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Institutional Presentation 2Q18 1 Disclaimer Statements regarding - - PowerPoint PPT Presentation

Jan 17, 2024 382 likes •836 views

| Apresentao do Roadshow Institutional Presentation 2Q18 1 Disclaimer Statements regarding the Companys future business perspectives and projections of operational and financial results are merely estimates and projections, and as such

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SLIDE 1

| Apresentação do Roadshow

1

Institutional Presentation

2Q18

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SLIDE 2

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

  • n

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

Disclaimer

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SLIDE 3

| COMPANY OVERVIEW

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SLIDE 4

Platform of brands of reference

Arezzo&Co is the leading Company in the footwear, handbags and accessories industry through its platform of Top of Mind brands

1

4
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SLIDE 5 5

1

TIMELESS CONSTRUCTIONS SEGMENT

WELLNESS

COMFORT + STYLE

TARGET AB1 CLASSES

35+

@owmeoficial

The 6th Brand – OWME

(“Own + Me”)

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SLIDE 6

Company overview

Arezzo&Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generation

1

6 1. As of 2017 2. Refers to the Brazilian women footwear market (source: Company estimates).

Leading company in the footwear and accessories industry with presence in all Brazilian states Controlling shareholders are reference in the sector Development of collections with efficient supply chain Asset light: high

  • perational

efficiency Strong cash generation and high growth

12.1 million pairs of shoes (1) 1,2 million handbags (1) More than 2,500 points of sale ~12% total market share and ~25% market share on AB classes More than 45 years of experience in the sector Wide recognition ~11,500 models created per year Average lead time of 40 days 15 to 18 launches per year 91,8% outsourced production ROIC of 31.2% in 2Q18 2,468 employees Net revenues CAGR: 7.9% (2012-2017) Net Profit CAGR: 8.1% (2012- 2017) Increased operating leverage

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SLIDE 7
  • 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
  • utsourcing 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 2011 – 2018

70’s 80’s 90’s 00’s

Opening of the first shoe factory Opening of the flagship store at Oscar Freire

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)

7
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SLIDE 8

Shareholder Structure

1. Arezzo&Co capital stock is composed of 90,302,408 common shares, all nominative, book-entry shares with no par value 2. Shareholder structure as of June 25th 2018 3. Includes Stock Options plan 8

51.1% 48.9%

Birman Family Float

1

Management² Others

30.5%

Aberdeen

7.5% 0.07%

BTG Pactual

5.7%

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SLIDE 9

Foundation 1972 1995 2008 2009 2015 Brands profile Trendy New Easy to use Eclectic Fashion Up to date Bold Provocative Pop Flat shoes Affordable Colorful Design Exclusivity Identity Seduction Casual Young Urban Modern Female target market 16 – 60 years 18 – 40 years 12 – 60 years 20 – 45 years 15 – 30 years % Web Gross Revenue

R$70.2 MM (7%) R$60.0 MM (11%) R$11.2 MM (6%) R$1.6 MM (3%) R$2.1 MM (11%)

Retail price point

R$220 / pair R$380 / pair R$110 / pair R$1,500 / pair R$280 / pair

Sales Volume3

R$937.3 MM R$556.1 MM R$186.2 MM R$59.2 MM R$20.1MM

% Gross Revenues4

53.3% 31.6% 10.6% 3.4% 1.1%

Strong platform of brands

Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segments

1

Distribution channel1 POS 1

9

% gross rev.2 O F MB EX 14 64% 13% 66 2% 25 67 17% 29% 25% 19% 3 51% 34% 8% 24 1% O MB EX 5 5% 31% 42 61% 24 O MB EX 4 40% 49% 2 0% 402 111 O F MB EX O F MB EX 1,167 388 14% 1,122 1,304

Notes: 1. Points of sales (LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports (including US and ROW wholesalers). 2. % of each brand gross revenues (LTM) does not include other revenues (not generated by any of the 6 brands). 3. Gross revenues LTM, including external market; does not include other revenues (not generated by any of the 6 brands). 4. % of Company’s total gross revenues of LTM

124

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SLIDE 10

Multiple distribution channels

Flexible platform through different distribution channels with specific strategies, maximizing the Company's profitability

1

Notas: 1. Without store overlap between brands 2. LTM 3. Domestic Market – multibrand without overlap. 10

Gross Revenue Breakdown by Channel2 – (R$ mm) Broad distribution network throughout Brazil 48 owned stores in Brazil 2,342 multibrand¹ clients in more than 1,270 cities 584 franchises in more than 220 cities in Brazil

NUMBER OF STORES – DOMESTIC MARKET 2Q18

FRANCHISE____________388 OWNED STORE__________14 MULTIBRAND____________1.167 FRANCHISE____________67 OWNED STORE__________22 MULTIBRAND____________1.122 FRANCHISE____________124 OWNED STORE__________3 MULTIBRAND___________1.304 OWNED STORE__________4 MULTIBRAND___________24 OWNED STORE__________4 MULTIBRAND___________402 OWNED STORE__________1 MULTIBRAND____________97
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SLIDE 11

| BUSINESS MODEL

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SLIDE 12

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 4 5

12

Unique business model in Brazil

2

2 3

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SLIDE 13

Ability to Innovate

We develop 15 to 18 collections per year

2

  • I. Research

Creation: 11,500 SKUs / year

  • II. Development
  • III. Sourcing
  • IV. Store Delivery

Arezzo&Co delivers on average 5 new models at the stores 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

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SLIDE 14

Broad Media Plan

2

14

Each brand has an integrated and expressive communication strategy, from the creation of campaigns to the point of sale

LIVE MARKETING AND EXPERIENCE AT POINT OF SALE STRONG PRESENCE IN SOCIAL, DIGITAL AND PRINT MEDIA DIGITAL COMMUNICATION INTERNATIONAL CELEBRITIES ENDORSEMENT AND STRONG PRESENCE IN THE PRESS CUSTOMIZED CONTENT FOR DIFFERENT CLIENTS OVER 12 MILLION FOLLOWERS OVER 4 MILLION MONTHLY WEBSITE ACCESS CUSTOMER ACTIVATION THROUGH FASHION AND LIFESTYLE EVENTS PUBLIC RELATIONS

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SLIDE 15

Stores are constantly changed to incorporate the concept of each new collection, resulting in a higher level of desire-driven purchases

Communication & Marketing Program reflected in every aspect of the stores

2

15

All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection

Flagship stores Store layout & visual merchandising POS materials (catalogs, packaging, and others)

15
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SLIDE 16

Atmosfera das lojas: conceitos diferenciados para cada marca

2

16
  • Display of a large variety of products
  • Inventory at the sales area: lower necessity of
additional space for storage Wall display Shelves, Niches and Suspended shelves
  • Increased number of displayed items
  • Products highlighted in the center of the stores
  • Favorable lighting project
  • Distribution of the furniture provides more comfort to the
customers New Store Concept
  • New store concept being tested in flagship stores
  • New digital experience: mobile check-out, RFID mirror
and touch-screen TV
  • Expected roll out for 2018/19
Each theme is disposed in different niches
  • Atmosphere of a jewelry store
  • Private shop experience
  • Focus on exclusivity, design and high quality
materials Experimental and creative
  • Experimental and creative space
  • Interaction with the customer
  • Collaborative experience
Wellness and style
  • Focus on wellness (comfort and style)
  • Timeless concept
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SLIDE 17

Reception: 100,000 units/day Storage: 100,000 units/day Picking: 150,000 units/day Distribution: 200,000 units/day

Flexible Production Process

2

17

Production speed, flexibility and scalability to ensure Arezzo&Co’s expected growth based on asset light model

Arezzo’s scale and structure gives flexibility to source a large number

  • f SKU’s from various factories on a short time frame at competitive

prices Owned factory with capacity to produce 1,1mm pairs annually and a strong relationship with Vale dos Sinos production cluster as the main outsourcing region

Sourcing 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) Coordination of material purchase jointly with shoe, handbag and accessories’ suppliers

New Distribution Center – Espirito Santo State Sourcing model – 92% of production outsourced¹ Consolidation and improvement of distribution in national scale

1 2 3 4

8% 92% Arezzo&Co Owned Factories Others

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SLIDE 18

Operation composed by flagship stores in key Brazilian locations

Owned stores are key to develop retail know-how and increase brands’ visibility

2

Flagship Stores

18

Greater brand awareness coupled with operational efficiencies

  • Owned stores are larger and more productive than average and

are located in key cities of Brazil (mainly SP and RJ)

  • The direct customer interaction enables the development of retail

capabilities, which are also reflected at franchised stores

  • Flagship stores ensure greater visibility and reinforce brand

image

R$ 6.3MM

Owned Franchise

Average Annual Sales per Store LTM

R$ 1.4MM

Arezzo – Iguatemi / SP Schutz – Iguatemi/ SP Arezzo – Oscar Freire/ SP Schutz – Oscar Freire/ SP Anacapri – Oscar Freire/ SP
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SLIDE 19

Structure applied to retail in order to achieve better sales and margin results as well as to integrate and connect all monobrand stores’ back office

2

19

Strong focus on performance in both

  • wned and franchised stores

Strong focus on franchise and owned store performance

  • All sales team (4,000+ people) get connected through national internet broadcast for three sales conventions per

year, creating an aligned sales pitch and a great sense of motivation before each season

  • Large service program to assist franchisees on sales and profitability goals
  • Recurring training programs in products, fashion trends, sales techniques, store management, IT, among others
  • Strong visual merchandising, trade marketing and ambiance investments and training
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SLIDE 20

56% 24% 10% 10%

  • 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 amounts to 100%
  • As mono-brand stores, franchises reinforce branding in each city

they are located

2

4 or more franchises 1 franchise 2 franchises 3 franchises

Efficient management of the franchise network

Model allows fast expansion with low invested capital

Successful Partnership: “Win – Win” Franchise Concentration per Operator

96% satisfaction of franchisees1 Seal of Excellence from ABF (Brazilian Association of Franchising)

(# of franchises by # of franchisees)

Notes: 1. 96% of the current franchisees indicated they would be interested in opening a franchise if they did not already have one 2. For a regular Arezzo brand store, with expected annual sales of R$ 2,2 million, the average investment is approximately R$ 670 thousand, including store capex, franchise fee, WC and initial inventory) 20

5-year contract and average payback of 36-48 months2

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SLIDE 21 88 104 2.188 2.342 1.800 1.900 2.000 2.100 2.200 2.300 2.400 – 20 40 60 80 100 120 140 160 180 200 2Q17 2Q18 Multibrand stores - Gross Revenue (R$mn) # Multibrand Stores

Multibrand stores as tool for increased capilarity

2

21

Multibrand stores’ gross revenue¹ Improved distribution and brand visibility

  • Greater brand distribution network
  • Presence in over 1,250 cities
  • Fast expansion at low investment and risk
  • Main focus: increase share of wallet, through the sale of more

brands at the same POS and also handbags as part of the mix

  • Important sales channel for smaller cities and the Brazilian

countryside

  • Sales team optimization: internal team and commissioned sales

representatives

Multibrand stores widen the distribution network and the brands’ visibility, resulting in a stronger retail footprint

Notes: 1. Domestic market only

Multi-brand stores

18.9% 7.0%
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SLIDE 22

Board of Directors Risk, Audit and Finance Committee People Committee Strategy Committee

Internal Auditing

Alexandre Birman CEO/CCO

The new structure presents a reduction in the number of CEO reports, value chain integration and higher speed in decision making, with an increased focus on people and sustainability

New Organizational Structure

2

BU Arezzo BU Schutz BU Anacapri LAB BU Fiever BU OWME Sourcing Engineering Quality Industry Planning Logistics People Sustainability*/PR Non productive purchase Management (Method, goals and indicators) Finance/Legal/Fiscal Controller Investor Relations Risk Management Strategic Planning/PMO

Brands Silvia Machado Industrial and Operations Cisso Klaus and Cassiano Lemos Administrative & Finance Rafael Sachete HR & Expansion Marco Aurélio Vidal

IT Innovation Valorizza (CRM) WEB (BR/USA)

Digital Transformation Maurício Bastos

Schutz USA BU Alexandre Birman Exports

International Business Wayne Kulkin

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SLIDE 23

José Bolonha (Coordinator) Juliana Rozenbaum (Coordinator)

Corporate governance

2

23

Risk, Audit and Finance Committee

Committees

Strategy and Brands Committee People Committee

Members: Alessandro Carlucci, Guilherme A. Ferreira and Edward Ruiz Members: Alexandre Birman, Paula Bellizia and Juliana Rozenbaum Members: Luiz Fernando Giorgi, José Bolonha and Cláudia Falcão

The Board is comprised of 7 members, of which 2 are independent, and has a very large engagement on the strategic planning of Arezzo&Co

Name Experience Name Experience Title Title

Board of Directors

Alessandro Carlucci

Chairman of the Board Natura’s CEO for over a decade and former Board Member of Lojas Renner, Redecard, Alcoa Latam and Itau-Unibanco

Luiz Fernando Giorgi

member 28 years of experience in Management and Leadership. Current member of people committees for Santander, Sul América and Grupo Martins

Alexandre Birman

Member Current CEO of Arezzo&Co and part of the controlling group. Founder of Schutz brand, with over 18 year of experience on the footwear industry.

Juliana Rozenbaum

Member Over 13 years of experience as sell side equity research analyst, focused on retail and consumer sector

Paula Bellizia

Independent member CEO of Microsoft Brasil. Former CEO for Apple Brasil and Facebook Latam Sales Diretor. Member of the Economic and Social Development Council (CDES).

Guilherme A. Ferreira

Independent Member CEO of Bahema Participações, current board member of Petrobras, Valid, Sul América, Gafisa and T4F

José Bolonha

Vice Chairman of the Board Founder and CEO of “Ethos Desenvolvimento Humano e Organizacional“; Board member of the Inter-American Economic and Social Council (UN, WHO)

Guilherme A. Ferreira (Coordinator)

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SLIDE 24

Multibrand and multichannel strategy

2

Organic growth leveraged by multi-brand, multichannel strategy in footwear and handbags

FRANCHISES MULTIBRANDS OWNED STORES WEB COMMERCE OVERSEAS MARKET REPRESENTATIVENESS OF THE BRAND LTM1,2 REVENUE BREAKDOWN LTM1,2 FOCUS ON SSS FOCUS ON BAGS SERVICES SEGMENTATION CROSS-SELL OF BAGS ACTIVATION POS MKT FOCUS ON SSS CHANNEL BOOST, EX.: APP PILOT STORE SHIPPING FOCUS ON KEY ACCOUNTS

53.2%

R$937 MM

31.6%

R$556 MM

10.6%

R$187 MM

3.4%

R$59 MM

1.1%

R$20 MM

100%

R$ 1.8 BN USA PROJECT MULTIBRAND STORES FASHION INFO SHOP NEW APP GROWTH WITH FOCUS ON SSS REFRESH FLAGSHIP INCREASE IN SHARE OF WALLET CUSTOMERS ATTRACTION CROSS-SELL OF BAGS NEW CATEGORIES FOCUS ON SSS LIFE STYLE NATIONAL ROLL-OUT ON-GOING INVEST. EM MKT RECENT RECOGNITION OF THE BRAND IN THE CHANNEL INCREASE PENETRATION FINALIZE TRANSFER OF PILOT STORES RETAINING A MAXIMUM OF 2 FLAGSHIPS BOOST DIGITAL PRESENCE INCREASE TRAFFIC AND CONVERSION NOT A CURRENT FOCUS NEW FACTORY WILL ENABLE SERVICING OF GROWING DEMAND LAUNCH IN 2017 IN BRAZIL AND 2018 USA AND EUROPE TOOL FOR ENHANCING BRAND AWARENESS AND PENETRATION NOT A CURRENT FOCUS FOCUS ON SSS OPENING OF MADISON STORE OPENING OF FLAGSHIP STORES SOLD AT SELECTED POINTS AND IN LINE WITH THE BRANDING EXPANSION IN NEW POINTS OF SALE LAUNCH OF FRANCHISES FIRST FRANCHISE IN 2018

44.8%

R$ 788 MM

9.1%

R$ 156 MM

8.2%

R$ 145 MM

20.8%

R$ 367 MM

17.0%

R$ 300 MM Notes: 1. % of each brand gross revenues (LTM) does not include other revenues (not generated by any of the 5 brands). 2. Gross revenues LTM from the 5 brands (Arezzo, Schutz, Anacapri, AB and Fiever); includes foreign market; does not include other revenues (not generated by any of the 5 brands). Information as of June 30th, 2018
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SLIDE 25 25

Clear focus of the future

2

Adjacencies Core

Brands Categories Geography

Female Children Teenager Wellness Male White soles Full plastic Footwear Leather accessories Other accessories Clothing Other categories Brazil North America Latin America Europe Middle East Owned stores Multi-brand Exports Online Outlets Dept Stores Kiosks

Channels

Franchises Handbags

Segment Positioning

Class A1 Class B1 Class C2 Arezzo Alexandre Birman Anacapri Schutz Class A2 Class B2 Class C1 Other brands Owme Fiever
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SLIDE 26

Ownership of the value chain, greater competitive advantage

  • More agile and collaborative model
  • Sell-out oriented to boost results in the value chain
26

Key messages

2

Arezzo&Co keeps developing its business model in a sustainable way

Consolidated business model with multiple growth opportunities

  • Sustainable growth and improvement in the profitability of existing brands.
  • Launch of a new brand Owme and encouraging results in Fiever brand

1

Staff management an ongoing development

  • Shareholders value creation sustained by leadership and training of talents
  • Strengthening of Company’s culture

2 3

Multi-channel management know-how, excellent platform to lift brands

  • Digital transformation and Omni channel growth as key priorities
  • Strong knowledge in franchises’ management coupled with efficiency opportunities
  • Multibrand channel boosting the growth of new brands

5

Company’s resilient financial growth

  • Consistent dividend payout combined with a strong cash flow
  • Expenses optimization in line with growing revenues

4

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SLIDE 27

| FINANCIAL HIGHLIGHTS

03

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SLIDE 28

719 767 738 804 874 200 227 400 434 467 458 451 120 114 41 72 93 119 157 32 48 10 9 9 21 42 9 15 1.170 1.282 1.307 1.402 1.524 360 405

  • 3.000,0
  • 2.500,0
  • 2.000,0
  • 1.500,0
  • 1.000,0
  • 500,0
  • 500,0
1.000,0 1.500,0
  • 100,0
100,0 300,0 500,0 700,0 900,0 1.100,0 1.300,0 1.500,0 1.700,0

2013 2014 2015 2016 2017 2Q17 2Q18 Arezzo Schutz Anacapri Others

28

Operational and financial highlights

3

Gross Revenue Breakdown by Brand – Domestic Market (R$ million)

CAGR: 6.8% 12.4%

Others: includes only domestic markets for Alexandre Birman, Fiever and Owme brands and other revenues.
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SLIDE 29

62 76 128 152 154 47 50 583 661 638 686 748 163 185 289 300 305 304 344 88 104 268 272 292 301 299 77 75 23 44 69 108 129 32 41 7 5 3 3 5 1 1.232 1.358 1.435 1.554 1.679 407 455

(3.000) (2.500) (2.000) (1.500) (1.000) (500) – 500 1.000 1.500 – 200,0 400,0 600,0 800,0 1.000,0 1.200,0 1.400,0 1.600,0 1.800,0

2013 2014 2015 2016 2017 2Q17 2Q18 Foreign Market Franchise Multibrands Owned Stores Web commerce Others Total

29

Operational and financial highlights

3

Gross Revenue Breakdown by Channel – Domestic and External Market (R$ million)

CAGR: 8.0% 11.6%

Others: includes domestic market revenues that are not specific for distribution channels.
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SLIDE 30

518 525 568 576 584 49 51 50 49 52 38,9 39,4 41,2 41,5 42,0

  • 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

2Q17 3Q17 4Q17 1Q18 2Q18 Franchises Owned Stores Area (m2) +8

  • 1
  • 1

3

30

Operational and financial highlights

Key highlights

Sales area increased 8.0% in the last twelve months. Gross revenue reached R$ 455 million in 2Q18, a increase of 11.6% over 2Q17.

Number of Stores (R$ mln) and Total Area (m2- ‘000)

CAGR 2007-2017: 21.5%

Net Revenues (R$ mln)

Area CAGR 2011-2017: 10.5%

194 367 412 572 679 860 963 1.053 1.121 1.239 1.360 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

89,4% 12,3% 38,7% 18,8% 26,7% 11,9% 9,3% 6,4% 10,6% 9,8%

+7 +2

+43

+8 +3

1,1% 4,7%

0,7%

1,3%

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SLIDE 31

111 120 120 116 154 39 33 11,5% 11,4% 10,7% 9,4% 11,4% 11,9% 8,9%

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0%
  • 50,0
100,0 150,0 200,0 250,0

2013 2014 2015 2016 2017 2Q17 2Q18 Net Profit Net Margin 426 456 476 549 624 154 179 44,2% 43,3% 42,5% 44,3% 45,8% 46,9% 47,8%

– 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0% 50,0% – 100 200 300 400 500 600 700 800

2013 2014 2015 2016 2017 2Q17 2Q18 Gross Profit Gross Margin

3

Operational and financial highlights

Gross Profit Evolution (R$ MM) and Gross Margin (%) Net Profit Evolution (R$ MM) and Net Margin (%)

31
  • 300 bps

+ 90 bps

15.8%

* In 4Q17 the company obtained an injunction exempting it from the payment of income and social contribution taxes (IR and CSLL) on an ICMS tax benefit , which remained valid during 1Q18. * Excluding the non-cash effect from exchange rate variation, net income would have reached R$ 46.9 million, 19.4% higher than in 2Q17. *
  • 15.9%
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SLIDE 32

159 170 165 177 206 50 57 16,6% 16,1% 14,8% 14,3% 15,2% 15,3% 15,1%

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0% 18,0%
  • 50,0
100,0 150,0 200,0 250,0 300,0

2013 2014 2015 2016 2017 2Q17 2Q18 EBITDA EBITDA Margin 62 76 128 152 154 47 50 1.170 1.282 1.307 1.402 1.524 360 405 1.232 1.358 1.435 1.554 1.679 407 455

– 200 400 600 800 1.000 1.200 1.400 1.600 1.800 – 200,0 400,0 600,0 800,0 1.000,0 1.200,0 1.400,0 1.600,0 1.800,0 2.000,0

2013 2014 2015 2016 2017 2Q17 2Q18 Foreign Market Domestic Market

3

Operational and financial highlights

Gross Revenue (R$ MM) EBITDA Evolution (R$ MM) and EBITDA Margin (%)

32
  • 20 bps

CAGR: 8.0% 12.4% 11.6%

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SLIDE 33

3

Operational and financial highlights

33

Arezzo&Co has a solid balance sheet with a healthy net cash position, coupled with a strong ability to generate operating cash flow and dividend payments

Operating cash flow yield¹

3.2%

Capex / Depreciation LTM

  • 1.0x

Net Debt / EBITDA

  • 0.5x

Working Capital (% of Net

Revenue)

26.3%

Increase in working capital needs by 290 bps from 2Q18 to 2Q17.

Dividend Payout (YTD)

111.2%

Consistent dividend payments, with a payout of more than 111.8% of net profit in 1H18. Arezzo&Co generated R$137MM in operating cash flow in the last twelve months, translating into cash flow yield

  • f 3.2%.

From 2015 onwards capex trended roughly in line or below depreciation. The Company has a strong balance sheet and a net cash/EBITDA ratio of -0.5x in June/18.

1) Operating cash flow yield = LTM Operating cash flow / Firm value. Considered Firm Value of R$ 4.359,2 MM (as of 06/30/2018)
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SLIDE 34 34

3

Operational and financial highlights

Cash Conversion Cycle (R$ thousand) Cash Flow From Operating Activities (R$ thousand) Capex (R$ thousand)

¹ Days of COGS ² Days of Net Revenues

Operational Indicators

* Include international stores

Cash Conversion Cycle 2Q18 2Q17 Change (in days) #days (R$'000) #days (R$'000)

101 367.491 99 327.574 2 Inventory¹ 66 140.861 62 123.048 4 Accounts Receivable² 85 333.982 82 293.872 3 (-) Accounts Payable¹ 51 107.352 45 89.346 5

Summary of investments 2Q18 2Q17

Δ 18 x 17 (%) Total CAPEX 15.014 5.606 167,8% Stores - expansion and refurbishing 3.705 1.976 87,4% Corporate 7.377 2.265 225,7% Other 3.932 1.365 188,1%

Operating Indicators 2Q18 2Q17 Δ 18 x 17

# of pairs sold ('000) 3.075 2.587 18,8% # of handbags sold ('000) 308 287 7,3% # of employees 2.468 2.337 5,6% # of stores* 636 567 69 Owned Stores 52 49 3 Franchises 584 518 66 Outsourcing (as % of total production) 91,8% 90,3% 1,5 p.p SSS² Sell-in (franchises) 7,3%
  • 0,8%
8,1 p.p SSS² Sell-out (owned stores + franchises + web) 3,9% 6,8%
  • 2,9 p.p

Operating Cash Flow 2Q18 2Q17

Profits before income tax and social contribution 34.883 48.497 Depreciation and amortization 8.788 6.737 Others 15.226 1.509 Decrease (increase) in assets / liabilities (28.098) (1.541) Trade accounts receivables 9.804 21.450 Inventories (14.689) (5.462) Suppliers (25.485) (23.682) Change in other noncurrent and current assets and liabilities 2.272 6.153 Payment of income tax and social contribution (2.751) (14.421) Net cash flow generated by operational activities 28.048 40.781
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SLIDE 35 35

3

Operational and financial highlights

Indebtedness (R$ thousand)

Total indebtedness of R$175.5 million in 2Q18 against R$110.8 million in 2Q17. Long term indebtedness of 7.7% of total debt in 2Q18, compared to 20.3% in 2Q17. The weighted average cost of the company’s total debt in 2Q18 remained at low levels.

2Q18 1Q18 2Q17

Cash 283.172 333.338 310.115 Total debt 175.501 172.112 110.847 Short term 162.002 156.354 88.311 % total debt 92,3% 90,8% 79,7% Long-term 13.499 15.758 22.536 % total debt 7,7% 9,2% 20,3% Net Debt (107.671) (161.226) (199.268)

Cash position and Indebtedness

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SLIDE 36 36

Appendix

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SLIDE 37 37

Key financial indicators

A

(1) Working Capital: current assets minus cash, cash equivalents and financial investments less from current liabilities minus loans and financing and dividends payable. (2) Invested Capital: working capital plus fixed assets and other long term assets less income tax and deferred social contributions. (3) Net debt is equal to total interest bearing debt position at the end of a period less cash, cash equivalents and short-term financial investments. Key financial indicators 2Q18 2Q17 Δ (%) 18 x 17 1H18 1H17 Δ (%) 18 x 17 Gross Revenues 454.679 407.301 11,6% 862.370 775.698 11,2% Net Revenues 373.859 328.903 13,7% 704.044 626.080 12,5% COGS (195.108) (174.572) 11,8% (378.733) (341.685) 10,8% Depreciation and amortization (cost) (329)
  • n/a (653)
  • n/a
Gross Profit 178.751 154.331 15,8% 325.311 284.395 14,4% Gross margin 47,8% 46,9% 0,9 p.p 46,2% 45,4% 0,8 p.p SG&A (130.987) (110.753) 18,3% (245.211) (211.459) 16,0% % of net revenues (35,0%) (33,7%) (1,3 p.p) (34,8%) (33,8%) (1,0 p.p) Selling expenses (88.314) (76.661) 15,2% (163.045) (146.905) 11,0% Ow ned stores and w eb commerce (31.059) (30.575) 1,6% (62.523) (60.256) 3,8% Selling, logistics and supply (57.255) (46.086) 24,2% (100.522) (86.649) 16,0% General and administrative expenses (32.126) (26.890) 19,5% (61.670) (50.607) 21,9% Other operating revenues (expenses) (2.088) (465) 349,0% (3.936) (535) 635,7% Depreciation and amortization (expenses) (8.459) (6.737) 25,6% (16.560) (13.412) 23,5% EBITDA 56.552 50.315 12,4% 97.313 86.348 12,7% Margin EBITDA 15,1% 15,3% (0,2 p.p) 13,8% 13,8%
  • Net Income
33.123 39.270 (15,7%) 60.237 61.445 (2,0%) Net Margin 8,9% 11,9% (3,0 p.p) 8,6% 9,8% (1,2 p.p) Working capital¹ - as % of revenues 26,3% 23,4% 2,9 p.p 26,3% 23,4% 2,9 p.p Invested capital² - as % of revenues 36,9% 38,7% (1,8 p.p) 36,9% 38,7% (1,8 p.p) Total debt 175.501 110.847 58,3% 175.501 110.847 58,3% Net debt³ (107.671) (199.268) (46,0%) (107.671) (199.268) (46,0%) Net debt/EBITDA LTM
  • 0,5x
  • 1,0x
  • 0,5x
  • 1,0x
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SLIDE 38 38

History – Franchises and Owned Stores

A

(1) Includes areas in square meters of the stores overseas (2) Includes seven outlet type stores with a total area of 2,100 m² (3) Includes areas in square meters of expanded stores (4) Includes Alexandre Birman and Schutz stores, 3 of them in NYC and 1 in Los Angeles

Store Information 2Q17 3Q17 4Q17 1Q18 2Q18

Sales area 1,3 - Total (m²) 38.930 39.351 41.211 41.487 42.044 Sales area - franchises (m²) 32.660 33.029 34.925 35.246 35.567 Sales area - ow ned stores² (m²) 6.270 6.322 6.286 6.242 6.477 Total number of domestic stores 560 569 611 618 627 # of franchises 513 520 563 571 579 Arezzo 369 369 382 385 388 Schutz 61 62 67 67 67 Anacapri 83 89 114 119 124 # of owned stores 47 49 48 47 48 Arezzo 14 15 15 14 14 Schutz 22 22 22 22 22 Alexandre Birman 3 4 4 4 4 Anacapri 4 4 3 3 3 Fiever 4 4 4 4 4 Ow me – – – – 1 Total number of international stores 7 7 7 7 9 # of franchises 5 5 5 5 5 # of ow ned stores4 2 2 2 2 4

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SLIDE 39 39

Balance Sheet - IFRS

A

Assets 2Q18 1Q18 2Q17

Current assets 842.426 875.500 767.569 Cash and Banks 17.464 8.292 7.695 Financial Investments 265.708 325.046 302.420 Trade accounts receivables 333.982 345.085 293.872 Inventory 140.861 128.153 123.048 Taxes recoverable 48.899 51.568 20.858 Other credits 35.512 17.356 19.676 Non-current assets 213.878 197.259 200.220 Long-term receivables 59.363 48.992 43.222 Trade accounts receivables 10.569 10.766 8.432 Deferred income and social contribution 25.207 15.075 14.049 Other credits 23.587 23.151 20.741 Investments property 3.325 3.324 2.406 Property, plant and equipment 77.831 68.843 71.549 Intangible assets 73.359 76.100 83.043 Total assets 1.056.304 1.072.759 967.789

Liabilities 2Q18 1Q18 2Q17

Current liabilities 360.659 355.966 256.977 Loans and financing 162.002 156.354 88.311 Suppliers 107.352 132.837 89.346 Other liabilities 91.305 66.775 79.320 Non-current liabilities 24.089 26.165 32.160 Loans and financing 13.499 15.758 22.536 Related parties 1.436 1.238 1.232 Other liabilities 9.154 9.169 8.392 Shareholder's Equity 671.556 690.628 678.652 Capital 341.073 330.375 330.375 Capital reserve 45.925 45.676 41.758 Profit reserves 178.748 224.748 269.024 Tax incentive reserve 64.658 64.658 Other comprehensive income 1.916
  • 1.943
  • 2.410
Accumulated Profit 39.236 27.114 39.905 Total liabilities and shareholders' equity 1.056.304 1.072.759 967.789
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SLIDE 40 40

Income Statement - IFRS

A

Income Statement - IFRS 2Q18 2Q17 Chg.% 1H18 1H17 Chg.%

Net operating revenue 373.859 328.903 13,7% 704.044 626.080 12,5% Cost of goods sold (195.108) (174.572) 11,8% (378.733) (341.685) 10,8% Gross profit 178.751 154.331 15,8% 325.311 284.395 14,4% Operating income (expenses): (130.987) (110.753) 18,3% (245.211) (211.459) 16,0% Selling (94.581) (81.387) 16,2% (175.492) (156.340) 12,3% Administrative and general expenses (34.319) (28.901) 18,7% (65.784) (54.584) 20,5% Other operating income, net (2.087) (465) 348,8% (3.935) (535) 635,5% Income before financial result 47.764 43.578 9,6% 80.100 72.936 9,8% Financial income (12.881) 4.919
  • 361,9%
(11.656) 9.998
  • 216,6%
Income before income taxes 34.883 48.497
  • 28,1%
68.444 82.934
  • 17,5%
Income tax and social contribution (1.760) (9.227)
  • 80,9%
(8.207) (21.489)
  • 61,8%
Current (9.001) (9.594)
  • 6,2%
(18.990) (27.133)
  • 30,0%
Deferred 7.241 367 1873,0% 10.783 5.644 91,1% Net income for period 33.123 39.270
  • 15,7%
60.237 61.445
  • 2,0%
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SLIDE 41 41

Cash Flow Statement - IFRS

A

Cash Flow 2Q18 2Q17 1H18 1H17

Operating activities Income before income tax and social contribution 34.883 48.497 68.444 82.934 24.014 8.246 31.376 12.066 Depreciation and amortization 8.788 6.737 17.213 13.412 Income from financial investments (4.605) (6.888) (9.623) (14.866) Interest and exchange rate 12.858 2.540 14.063 2.241 Other 6.973 5.857 9.723 11.279 Decrease (increase) in assets Trade accounts receivables 9.804 21.450 1.597 19.511 Inventory (14.689) (5.462) (29.041) (14.808) Recoverable taxes (9.036) (3.686) (9.927) (8.498) Change in other current assets (1.005) (1.669) (3.665) (4.270) Judicial deposits (857) (1.618) (1.005) (2.554) Decrease (increase) in liabilities Suppliers (25.485) (23.682) 2.936 22.905 Labor liabilities 10.545 9.199 2.355 3.508 Fiscal and social liabilities (781) 2.301 (3.283) (3.057) Variation in other liabilities 3.406 1.626 4.563 1.868 Payment of income tax and social contribution (2.751) (14.421) (6.141) (14.871) Net cash flow from operating activities 28.048 40.781 58.209 94.734 Adjustments to reconcile net income with cash from operational activities
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SLIDE 42 42

Cash Flow Statement - IFRS

A

Cash Flow 2Q18 2Q17 1H18 1H17 Investing activities Sale of fixed and intangible assets (2) 6 680 37 Acquisition of fixed and intangible assets (15.014) (5.606) (22.227) (8.860) Financial Investments (182.058) (253.452) (408.102) (484.530) Redemption of financial investments 244.619 239.513 477.998 431.664 Net cash used in investing activities 47.545 (19.539) 48.349 (61.689) Financing activities with third parties Increase in loans 45.770 32.777 50.336 39.107 Payments of loans (60.872) (22.292) (75.705) (36.293) Payments of Interest on loans (1.685) (301) (2.364) (647) Net cash used in financing activities with third parties (16.787) 10.184 (27.733) 2.167 Financing activities with shareholders Interest on equity
  • (20.920)
  • Profit distribution
(48.796) (52.975) (48.796) (52.975) Receivables (payables) w ith shareholders 198 52 204 18 Issuing of shares
  • 20.367
  • 20.367
Repurchase of shares (1.814)
  • (2.806)
  • Net cash used in financing activities
(50.412) (32.556) (72.318) (32.590) Increase (decrease) in cash and cash equivalents 8.394 (1.130) 6.507 2.622 Cash and cash equivalents Foreign exchange effect on cash and cash equivalents 778 151 801 53 Cash and cash equivalents - Initial balance 8.292 8.674 10.156 5.020 Cash and cash equivalents - Closing balance 17.464 7.695 17.464 7.695 Increase (decrease) in cash and cash equivalents 8.394 (1.130) 6.507 2.622
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SLIDE 43

Contacts

Telephone: +55 11 2132-4303 ri@arezzoco.com.br www.arezzoco.com.br

Rafael Sachete da Silva CFO Aline Penna IR Officer Victoria Machado IR Coordinator Rafaella Nolli IR Analyst