IN

(FRANCHISES)

SSS SELL-OUT

(LOJAS PRÓPRIAS + WEB + FRANQUIAS)

SSS SELL-OUT

(OWNED STORES + WEB + FRANCHISES)

9.2% 3.6% 5.0% 3.9% 4.7% 4.2%

12,3% 11,2% 11,1% 0,0% 26,1% 11,8% 16,2%

• 4,1%

25,4%

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Distribution Channel Expansion

OWNED STORES AND FRANCHISES EXPANSION1 NUMBER OF STORES – DOMESTIC MARKET 4Q18

AREZZO&CO’S OPENED 36 NET STORES AND ENDED THE QUARTER WITH 685 STORES, 673 IN BRAZIL AND 12 ABROAD. 8.0% SALES AREA INCREASE OVER THE LAST 12 MONTHS AND 67 NET OPENED STORES.

• 1. INCLUDES SEVEN OUTLET TYPE STORES WITH A TOTAL AREA OF 2,223 M² AND STORES OVERSEAS.

Results | 4Q18

FRANCHISES__ 405 OWNED STORES 14 MULTIBRANDS 1,188 FRANCHISES 73 OWNED STORES 17 MULTIMARCAS 1,096 FRANQUIAS 150 OWNED STORES 3 MULTIBRANDS 1,439 OWNED STORES 4 MULTIBRANDS 29 OWNED STORES 5 MULTIBRANDS 413 OWNED STORES 2 MULTIBRANDS 248

• 2. INCLUDES ALEXANDRE BIRMAN AND SCHUTZ STORES, 3 IN NEW YORK, ONE IN MIAMI AND ONE IN LOS ANGELES.

568 576 584 595 634 50 49 52 54 51 41,2 41,5 42,0 42,6 43,5

• 10,0

20,0 30,0 40,0 50,0 60,0 70,0

• 100

100 300 500 700 900 1.100 1.300 1.500 4Q17 1Q18 2Q18 3Q18 4Q18 Franchises Owned Stores Area (000 m2) +11 +2 +3 0,7% 1,3% 1,1% 2,3%

• 1

+8 +8

• 3

+39

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Gross Profit and EBITDA

GROSS PROFIT (R$ MILLION) EBITDA (R$ MILLION)

GROSS PROFIT TOTALED R$ 194.7 MILLION IN 4Q18 WITH AN INCREASE OF 14.8% (+ 60BPS IN GROSS MARGIN). EBITDA GREW BY 17.7% IN 4Q18 TO R$ 64.1 MILLION (EBITDA MARGIN OF 15.6%).

Results | 4Q18

169,6 194,7 623,8 710,7 46,6% 47,2% 45,8% 46,6% 0% 20% 40%

• 100,0

200,0 300,0 400,0 500,0 600,0 700,0 800,0 900,0 1.000,0 4Q17 4Q18 2017 2018 Gross Profit Gross Margin 54,5 64,1 206,3 232,2 15,0% 15,6% 15,2% 15,2%

• 3

3 , %

• 2

3 , %

• 1

3 , %

• 3

, % 7 , %

• 2,0

4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 22,0 24,0 26,0 28,0 30,0 32,0 34,0 36,0 38,0 40,0 42,0 44,0 46,0 48,0 50,0 52,0 54,0 56,0 58,0 60,0 62,0 64,0 66,0 68,0 70,0 72,0 74,0 76,0 78,0 80,0 82,0 84,0 86,0 88,0 90,0 92,0 94,0 96,0 98,0 100,0 102,0 104,0 106,0 108,0 110,0 112,0 114,0 116,0 118,0 120,0 122,0 124,0 126,0 128,0 130,0 132,0 134,0 136,0 138,0 140,0 142,0 144,0 146,0 148,0 150,0 152,0 154,0 156,0 158,0 160,0 162,0 164,0 166,0 168,0 170,0 172,0 174,0 176,0 178,0 180,0 182,0 184,0 186,0 188,0 190,0 192,0 194,0 196,0 198,0 200,0 202,0 204,0 206,0 208,0 210,0 212,0 214,0 216,0 218,0 220,0 222,0 224,0 226,0 228,0 230,0 232,0 234,0 236,0 238,0 240,0 242,0 244,0 246,0 248,0 250,0 252,0 254,0 256,0 258,0 260,0 262,0 264,0 266,0 268,0 270,0 272,0 274,0 276,0 278,0 280,0 282,0 284,0 286,0 288,0 290,0 292,0 294,0 296,0 298,0 300,0 302,0 304,0 306,0 308,0 310,0 312,0 314,0 316,0 318,0 320,0 322,0 324,0 326,0 328,0 330,0 332,0 334,0 336,0 338,0 340,0 342,0 344,0 346,0 348,0 350,0 352,0 354,0 356,0 358,0 360,0 362,0 364,0 366,0 368,0 370,0 372,0 374,0 376,0 378,0 380,0 382,0 384,0 386,0 388,0 390,0 392,0 394,0 396,0 398,0 400,0 4Q17 4Q18 2017 2018 EBITDA EBITDA Margin 12,6%

+60 bps +80 bps +60 bps +0 bps

13,9% 14,8% 17,7%

55,3 42,2 154,5 142,6 15,2% 10,2% 11,4% 9,3% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0%

• 50,0

100,0 150,0 200,0 250,0 300,0 4Q17 4Q18 2017 2018 Net Income Net Margin

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Net Income

NET INCOME (R$ MILLION)

THE COMPANY POSTED A NET MARGIN OF 10.2% IN 4Q18 AND A NET INCOME OF R$ 42.2 MILLION, 23.7% INCREASE AGAINST 4Q17. EXCLUDING THE RETROACTIVE EFFECT, NET INCOME WOULD BE 8.6% HIGHER THAN 4Q17.

Results | 4Q18

• 7,7%
• 500 bps
• 210 bps
• 23,7%

15,2% 10,2%

Operating Cash Flow

OPERATING CASH FLOW (R$ THOUSAND)

AREZZO&CO GENERATED R$ 33.2 MILLION CASH FROM OPERATIONS IN THE 4Q18, LOWER THAN THE AMOUNT PRESENTED IN 4Q17. IT IS WORTH HIGHLIGHTING THE PAYMENT OF DIVIDENDS RELATED TO 2Q18, ON OCTOBER 22ND, IN THE AMOUNT OF R$ 25.0 MILLION.

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Results | 4Q18

Operating Cash Flow 4Q18 4Q17 2018 2017

Profits before income tax and social contribution 47.792 41.786 169.998 182.933 Depreciation and amortization 13.002 10.002 40.882 32.632 Others (10.781) 2.469 (3.177) (3.672) Decrease (increase) in assets / liabilities (2.104) 7.001 (66.170) 3.346 Trade accounts receivables 2.248 (292) (47.759) (30.859) Inventories (4.921) 3.729 (39.845) (6.065) Suppliers (17.424) (4.604) 5.705 37.971 Change in other noncurrent and current assets and liabilities 17.993 8.168 15.729 2.299 Payment of income tax and social contribution (14.750) (17.555) (28.746) (45.466) Net cash flow generated by operational activities 33.159 43.703 112.787 169.773

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Investments (CAPEX) and Indebtedness

CAPEX (R$ MILLION) INDEBTEDNESS (R$ MILLION)

IN 4Q18, AREZZO&CO INVESTED R$ 12.6 MILLION IN CAPEX, INCLUDING:

• BRAZILIAN OPERATION: (I) INVESTMENTS IN TECHNOLOGY IN ALEXANDRE BIRMAN BRAND FACTORY (II) UPGRADE IN OUR DATACENTER.
• U.S. OPERATION: (I) LAUNCHING OF SCHUTZ STORE IN AVENTURA MALL AND ALEXANDRE BIRMAN STORE IN BAL HARBOUR SHOPS, BOTH IN MIAMI (II) IMPROVEMENTS IN

THE INTERNATIONAL WEB COMMERCE PLATFORM AND (III) SOFTWARE AND IT INVESTMENTS.BRAZIL: (I) INVESTMENTS IN TECHNOLOGY IN ALEXANDRE BIRMAN BRAND FACTORY (II) UPGRADE IN DATACENTER IBM SYSTEM

Results | 4Q18

2,0 1,4 7,4 10,8 5,2 4,1 11,2 20,3 0,4 7,1 3,0 17,6 7,6 12,6 21,5 48,6 4Q17 4Q18 2017 2018 Stores Corporate Others 125,6% 490,7% 45,4% 81,7% 66,4% 1492,9%

• 20,3%
• 27,2%

Cash position and Indebtedness 4Q18 3Q18 4Q17

Cash 235.801 283.745 337.920 Total Debt 111.418 172.421 181.745 Short term 43.978 161.180 163.729 % total debt 39,5% 93,5% 90,1% Long-term 67.440 11.241 18.016 % total debt 60,5% 6,5% 9,9% Net Debt (124.383) (111.324) (156.175)

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ROIC (Return on Invested Capital)

RETURN ON INVESTED CAPITAL (ROIC) PRESENTED GROWTH IN 4Q18, REACHING 29.2%. AMONG THE FACTORS RESPONSIBLE FOR THIS IMPROVEMENT IS THE INCREASE OF 12,9% NOPAT AGAINST 4Q17.

IT IS WORTH MENTIONING THAT PART OF THE INCREASE IS DUE TO AN INJUNCTION OBTAINED IN 4Q17 EXEMPTING THE COMPANY FROM THE PAYMENT OF INCOME AND SOCIAL CONTRIBUTION TAXES (IR AND CSLL - 34%) ON AS ICMS TAX BENEFIT RETROACTIVE TO 2017, WHICH REMAINED VALID DURING 2018.

Results | 4Q18

Income from operations 4Q18 4Q17 4Q16 Δ 18 x 17

(%)

EBIT (LTM) 191.280 173.633 151.326 10,2% + IR and CS (LTM) (27.354) (28.463) (40.851) (3,9%) NOPAT 163.926 145.170 110.475 12,9% Working Capital¹ 412.461 342.283 340.528 20,5% Permanent assets 153.693 149.754 159.918 2,6% Other long-term assets² 31.847 33.375 32.596 (4,6%) Invested capital 598.001 525.412 533.042 13,8% Average invested capital³ 561.707 529.227 6,1% ROIC4 29,2% 27,4%

Contacts

CFO RAFAEL SACHETE IRO ALINE PENNA IR COORDINATOR VICTORIA MACHADO IR ANALYST MARCOS BENETTI

+55 11 2132 4300 RI@AREZZOCO.COM.BR WWW .AREZZOCO.COM.BR