| company overview...7.9% (2012-2017) net profit cagr: 8.1% (2012- 2017) increased operating...
TRANSCRIPT
| Apresentação do Roadshow
1
Institutional Presentation1Q18
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 on 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
| 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
4
5
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
61. 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
operational
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
outsourcing 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 ReferenceFoundation and structuring Industrial Era Corporate EraRetail 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 development1
Consolidate
leadership
position
Initial Public Offering
(February 2011)
7
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 May 25th 2018
3. Includes Stock Options plan8
51.1% 48.8%
Birman Family Float
1Management²Others
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
market16 – 60 years 18 – 40 years 12 – 60 years 20 – 45 years 15 – 30 years
% Web Gross
RevenueR$64.3MM (7%) R$58.7MM (11%) R$10.7MM (6%) R$1.6MM (3%) R$1.8MM (10%)
Retail price
pointR$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$18MM
% Gross
Revenues4 53.2% 32.6% 10.0% 3.2% 1.0%
Strong platform of brands
Strong platform of brands, aimed at specific target markets, enables the Company to capture growth from different income segments
1D
istr
ibu
tio
n
ch
an
nel1 POS 1
9
% gross
rev.2
O F MB EX
14
65%13%
70
2%
22 67
17% 29%25% 18%
3
49% 34%9%
23
2%
O MB EX
4
5%30%
39
62%
25
O MB EX
4
40%50%
2
0%
363124
O F MB EX O F MB EX
1,187385
13%
1,163 1,323
Notes:1. Points of sales (LTM); O = Owned Stores; F = Franchised Stores; MB = Multi-brand Stores; EX = Exports (including US and ROW wholesalers).
2. % of each brand gross revenues (LTM) does not include other revenues (not generated by any of the 6 brands).
3. Gross revenues LTM, including external market; does not include other revenues (not generated by any of the 6 brands).
4. % of Company’s total gross revenues as of March 31th, 2018.
119
Multiple distribution channels
Flexible platform through different distribution channels with specific strategies, maximizing the Company's profitability
1
Notas:
1. Without store overlap between brands
2. LTM
3. Domestic Market – multibrand without overlap. 10
Gross Revenue Breakdown by Channel2 – (R$ mm)
Broad distribution
network
throughout Brazil
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-channelSourcing & LogisticsCommunication &
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
Ability to Innovate
We develop 15 to 18 collections per year2I. 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
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 SALESTRONG PRESENCE IN SOCIAL, DIGITAL AND PRINT MEDIA
DIGITAL COMMUNICATION
INTERNATIONAL CELEBRITIES ENDORSEMENT AND
STRONG PRESENCE IN THE PRESSCUSTOMIZED CONTENT FOR DIFFERENT CLIENTS
OVER 12 MILLION FOLLOWERS
OVER 4 MILLION MONTHLY WEBSITE ACCESSCUSTOMER 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 stores2
15
All visual communication at stores is monitored and updated simultaneously throughout Brazilfor each new collection
Flagship storesStore layout & visual merchandising
POS materials (catalogs, packaging, and others)
15
Distinguished storefront
Atmosphere of Stores: differentiated
concepts for each brand2
16
New Store Concept
Smart Mirror Mobile Checkout
“Home Feeling”
New store concept being
tested in flagship stores
New digital experience: mobile
check out, RFID mirror and
touch tv
Expected roll out for 2018/19
Display of a large variety of
products
Inventory at the sales area:
lower necessity of additional
space for storage
Atmosphere of a jewelry
store
Private shop experience
Focus on exclusivity, design
and high quality materials
Wall display
Combos
Each theme is disposed in different niches
Accessories
Sophisticated lightingStorage
Iguatemi Faria Lima - SP
Shelves, Niches and Suspended shelves
Visual merchandising:
Increased number of
models exposed
Products highlighted in the
center of the stores
Favorable lighting project
Distribution of the furniture
provides more comfort to
the customers
Suspended Shelves
Experimental and creative
space
Interaction with the customer
Experimental and creative
Oscar Freire St 1128
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
of 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 purchasesCertification 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
12
34
10%
90%
Arezzo&Co OwnedFactories
Others
Operation composed by flagship stores in
key Brazilian locations
Owned stores are key to develop retail know-how and increase brands’ visibility2Flagship 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
Ow
ned
Fra
nchis
e
Average Annual
Sales per Store
LTM
R$ 1.3MM
Arezzo – Iguatemi / SP
Schutz – Iguatemi/ SP Arezzo – Oscar Freire/ SP
Schutz – Oscar Freire/ SP
Anacapri – Oscar Freire/ SP
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
owned 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 peryear, 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
24 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
78 86
2.229
2.379
1.800
1.900
2.000
2.100
2.200
2.300
2.400
2.500
–
20
40
60
80
100
120
140
160
180
200
1Q17 1Q18
Gross Revenue
# Stores MB
Multibrand stores as tool for increased
capilarity2
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
10.0%
6.7%
Board of DirectorsRisk, 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
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
BrandsSilvia Machado
Industrial and OperationsCisso Klaus and Cassiano
Lemos
Administrative & Finance
Rafael Sachete
HR & ExpansionMarco Aurélio Vidal
IT
Innovation
Valorizza (CRM)
WEB (BR/USA)
Digital TransformationMaurício Bastos
Schutz USA
BU Alexandre
Birman
Exports
InternationalBusiness
Wayne Kulkin
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 CarlucciChairman 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 Giorgimember
28 years of experience in Management and Leadership.
Current member of people committees for Santander, Sul
América and Grupo Martins
Alexandre BirmanMember
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 RozenbaumMember
Over 13 years of experience as sell side equity research
analyst, focused on retail and consumer sector
Paula BelliziaIndependent 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. FerreiraIndependent Member
CEO of Bahema Participações, current board member of
Petrobras, Valid, Sul América, Gafisa and T4F
José BolonhaVice 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)
Multibrand and multichannel strategy
2Organic 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$912 MM
32.6%
R$558 MM
10.0%
R$172 MM
3.2%
R$55 MM
1.0%
R$18 MM
100%
R$ 1,7 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 44.7%
R$ 766 MM
9.2%
R$ 157 MM
8.0%
R$ 137 MM
20.5%
R$ 352 MM
17.6%
R$ 302 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, including external market; does not include other revenues (not generated by any of the 5 brands).
Information as of March 31th, 2018
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
OutletsKiosks
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
26
Key messages
2Arezzo&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 brand1Staff management an ongoing development• Shareholders value creation sustained by leadership and training of talents• Strengthening of Company’s culture2
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 revenues4
| FINANCIAL HIGHLIGHTS03
719 767 738 804874
199 219
400434 467
458451
98 103
41
72 93119
157
34 45
10
9 921
42
910
1.1701.282 1.307
1.4021.524
341377
-3.000, 0
-2.500, 0
-2.000, 0
-1.500, 0
-1.000, 0
-500,0
-
500 ,0
1.00 0,0
1.50 0,0
2.00 0,0
-
200 ,0
400 ,0
600 ,0
800 ,0
1.00 0,0
1.20 0,0
1.40 0,0
1.60 0,0
1.80 0,0
2.00 0,0
2013 2014 2015 2016 2017 1Q17 1Q18
Arezzo Schutz Anacapri Others
28
Operational and financial highlights
3Gross Revenue Breakdown by Brand – Domestic Market (R$ million)
CAGR: 6.8%
10.7%
Others: includes only domestic markets for Alexandre Birman and Fiever brands and other revenues.
62 76 128 152 15428 30
583661
638686 748
173 191
289
300 305304
344
78 86
268
272292
301
299
63 66
23
4469
108
129
25
33
7
53
3
5
2 1
1.2321.358 1.435
1.5541.679
368
408
(3.000, 0)
(2.500, 0)
(2.000, 0)
(1.500, 0)
(1.000, 0)
(500,0)
–
500 ,0
1.00 0,0
1.50 0,0
2.00 0,0
–
200 ,0
400 ,0
600 ,0
800 ,0
1.00 0,0
1.20 0,0
1.40 0,0
1.60 0,0
1.80 0,0
2.00 0,0
2013 2014 2015 2016 2017 1Q17 1Q18
Foreign Market Franchise Multibrands Owned Stores Web commerce Others Total
29
Operational and financial highlights
3Gross Revenue Breakdown by Channel – Domestic and External Market (R$ million)
CAGR: 8.0%
10.7%
Others: includes domestic market revenues that are not specific for distribution channels.
3
30
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%
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%
514 518 525 568 576
48 49 51 50 49
38.6 38.9 39.441.2 41.5
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
-100
100
300
500
700
900
1.100
1.300
1.500
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
111120 120 116
154
22 27
11,5% 11,4%10,7%
9,4%
11,4%
7,5%8,2%
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 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%
–
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 1Q17 1Q18
Gross Profit Gross Margin
3Operational and financial highlights
Gross Profit Evolution (R$ MM) and Gross Margin (%) Net Profit Evolution (R$ MM) and Net Margin (%)
31
22.3%
+70 bps+ 60 bps
12.7%
*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.
**
159170 165
177
206
36 41
16,6% 16,1%
14,8%14,3%
15,2%
12,1% 12,3%
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 1Q17 1Q18
EBITDA Margem EBITDA
62 76 128 152 15428 30
1.170 1.282
1.307 1.402
1.524
341 377
1.232
1.3581.435
1.554
1.679
368 408
–
200 ,0
400 ,0
600 ,0
800 ,0
1.00 0,0
1.20 0,0
1.40 0,0
1.60 0,0
1.80 0,0
–
200 ,0
400 ,0
600 ,0
800 ,0
1.00 0,0
1.20 0,0
1.40 0,0
1.60 0,0
1.80 0,0
2.00 0,0
2013 2014 2015 2016 2017 1Q17 1Q18
Foreign Market Domestic Market
3Operational and financial highlights
Gross Revenue (R$ MM) EBITDA Evolution (R$ MM) and EBITDA Margin (%)
32
+20 bpsCAGR: 8.0%
13,1%
10,7%
3Operational 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 3.9%
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$150MM in operating cash flow
in the last twelve months, translating into cash flow yield
of 3.9%.
From 2015 onwards capex trended roughly in line or
below depreciation.
The Company has a strong balance sheet and a net
cash/EBITDA ratio of -0.8x in March/18.
1) Operating cash flow yield = LTM Operating cash flow / Firm value. Considered Firm Value of R$ 3.872,69MM (as of 03/31/2018)
34
3Operational 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
Operating Indicators 1Q18 1Q17Δ
18 x 17
# of pairs sold ('000) 2.742 2.560 7,1%
# of handbags sold ('000) 358 267 34,1%
# of employees 2.419 2.307 4,9%
# of stores* 625 562 63
Owned Stores 49 48 1
Franchises 576 514 62
Outsourcing (as % of total production) 90,3% 89,2% 1,1 p.p
SSS² Sell-in (franchises) 3,7% 13,6% -9,9 p.p
SSS² Sell-out (owned stores + franchises + web) 8,4% 2,5% 5,9 p.p
35
3Operational 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.
36
Appendix
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.
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 stores expanded
39
Balance Sheet - IFRS
A
40
Income Statement - IFRS
A
41
Cash Flow Statement - IFRS
A
42
Cash Flow Statement - IFRS
A
Contacts
Telephone: +55 11 2132-4303
www.arezzoco.com.br
Rafael Sachete da Silva
CFO
Aline Penna
IR Officer
Victoria Machado
IR Coordinator
Rafaella Nolli
IR Analyst