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

| Apresentação do Roadshow

Institutional Presentation

1Q18

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, handbags and accessories industry through its platform of Top of Mind brands

1

The 6th Brand – OWME

(“Own + Me”)

1

TARGET

“MINDSET MATTERS – NOT YOUR AGE”

SEGMENT

WELLNESS AB1 Classes

35+

COMFORT + STYLE @owmeoficial

TIMELESS CONSTRUCTIONS

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

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 90,9% outsourced production (1) ROIC of 30.2% in 1Q18 2,419 employees Net revenues CAGR: 7.9% (2012-2017) Net Profit CAGR: 8.1% (2012- 2017) 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 – 2018

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

51.1% 48.8%

Birman Family Float

1

Management² Others

30.5%

Aberdeen

7.5% 0.07%

BTG Pactual

5.7%

JP Morgan

5.2%

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$64.3MM (7%) R$58.7MM (11%) R$10.7MM (6%) R$1.6MM (3%) R$1.8MM (10%)

Retail price point

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

Sales Volume3

R$912MM R$558MM R$172MM R$55MM R$18MM

% Gross Revenues4

53.2% 32.6% 10.0% 3.2% 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 14 65% 13% 70 2% 22 67 17% 29% 25% 18% 3 49% 34% 9% 23 2% O MB EX 4 5% 30% 39 62% 25 O MB EX 4 40% 50% 2 0% 363 124 O F MB EX O F MB EX 1,187 385 13% 1,163 1,323

119

Multiple distribution channels

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

1

Gross Revenue Breakdown by Channel2 – (R$ mm) Broad distribution network throughout Brazil

385 franchises + 14 owned stores + 1.187 multibrand clients 67 franchises + 22 owned stores + 1.163 multibrand clients

Points of Sale (1Q18)2

119 franchises + 3 owned stores + 1.323 multibrand clients 4 owned stores + 25 multibrand clients 4 owned stores + 363 multibrand clients

47 owned stores in Brazil 2,379 multibrand¹ clients in more than 1,250 cities 571 franchises in more than 220 cities in Brazil

44,6% 20,5% 17,6% 8,0% 0,2% 9,2% 100%

766 352 302 137 4 157 1.718 Franchises Multibrand Owned Stores Web commerce Other Foreign 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

2

2 3

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

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

Broad Media Plan

2

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

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

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

• New store concept being

• New digital experience: mobile

• Expected roll out for 2018/19
• Display of a large variety of

• Inventory at the sales area:

• Atmosphere of a jewelry

• Private shop experience
• Focus on exclusivity, design

• Increased number of

• Products highlighted in the

• Favorable lighting project
• Distribution of the furniture

• Experimental and creative

• Interaction with the customer

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 – Espirito Santo State Sourcing model – 90% of production outsourced¹ Consolidation and improvement of distribution in national scale

1 2 3 4

10% 90% Arezzo&Co Owned Factories Others

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

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

Average Annual Sales per Store LTM

R$ 1.3MM

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

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

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)

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

Multibrand stores as tool for increased capilarity

2

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

Multi-brand stores

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

Internal Auditing

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

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

Digital Transformation Maurício Bastos

International Business Wayne Kulkin

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 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

Luiz Fernando Giorgi

Alexandre Birman

Juliana Rozenbaum

Paula Bellizia

Guilherme A. Ferreira

José Bolonha

Guilherme A. Ferreira (Coordinator)

Multibrand and multichannel strategy

2

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

53.2%

32.6%

10.0%

3.2%

1.0%

100%

44.7%

9.2%

8.0%

20.5%

17.6%

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 Owme Fiever

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

• 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

| FINANCIAL HIGHLIGHTS

03

719 767 738 804 874 199 219 400 434 467 458 451 98 103 41 72 93 119 157 34 45 10 9 9 21 42 9 10

1.170 1.282 1.307 1.402 1.524 341 377

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

• 200,0

2013 2014 2015 2016 2017 1Q17 1Q18 Arezzo Schutz Anacapri Others

Operational and financial highlights

3

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

CAGR: 6.8% 10.7%

62 76 128 152 154 28 30 583 661 638 686 748 173 191 289 300 305 304 344 78 86 268 272 292 301 299 63 66 23 44 69 108 129 25 33 7 5 3 3 5 2 1

1.232 1.358 1.435 1.554 1.679 368 408

2013 2014 2015 2016 2017 1Q17 1Q18 Foreign Market Franchise Multibrands Owned Stores Web commerce Others Total

Operational and financial highlights

3

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

CAGR: 8.0% 10.7%

3

Operational and financial highlights

Key highlights

Sales area increased 7.4% in the last twelve months. Gross revenue reached R$ 408 million in 1Q18, a increase of 10.7% over 1Q17.

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

CAGR 2007-2017: 21.5%

Net Revenues (R$ mln)

Area CAGR 2008-2017: 13.4%

89,4% 12,3% 38,7% 18,8% 26,7% 11,9% 9,3% 6,4% 10,6% 9,8% 514 518 525 568 576 48 49 51 50 49 38.6 38.9 39.4 41.2 41.5

• 10,0

• 100

1Q17 2Q17 3Q17 4Q17 1Q18 Franchises Owned Stores Area (000 m2) 0.7% 4.7% +2 +8 1.1% 0.8% +4 +1 +7 +43

• 1
• 1

111 120 120 116 154 22 27 11,5% 11,4% 10,7% 9,4% 11,4% 7,5% 8,2%

• 50,0

2013 2014 2015 2016 2017 1Q17 1Q18 Net Profit Net Margin 426 456 476 549 624 130 147 44,2% 43,3% 42,5% 44,3% 45,8% 43,8% 44,4%

2013 2014 2015 2016 2017 1Q17 1Q18 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 (%)

22.3%

+70 bps + 60 bps

12.7%

159 170 165 177 206 36 41 16,6% 16,1% 14,8% 14,3% 15,2% 12,1% 12,3%

• 50,0

2013 2014 2015 2016 2017 1Q17 1Q18 EBITDA Margem EBITDA 62 76 128 152 154 28 30 1.170 1.282 1.307 1.402 1.524 341 377 1.232 1.358 1.435 1.554 1.679 368 408

2013 2014 2015 2016 2017 1Q17 1Q18 Foreign Market Domestic Market

3

Operational and financial highlights

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

+20 bps

CAGR: 8.0% 13,1% 10,7%

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

3.9%

Capex / Depreciation LTM

• 0.7x

Net Debt / EBITDA

• 0.8x

Working Capital (% of Net

Revenue)

24.8%

Increase in working capital needs by 70 bps from 1Q18 to 1Q17.

Dividend Payout (YTD)

86.8%

Consistent dividend payments, with a payout of more than 86.8% of net profit in 2017 (or 100% payout

considering the distributable income).

Arezzo&Co generated R$150MM in operating cash flow in the last twelve months, translating into cash flow yield

• f 3.9%.

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 -0.8x in March/18.

3

Operational and financial highlights

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

Operational Indicators

Operating Indicators 1Q18 1Q17 Δ 18 x 17

• 9,9 p.p

3

Operational and financial highlights

Indebtedness (R$ thousand)

Total indebtedness of R$172.1 million in 1Q18 against R$97.2 million in 1Q17. Long term indebtedness of 9.2% of total debt in 1Q18, compared to 25.5% in 1Q17. The weighted average cost of the company’s total debt in 1Q18 remained at low levels.

Appendix

Key financial indicators

A

History – Franchises and Owned Stores

A

Balance Sheet - IFRS

A

Income Statement - IFRS

A

Cash Flow Statement - IFRS

A

Cash Flow Statement - IFRS

A

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