Institutional Presentation | Apresentao do Roadshow As of 3Q17 - - PowerPoint PPT Presentation

| Apresentação do Roadshow

Institutional Presentation

As of 3Q17

November 2017

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.

Disclaimer

| Company overview

Platform of brands of reference

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

1

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 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

11.6 million pairs of shoes (1) 1,244 thousand handbags (1) 2,289 points of sale 12% market share (2) More than 45 years of experience in the sector Wide recognition ~11,500 models created per year Lead time of 40 days 15 to 18 launches per year 90.7% outsourced sdproduction ROIC of 23.9% in 3Q17 2,355 employees Net revenues CAGR: 10.5% (2011-2016) Net Profit CAGR: 4.0% (2011- 2016) Increased operating leverage

• 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

Commercial operations centralized in São Paulo

Industry Reference Foundation and structuring Industrial Era Corporate Era Retail Era 2011 – 2017

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)

Shareholder structure

51.4% 48.6%

Birman family Float

1

Management² Others

40.6%

Aberdeen

8.0% 0.0%

Culture & Management

1

01 That which cannot be transparent should not be done. 02 Always be true, so that at any point you are not false in your job. Always be authentic. 03 Clearly negotiate your goals and responsibilities, and consider achievement as a requirement for continuity and prosperity. 04 Do not uncover problems only. Blaming others will never be the solution. Take risks, propose

• solutions. In case of doubt, act!

05 Formalize everything, even if in an informal way. 06 Always be flexible. Be ready for changes. 07 Goals met are, at least, the basis for the next goal. 08 United we stand! Divergences are constructive, conflicts are destructive. 09 A humble stance: the key to our success. 10 Enjoy. Appreciate. Get involved. And always be happy!

Principles of success at Arezzo&Co:

2154

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$55.5MM (6%) R$57.3MM (10%) R$8.7MM (6%) R$0.8MM (2%) R$1.5MM (9%)

Retail price point

R$230 / pair R$330 / pair R$110 / pair R$1390 / pair R$248 / pair

Sales Volume3

R$874MM R$557MM R$149MM R$50MM R$17MM

% Gross Revenues4

53.1% 33.8% 9.1% 3.0% 1.0%

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

% gross rev.2 O F MB EX 15 65% 14% 75 2% 22 62 16% 29% 27% 18% 4 89 46% 36% 10% 19 2% O MB EX 4 4% 28% 44 66% 20 O MB EX 4 53% 38% 2 0% 296 136 O F MB EX O F MB EX 1,136 369 13% 1,200 1,201

Multiple distribution channels

1

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

49 owned stores in Brazil 2,289 multibrand¹ clients in more than 1,220 cities 520 franchises in more than 220 cities in Brazil Broad distribution network throughout Brazil Gross Revenue Breakdown by Channel – (R$ mm)²

44.4% 20.4% 18.3% 7.5% 0.2% 9.2% 100%

733 337 302 124 3 152 1,650 Franchises Multibrand Owned Stores Web commerce Other External Market Total

| Business model

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

Unique business model in Brazil enhanced by….

2

2 3

Ability to Innovate

We produce 15 to 18 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 at the stores per day, allowing for consistent desire-driven purchases

Available for selection: 63% of SKUs created / year

Stores: 52% of SKUs created / year

Creation Launch Orders Production Delivery Normal sale Discount sale

Activities JAN FEV MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

CRM – VIP sales In-store events – PA Stylists Fashion Advisors

Broad media plan

2

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

Strong presence in printed media Digital communication Presence in electronic media and television

Demi Moore Seasonal showroom in Los Angeles near the Red Carpet Season

Celebrity Endorsement Marketing Events

+2.2 million accesses to site/month +180k monthly access to Schutz’s Blog Average navigation time: 8 minutes Gisele Bündchen Blake Lively

Over 6 million followers/ fans: Facebook, Instagram and Twitter (all 4 Brands) Arezzo is leader in interactions1

Stores constantly modified to incorporate the concept of each new collection, creating desire- driven purchases

Communication & marketing program reflected in every aspect of the stores

2

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)

Atmosphere of stores: differentiated concepts for each brand

2

• Jackets and accessories
• Campaigns and marketing

• Preeminence for products
• Differentiated products
• Display of a large variety of

• Inventory at the sales area:

• Atmosphere of a jewelry

• Private shop experience
• Focus on exclusivity, design

• Window related to the

• To increase in 50% the

• Products highlighted in the

• Lights that highlighting the

• A better distribution of the

• Experimental and creative

• Interaction with the customer
• Collaborative experience (in-

Large distribution network and scale of store chain

2

Brand Average size (m2) Net Revenue/m2 (R$ 000s) Total Stores1

69 32 562 140 16 644 1,317 10 444 1,040 6 398 59 11 327

Mono-brand store chain with high distribution network, reaching more than 220 cities and well- positioned among the retail companies

Points of sale (3Q17)3

GDP³: 14% A&C¹: 17% GDP³: 55% A&C¹: 55% GDP³: 17% A&C¹: 14% GDP³: 9% A&C¹: 9% GDP³: 5% A&C¹: 5%

85 sq m 80 sq m Points of sale – average size: new stores are increasing the network’s average store size

2011 new stores 2012 new stores 2013 new stores

55 sq m

2014 new stores

52 sq m

2015 new stores

69 sq m

Size and average sales per mono-brand stores – 2016 66 sq m

2016 new stores

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

Flexible production process…

2

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 Sourcing model – 91% of production outsourced¹ Consolidation and improvement of distribution in national scale

1 2 3 4

9% 91% Arezzo&Co Owned Factories Others

497 515 514 518 525 47 50 48 49 51 37.7 38.8 38.6 38.9 39.4

• 100

3Q16 4Q16 1Q17 2Q17 3Q17 Franchises Owned Stores¹ Area (000 M²)

... sold through owned stores…

Capturing value from the network while developing retail know-how and brands’ visibility

2

Flagship Stores

Greater brand awareness coupled with operational efficiencies

• Clustering higher productivity stores in main areas (mainly SP and RJ) improving
• perational efficiency and profitability:
• Direct costumers interaction develops retail assets which are also reflected at

franchised stores

• Flagship stores ensure greater visibility and reinforce brand image

R$6.2mm

Average Sales per Store 3Q17 LTM

Total sales area and # of stores (000 m2)

R$1.4mm

1.1% +18

• 0.2%

0.5% +3

• 2
• 1

0.3% +1 +4 +2 +7

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

… based on a retail oriented structure...

Strong focus on franchise and owned store performance

• All sales team (4,000+) 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

57% 24% 9% 9%

• 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

.10 …with efficient management of the franchise network...

Model allows rapid expansion with low invested capital by Arezzo&Co and high profitability to franchisees

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

96% satisfaction of franchisees1 Excellence in Franchising (ABF). Awarded in the last 8 years Best Franchise in Brazil (2005 and 2012) and in the industry for 7 years since 2004

(# of franchises by # of franchisees)

5-year contract and average payback of 48 months2

...and of the multi-brand stores

2

Multi-brand stores’ Gross Revenue¹ Improved distribution and brand visibility

• Greater brand distribution network
• Presence in over 1,220 cities
• Rapid expansion at low investment and risk
• Main focus: share of wallet
• Owner’s loyalty

 Schutz Club – Relationship program that

• ffers

advantages to the 50 Top Multi-brand stores, such as better products display, training and awards to the best sales teams.

• Important sales channel for smaller cities
• Sales team optimization: internal team and commissioned sales

representatives

Multi-brand stores widen the distribution network and the brands’ visibility, resulting in a strong retail footprint

Multi-brand stores

• USA
• Fiever/ New Brands
• Strategic Planning

• Expansion*
• Portfolio Management

• BU Arezzo
• BU Schutz
• BU Anacapri
• BU A.Birman
• E-commerce
• Commercial

• Sourcing
• Engineering
• Quality
• Industry
• Planning
• Logistics
• People
• Sustainability*/PR
• Non productive

• Management

• Finance/Legal/Fiscal
• IT
• Controller
• Investor Relations
• Risk Management

Board of Directors Brands Silvia Machado Industrial & Operations Cisso Klaus e Cassiano Lemos New Business Development Administrative & Finance Daniel Levy HR & Management Marco Aurélio Vidal Risk, Audit and Finance Committee People Committee Strategy Committee

Internal Auditing

CEO

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

José Bolonha (Coordinator) Juliana Rozenbaum (Coordinator)

Corporate governance

2

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 Ligia Martins

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

Luiz Fernando Giorgi

Alexandre Birman

Juliana Rozenbaum

Paula Bellizia

Guilherme A. Ferreira

José Bolonha

Guilherme A. Ferreira (Coordinator)

Ownership of the value chain, greater competitive advantage

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

Key messages

2

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

Consolidated business model with multiple growth opportunities

• Launch of a new brand Fiever with encouraging results
• Improvement in the profitability of existing brands: Anacapri and Alexandre Birman

1

Staff management an ongoing development

• Broad range of selection, training and retaining of staff at all levels
• Strengthening of organizational identity

2 3

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

• Omni channel growth: Fiever debut, Schutz FIS, Arezzo consolidation, Anacapri expansion
• Strong knowledge in franchises’ management in addition to improving opportunities
• Multibrand channel leverages growth of new brands

5

Financial strength allows for sustainable business growth

• History of cash generation together with consistent dividend payment policy
• Net cash position, an important differentiator in challenging economic times

4

…a multi-brand and multichannel strategy…

2

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

….aligned with a 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 Kiosks Department stores

Channels

Franchises Handbags

Segment Positioning

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

| Financial Highlights

03

567 663 719 767 738 804 220 238 216 357 400 434 467 458 130 126 41 72 93 119 33 42 11 18 10 9 9 21 6 11 815 1.070 1.170 1.,282 1.307 1.402 390 416

• 3.000,0
• 2.500,0
• 2.000,0
• 1.500,0
• 1.000,0
• 500,0
• 500,0

• 200,0

2011 2012 2013 2014 2015 2016 3Q16 3Q17 Arezzo Schutz Anacapri Others

Operational and financial highlights

3

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

CAGR: 12% 7%

Others: includes only domestic markets for Alexandre Birman and Fiever brands and other revenues.

47 39 62 76 128 152 36 39 420 512 583 661 638 686 182 202 234 286 289 300 305 304 107 111 151 246 268 272 292 301 71 68 1 10 23 44 69 108 29 35 9 15 7 5 3 3 1 863 1.109 1.232 1.358 1.435 1.554 390 416

2011 2012 2013 2014 2015 2016 3Q16 3Q17 Foreign Market Franchise Multibrands Owned Stores Web commerce Others Total

Operational and financial highlights

3

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

CAGR: 13% 7%

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

3

Operational and financial highlights

Key highlights

Sales area increased 4.2% in the last twelve months. Gross revenue reached R$455 million in the 3Q17, a increase of 6.7% over 3Q16.

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

CAGR 2007-2016: 20.4%

Net Revenues (R$ mln)

Area CAGR 2008-2016: 12.6%

89.4% 12.3% 38.7% 18.8% 26.7% 11.9% 9.3% 6.4% 10.6% 497 515 514 518 525 47 50 48 49 51 37.7 38.8 38.6 38.9 39.4

• 100

3Q16 4Q16 1Q17 2Q17 3Q17 Franchises Owned Stores¹ Area (000 M²) 1.1% +18

• 0.2%

0.5% +3

• 2
• 1

0.3% +1 +4 +2 +7

281 376 426 456 476 549 152 170 41,5% 43,7% 44,2% 43,3% 42,5% 44,3% 43,9% 45,8%

2011 2012 2013 2014 2015 2016 3Q16 3T17

Gross Profit Gross Margin

92 102 111 120 120 116 35 38 13,5% 11,9% 11,5% 11,4% 10,7% 9,4% 10,2% 10,2%

• 50,0

2011 2012 2013 2014 2015 2016 3Q16 3Q17 Net Profit Net Margin

3

Operational and financial highlights

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

6.3%

0 bps + 190 bps

11.6%

118 144 159 170 165 177 56 65 17,3% 16,7% 16,6% 16,1% 14,8% 14,3% 16,1% 17,6%

• 50,0

2011 2012 2013 2014 2015 2016 3Q16 3Q17 EBITDA EBITDA Margin 47 39 62 76 128 152 36 39 815 1.070 1.170 1.282 1.307 1.402 390 416 863 1.109 1.232 1.358 1.435 1.554 426 455

2011 2012 2013 2014 2015 2016 3Q16 3Q17 Foreign Market Domestic Market

3

Operational and financial highlights

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

+ 150 bps

CAGR: 13% 17.1% 6.7%

3

Operational and financial highlights

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

5.9%

Capex / Depreciation LTM

0.2x

Net Debt / EBITDA

• 0.6x

Working Capital (% of Net

Revenue)

23.5%

Reduction in working capital needs by 560 bps from 3Q16 to 3Q17

Dividend Payout (YTD)

111.3%

Consistent dividend payments, with a payout of more than 90% of net profit in 2016. In 9M17, payout of more than 100% of net profit. Arezzo&Co generated R$173.6 mm in operating cash flow in 3Q17, translating into cash flow yield of 5,9% From 2015 onwards capex trended roughly in line with depreciation The Company has a strong balance sheet and a net cash/EBITDA ratio of -0.6x in Sep/17.

1) Operating cash flow yield = LTM Operating cash flow / Firm value. Considered Cash Flow LTM of R$ 2,835.4mm (as of 09/29/2017)

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

• perational activities

Summary of investments 3Q17 3Q16

115 355.827 97 347.924

• 18

Inventory¹ 68 124.019 59 116.783

• 10

Accounts Receivable² 103 334.858 93 340.155

• 10

(-) Accounts Payable¹ 57 103.050 55 109.014

• 1

Operating Indicators 3Q17 3Q16 Δ 17 x 16

• 4,1 p.p

• 3,7 p.p

3

Operational and financial highlights

Indebtedness (R$ thousand)

Total indebtedness of R$93.2 million in 3Q17 against R$95.7 million in 3Q16. Long term indebtedness of 21.7% of total debt in 3Q17, compared to 30.7% in 3Q16. The weighted average cost of the company’s total debt in 3Q17 remained at low levels. It is worth mentioning that during 3Q17, the Company distributed the amount of R$ 88.8 million in dividends. 3Q17 2Q17 3Q16

Cash 218.254 310.115 221.591 Total debt 93.221 110.847 95.785 Short term 72.946 88.311 66.424 % total debt 78,3% 79,7% 69,3% Long-term 20.275 22.536 29.361 % total debt 21,7% 20,3% 30,7% Net debt (125.033) (199.268) (125.806)

Cash position and Indebtedness

Appendix

Key financial indicators

A

3Q17 3Q16 Δ (%) 17 x 16 9M17 9M16 Δ (%) 17 x 16

• 9,9%

• 0,6x
• 0,7x
• 0,7x
• 0,7x
• Key financial indicators

History – Franchises and Owned Stores

A

3Q16 4Q16 1Q17 2Q17 3Q17

History of Stores

Balance Sheet - IFRS

A

Liabilities 3Q17 2Q17 3Q16

• 1.182
• 2.410
• 1.850

• Total liabilities and shareholders' equity

Income Statement - IFRS

A

Income statement - IFRS 3Q17 3Q16 Var.% 9M17 9M16 Var.%

• 81,5%

• 55,4%

R L

IR

• 40,8%

A LL

M

R

L IR

A

Cash Flow Statement - IFRS

A

Cash Flow - IFRS 3Q17 3Q16 9M17 9M16

Operating activities Income before income tax and social contribution 58.213 52.769 141.147 110.462 Adjustments to reconcile net income with cash from operational activiti 6.293 5.620 18.359 (3.273) Depreciation and amortization 9.218 6.500 22.630 19.282 Income from financial investments (6.485) (6.804) (21.351) (21.722) Interest and exchange rate (1.301) 6.203 940 (5.427) Other 4.861 (279) 16.140 4.594 Decrease (increase) in assets Trade accounts receivables (50.078) (50.634) (30.567) (53.991) Inventory 5.014 3.741 (9.794) (17.917) Recoverable taxes 350 2.188 (8.148) (5.820) Variation other current assets 4.015 3.405 (255) 6.813 Judicial deposits (1.281) (1.971) (3.835) (4.412) Decrease (increase) in liabilities Suppliers 19.670 21.930 42.575 38.169 Labor liabilities 8.726 6.045 12.234 10.744 Fiscal and social liabilities (2.803) (4.029) (5.860) (5.459) Variation in other liabilities (1.873) (2.349) (5) (77) Payment of income tax and social contribution (13.040) (10.672) (27.911) (19.209)

Cash Flow Statement - IFRS

A

• 950

Contacts

Telephone: +55 11 2132-4300 ri@arezzoco.com.br www.arezzoco.com.br

Daniel Levy CFO and IR Officer Aline Penna IR Manager Victoria Machado IR Analyst Guilherme de Biagi IR Coordinator