May 2012 - institutional presentation - may, 2012

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<ul><li> 1. | Apresentao do Roadshow As of March 31, 2012 May, 2012 1</li></ul><p> 2. DisclaimerStatements regarding the Companys future business perspectives and projections of operational andfinancial results are merely estimates and projections, and as such they are subject to different risks anduncertainties, including, but not limited to, market conditions, domestic and foreign performance in generaland in the Companys line of business.These risks and uncertainties cannot be controlled or sufficiently predicted by the Company managementand may significantly affect its perspectives, estimates, and projections. Statements on futureperspectives, estimates, and projections do not represent and should not be construed as a guarantee ofperformance. The operational information contained herein, as well as information not directly derived fromthe financial statements, have not been subject to a special review by the Companys independentauditors and may involve premises and estimates adopted by the management. 2 3. | Company overview 4. 1.1 Platform of brands of referenceArezzo&amp;Co is the leading Company in the footwear andaccessories sector through its platform of Top of Mind brands4 5. 1 .2 Company overview Arezzo&amp;Co is the reference in the Brazilian retail sector and has a unique positioning combining growth with high cash generationLeading company in ControllingDevelopment of Asset light: high Strong cashthe footwear and shareholders are the collections with operational efficiencygeneration and highaccessories sector reference in the sectorefficient supply chain growthwith presence in allBrazilian states7.8 million pairs of shoes(1)Net revenues CAGR: ~11,500 models created29.3% (2007- 1Q12) 86% outsourced production 39 years of experience in per year499 thousand handbags(1) the sector ROIC of 32.5% in 1Q12 Net income CAGR: 38.2% Lead time of 40 days(2007- 1Q12)c.2,515 points of sale Wide recognition 1,952 employees 7 to 9 launches per yearIncreased operating11.1% market share(2) leverageNotes:1. LTM as of March, 2012.2. Refers to the Brazilian women footwear market (source: Euromonitor, IBGE and Company estimates) . Estimated for 2010.5 6. 1 .3 Successful track record of entrepreneurship The right changes at the right time accelerated the Companys developmentFoundation and structuring Industrial EraRetail EraCorporate Era Industry Reference70s80s90s 00s2012 Founded in 1972 Consolidation of Focus on retail Specific brands for each Focused on brand and industrial business model R&amp;D and productionsegmentproductlocated in Minas Gerais outsourcing on Vale dos Sinos - Expansion of distribution 1.5 mm pairs per year RSchannels and 2,000 employees Franchises expansionEfficient supply chainLaunch of newbrandsConsolidateOpening of the first Opening of the flagshipleadershipshoe factory store at Oscar Freireposition+Merger First storeSchutz launchStrategic Partnership (November 2007) Launch of the first Commercial operations design withcentralized in So Paulonational successFast FashionconceptInitial Public Offering(February 2011) 7. .4 Shareholder structure11Post-offeringBirman familyManagementOthers52.6% 0.2%47.1%Notes:1. Arezzo&amp;Co capital stock is composed of 88,542,410 common shares, all nominative, book-entry shares with no par value.Shareholder structure as of March, 2012.7 8. 1 .5 Culture &amp; Management: Arezzo towards 2154Meritocratic culture based on best practices makes Arezzo acompany prepared to reach 2154 Code of Ethics Our behavior is a positive example for all activities and internal or external interactions; and we treat everyone with respect, equality and cooperation We properly protect the confidentiality of our information, documents, trademarks, intellectual property and cherish the proper use of our assets The Arezzo Groups interests prevail over personal or third party interests and guide any decision-making in the company We act with fairness in our relationships with suppliers, franchisees and customers, eliminating any situation that may generate expectations of bias inthe context of receipt of gifts and invitations Our suppliers are evaluated and contracted based on clear criteria and in line with our ethical standards and conduct We are committed to ensure a responsible environmental stewardship by ensuring and establishing high standards for the purposes of protecting theenvironment and conserving its resources We have a socially responsible conduct and do not use any resources for unethical or illegal purposes, or that violates local or international laws It is our duty to report any breach of the Code of Ethics irrespective of the public involved2010 21548 9. 1 .6 Strong platform of brands Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segmentsFoundation197219952008 2009TrendyFashion PopDesign Brands New Up to dateFlat shoes Exclusivity profileEasy to wearBoldAffordable IdentityEclecticProvocative Colorful Seduction Femaletarget16 - 60 years old 18 - 40 years old 12 - 60 years old20 - 45 years old marketO FMBEX OF MB EX OMBO MB EXDistribution POS 1 channel118 290 877 -19 21,509-8 783 118 - % gross14%73% 12% 1%26%1%65% 8%41% 59% 14%7%79% rev.2 Retail price R$ 180.00/pair R$ 285.00/pair R$ 99.00/pair R$ 960.00/pairpointSales R$ 23.9 millionR$ 589.1 millionR$ 249.8 million R$ 8.3 million Volume3 % Gross2.7%65,7% 27.8%0.9%Revenues4Notes:1. Points of sales (1Q12 LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports2. % of each brand gross revenues (2011 LTM)3. (1Q12 LTM) gross revenues, does not include other revenues (not generated by the 4 brands)4. % total (1Q12 LTM) gross revenues 9 10. 1.7 Multiple distribution channels Flexible platform through three distribution channels with differentiated strategies, maximizing the Companys profitabilityGross Revenues per ChannelReach about292 franchises in46 owned stores Broad distribution1.200 cities andmore than 160being 5 Flagshipin every Brazilian2,500 multi-cities storesstatebrandsGross Revenue Breakdown (R$ mn) 48% 27% 19% 6% 100% 56 170 242 897429FranchisesMulti-brands Owned stores OthersTotalNotes:1. (1Q12 LTM) gross revenues2. Considers external market and other revenues in the domestic market10 11. | Business model 12. 2Unique business model in Brazil Customer focus: we are at the forefront of Brazilian women fashion and design1ABILITY TO2SOLID MARKETING3EFFICIENT 4 NATIONWIDE5SEASONED DISTRIBUTION MANAGEMENTINNOVATEAND SUPPLY CHAINTEAM WITH STRATEGYCOMMUNICATION PERFORMANCEPROGRAM BASED INCENTIVESCommunication &amp; R&amp;DSourcing &amp; LogisticsMulti-channelManagement MarketingBRANDS OF REFERENCE12 13. 2.1 Ability to InnovateWe produce 7 to 9 collections per yearI. ResearchII. DevelopmentIII. Sourcing IV. DeliveryCreation:11,500 SKUs / year Available for selection:63% of SKUs created /yearStores: 52% of SKUs created / yearActivitiesJANFEV MARAPR MAY JUN JULAUGSEP OCTNOV DECCreationLaunchOrdersProductionDeliveryNormal saleDiscount sale Winter I Winter II Winter III Summer I Summer IISummer III Summer IVArezzo&amp;Co fulfills the various aspirations of women, delivering on average 5 newmodels per day, allowing for consistent desire-driven purchases13 14. 2.2 Broad media planThe brand has an integrated and expressive communication strategy, from thecreation of campaigns to the point of sales Presence in eletronic media and television Strong presence in printed media+1000 exhibition on TV e 620 exhibition in cinema in 2011150 inserts in printed media in 300 pages in 2011 (45 million readers)+ 40 million impact78 exhibition in fashion editorials in 1Q12Digital communication Celebrity EndorsementMarketing Events549k accesses to site/month115 k Facebook fans: leader in Demi MooreGisele Bndchen Blake Lively CRM VIP salesAverage navigation time: 8 minutes interactions Seasonal showroom in Los Angeles near theIn-store events PA51 k Twitter followers : category leader 30 k monthly access to Schutzs Blog Red Carpet Stylists Fashion AdvisorsSeason 14 15. 2 .2 Communication &amp; marketing program reflected in every aspect of the stores Stores constantly modified to incorporate the concept of each new collection, creating desire-driven purchasesPOS materials (catalogs, packaging, among others)Store layout &amp; visual merchandisingFlagship stores All visual communication at stores is monitored and updated simultaneously throughout Brazil for each new collection15 16. 2 .2 Atmosphere of stores: differentiated concepts for each brand Niches and lighting Summer Flagship Oscar FreireWall display Each theme is disposed in different nichesChameleon project: constantmodification to incorporate the newcollections conceptCloset Essential Sophisticated lightingCombosWinter Flagship Oscar Freire Video WallAcessoriesStorageDistinguished storefrontSpecial collectionsVisual merchandising: Updates at low cost investment Jaquets and accessories Exposure of a large variety of Atmosphere of a jewelry store Brings relevant information from Campaigns and marketing actions products Private shop experience each collection to stores level Preeminence for products Selling area inventory: lower Focus on exclusivity, design and 3 main updates per year Differentiated products necessity of area for storagehighly selected materials16 17. .3 Flexible production process2 Production speed, flexibility and scalability to ensure Arezzo&amp;Cosexpected growth based on asset light modelSourcing Model Gains of scaleOwned factory with capacity to produce 1.2 million pairsannually and strong relationship with Vale dos Sinos Arezzos size allows for large scale purchases from eachproduction cluster as the outsourcing represents 86% of totalsupplierproductionCertification and auditing of suppliersJoint purchasesIn-house certification and auditing ensure quality and Negotiation of raw material jointly with local supplierspunctuality (ISO 9001 certification in 2008)New Distribution Center Consolidation and improvement of distribution in nationalscale1Reception: 100,000 units / day2Storage: 100,000 units / day3Picking: 150,000 units / day4Distribution: 200,000 units / day5Replacement of milky run strategy17 18. .4 ...leveraged by owned stores2Capturing value from the chain while developing retail know how and brands visibilityFlagship StoresGreater brand awareness coupled with operational efficiencies Clustering higher productivity stores in main areas (mainly SP and RJ) improving operational efficiency and profitability:Franchise Owned R$ 3,292 M Annual Average Sales per Store2011R$ 5,249 M Direct costumers interaction develops retail competences which are also reflectedArezzo Ipanema / RJat franchised storesArezzo Cid. Jardim / SP Flagship stores ensure greater visibility and reinforce brand image Total sales area and # of stores (sq m)45464,686 4,75429 21 20% 20% FlagshipStandard Store 2,96710 # stores 62,06723% 1,36919% 80% 80%1,044 9% 12% 77%81%Schutz Iguatemi / SP 88% 91%Schutz Oscar Freire / SP 20072008 2009 2010 20111Q12 18 19. .4 with efficient management of the2 franchise network...Model allows rapid expansion with little invested capital byArezzo&amp;Co and high profitability to franchiseesSuccessful Partnership: Win Win Franchise Concentration per Operator Intense retail training (# of Franchisees by # of Franchises) Ongoing support: average of 6 stores/ consultant andaverage of 22 visits per store/ year 4 or more franchises Strong relationship with and ongoing support to franchisee IT integration with our franchises amount to more than 80% As mono-brand stores, franchises reinforce the branding in 10%3 franchiseseach city they are located16% 1 franchise 46%Best Franchise in Brazil (2005) and in the sector for 728%years since 2004Excellency in Franchising Award in the last 8 years (ABF) 2 franchises96% satisfaction of franchises1 Notes: FY2011 data100% of on-time payments 1. 96% of the current franchisees indicated they would be interested in opening afranchise if they did not already have oneAverage payback of 39 months22. Annual sales of R$ 2,330 thousand + average initial investment of R$ 600 thousand+ working capital of R$ 414 thousand19 20. 2 .4 ...and of the multi-brand stores Multi-brand stores widen the distribution capillarity and the brands visibility, resulting in a strong retail footprint Multi-brand stores Gross Revenue (R$ mn)Improved distribution and brand visibility2,177 Greater brand capillarity1,782 Presence in over 1,200 cities# Store Rapid expansion at low investment and riskGross Revenue1(R$ mn) Main Focus: share of wallet188 234 Owners loyalty 56 Important sales channel for smaller cities 47 Sales team optimization: internal team and commissioned 2010 20111Q111Q12sales representativesMulti-brand storesNotes:1. Domestic market only 20 21. 2.4 Large capillarity and scale of storechain Mono-brand store chain with high capillarity, reaching more than 160 cities and well-positioned among the retail companiesPoints of sale (1Q12)Size and average sales per mono-brand stores - 2011 290 franchises +BrandAverage size Net Revenue/ m2TotalGDP: 5%18 owned stores +(m2) (R$ 000s)Stores 1,2 A&amp;C: 4% 4 outlets +5 61 354 328 877 multi-brand clients133244 432 GDP: 18% A&amp;C: 17% 1,9049167 2 franchises + 1,0317336 19 owned stores + 2.5138145 1 outlet +263 17 104 1,509 multi-brand clientsPoints of sale average size : new stores are increasingGDP: 7% 8 owned storesnetwork average sizeA&amp;C: 7%GDP: 55%A&amp;C: 57%783 multi-brand clients8580GDP: 15%1 owned store + 57sq msq m A&amp;C: 15%18 multi-brand clientssq m TOTAL20102011 new stores 2012 new stores292 franchises +Source: IBGE, Companies Reports; number of stores according to latest data provided by the Companies40 owned stores +Notes:1.Considers only monobrand stores of Arezzo and Schutz;5 outlets +2.For Hering, considers only Hering Store chain stores;3.2008 data; 2.177 multi-brand clients4.Net Revenue (assuming that sales taxes and deduction = 30% of gross revenues);5.Considers Arezzo + Schutz, except for outlets, handbags stores and Schutz franchise;= 2,515 points of sales21 22. 2 .5 Seasoned and professional management teamAnderson Birman Internal Auditing Marco Coelho Schutz and AlexandreArezzo and Ana Capri Industrial Supply ChainStrategy and ITFinancial HRBirman Anderson Birman Alexandre Birman Cisso Klaus Marcio Jung Kurt RichterThiago Borges Raquel CarneiroClaudia NarcisoHighly qualified management teamNameYears of YearsTitleexperienceat ArezzoAnderson Birman 39 39 Stock option plan for key executivesCEOAlexandre BirmanCOO 16 16 Performance based compensation package for allThiago Borgesemployees 124CFO and Investor Relations OfficerCisso Klaus 468 Independent business units for each brand but unifiedDirector Industrial officers (Industrial, Logistics, Financial and HR) for theClaudia Narciso 23 13whole companyDirector R&amp;DKurt Ritchter 31 10Director Strategy and ITMarcio Jung 277Director Supply ChainMarco Coelho 40 29D...</p>