Guararapes announces its 1Q16 Results

RESULTS OF THE FIRST QUARTER OF 2016 (1Q16)
São Paulo, May 13, 2016 – Guararapes Confecções S.A. (BM&FBOVESPA: GUAR3 - ON and GUAR4 - PN), Brazil’s
largest apparel manufacturer and the parent company of Lojas Riachuelo, reports its results for the first quarter
(1Q16).
Except where stated otherwise, the financial and operating data are presented on a consolidated basis and in
Brazilian Reais, pursuant to Brazilian Corporate Law.
Share Price (05/13/2016)
GUAR3: R$56.00
GUAR4: R$57.87
Operating and Financial Highlights

Consolidated net revenue grew by 10.6%, totaling R$1,213.8 million in 1Q16.

Riachuelo’s same-store sales fell by 3.1% in 1Q16.

The consolidated gross product margin came to 51.3% in 1Q16.

Operating expenses per store increased by 3.3% in 1Q16.

Adjusted EBITDA amounted to R$86.3 million in 1Q16.

The adjusted EBITDA margin on net revenue from products came to 10.5% in 1Q16.

Net income came to R$11.1 million in 1Q16.

The Riachuelo card loss ratio ended 1Q16 at 8.6%. The loss ratio from personal
loan operations closed 1Q16 at 17.1%;

Market Capitalization
R$3.6 billion
Conference Call
Tuesday (5/17)
Portuguese: 11:00 a.m. (SP)
Phone: (0xx11) 3728 5971
(0xx11) 3127 4971
Code: Guararapes
Contacts
Flávio Rocha
CEO
The financial cycle improved by 37.4%, from 233 days in 1Q15 to 146 days in 1Q16.
Tulio Queiroz
CFO
[email protected]
Marcelo Oscar
Controller and Investor
Relations
[email protected]
1Q16 Results
Financial Highlights (R$ Million)
1Q16
1Q15
Chg.(%)
Gross Revenue
Net Revenue
Gross Profit
Gross Margin
Gross Margin - Products
EBITDA Adjusted
Adjusted EBITDA margin on Consolidated Net revenue
Adjusted EBITDA margin on Consolidated Net revenue from products
Net Income (Loss)
EPS (R$)
1,518.8
1,213.8
757.9
62.4%
51.3%
86.3
7.1%
10.5%
11.1
0.18
1,404.2
1,097.6
708.8
64.6%
54.6%
175.5
16.0%
22.3%
84.9
1.36
8.2%
10.6%
6.9%
-2.1 p.p.
-3.4 p.p.
-50.8%
-8.9 p.p.
-11.7 p.p.
-87.0%
-87.0%
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Guararapes Confecções
The parent company is responsible for the industrial division of the Group, whose entire output is routed to Riachuelo, reflecting
the full integration between the retail and production areas.
Production
In 1Q16, Guararapes produced 9.0 million pieces versus 10.1 million pieces in 1Q15. In order to express the value generated by
the plants, Guararapes billed R$331.0 million between January and March 2016, 3.9% more than in 2015.
Lojas Riachuelo
In February, winter was already announcing its arrival on Riachuelo’s hangers. As of the second half of the month, Riachuelo’s
stores throughout Brazil received novelties for the cold season. Riachuelo’s 2016 Autumn/Winter campaign was photographed
and filmed in Peru, amidst the natural beauties of the Andean country. Our special guest for the campaign was actress and
singer Sophia Abrahão, who went to Peru with Riachuelo’s team and starred this season’s video. Sophia also shared all the
details of the trip on her social media profiles: from her favorite dishes of the renowned local cuisine to the places she visited in
the historic city of Cuzco.
Net revenue from products totaled R$820.6 million in 1Q16, 4.0% higher than the R$788.8 million recorded in the same period
in 2015. In same-store terms, it declined by 3.1%. The consolidated gross product margin came to 51.3% in 1Q16, dropping by
3.4 p.p. compared to 1Q15. The resumption of deducting payroll taxes increased the gross product margin in 0,7p.p.
The high level of markdowns in January and beginning of February, the deterioration of macroeconomic scenario and the
sector’s poor performance jeopardized sales growth in 1Q16. However, the Company maintained the effort to reduce inventory
to 2013 levels (in inventory days) and helped to significantly improve the Group’s financial cycle and cash generation.
As a result, the Company’s financial cycle closed 1Q16 at 146 days, versus 145 days at the close of 4Q15 and 233 days at the end
of 1Q15. This improvement was due to measures taken in recent months such as the reduction in inventory levels, as explained
above, the extension of payment terms to national and international suppliers, and reduction in the volume of personal loans
and branded cards granted to clients.
Operating Data
Consolidated Net Revenue (R$ MM)
Consolidated Net Revenue from Products (R$ MM)
All-store nominal growth over the previous year
Same-store nominal growth over the previous year
Number of stores under remodeling in the Period
Total number of stores at the end of the period
Sales area in thousand m² at end of the period
Net revenue per m² (R$ per m²)
Net revenue per average sales area in the period
1Q16
1Q15
Chg.(%)
1,213.8
820.6
4.0%
-3.1%
1,097.6
788.8
16.8%
5.8%
10.6%
4.0%
0
285
605.7
2
260
561.4
9.6%
7.9%
1,354.8
1,410.8
-4.0%
Average Ticket of the Riachuelo Card (R$)
Total number of Riachuelo Cards (MM)
% of total sales using the Riachuelo Card
% of sales through interest-bearing plans (0+8)
Total Net Personal Loan Portfolio (R$ MM)
156.0
27.1
43.5%
8.4%
260.4
148.4
25.5
44.2%
8.1%
313.5
5.1%
6.6%
-0.7 p.p.
0.3 p.p.
-16.9%
Number of employees
Guararapes + Riachuelo + TCV + Midway Mall
38,267
39,111
-2.2%
Guararapes' products accounted for 25.6% of Riachuelo’s total sales in the first quarter. Note that the current share of
Guararapes’ products is envisaged in the Company’s plans, given that growth in retail operations is expected to outpace the
upturn in the Group’s production capacity, which is increasingly focused on the production of higher added value fashion items.
1Q16 Results
2 of 16
Sales Area (1,000 sq.m.) at the end of the period
+ 251%
mil m²
605.7
605.7
285
285
556.8
490.0
413.5
364.4
314.5
257.5
206.2
277.7
230.4
172.8
77
86
145
169
212
257
Stores
Stores
Stores
Stores
Stores
Stores
Stores
Stores
Stores
Stores
Stores
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
93
102
123
107
Stores
1Q16
The Company inaugurated four stores in April, giving a total of 289 stores and 613,000 sq.m. of sales area, as shown below:
New Stores 2016
Opening
1 - Criciúma/SC - Nações Shopping
2 - Goiânia/GO - Shopping Cerrado
3 - Porto Alegre/RS - Shopping Iguatemi Porto Alegre
4 - Nova Iguaçú/RJ - Shopping Nova Iguaçú
Total Sales Area 2016
Average Stores Area 2016
April
April
April
April
16
26
27
28
Sales Area
(m²)
1,849
1,410
1,711
2,360
7,330
1,833
The expansion process reflects Riachuelo’s goal of capturing new markets and consolidating its position in the regions by
opening new stores and remodeling existing ones. It is worth remembering that the maturation period of a new store is
approximately five years, which makes these areas an important factor in defining the growth pace of the Company’s sales. At
the close of 1Q16, 45% of Riachuelo’s sales area was between one and five years old.
Number of Stores
285
285
257
212
169
145
86
2006
1Q16 Results
93
2007
102
107
2008
2009
123
2010
2011
2012
2013
2014
2015 1Q16
3 of 16
Midway Financeira
Revenue from financial operations totaled R$400.2 million in 1Q16, 27.8% up on the R$313.1 million recorded in the same
period last year. Financial revenue from interest-bearing installments sales, fines and interest on arrears grew by 43.1%, from
R$201.8 million in 1Q15 to R$288.7 million in 1Q16. It is worth noting that the increase in revenue from commissions from
branded cards came from revenue with annuities paid by cardholders and additional cardholders, card base growth and
interchange revenues. The slower growth of revenue from personal loans and Saque Fácil cash withdrawals reflects the
Company’s decision to reduce the pace of these operations in light of the risk associated with the macroeconomic scenario.
In R$ thousand
Midway Financeira - Income Statement
1Q16
Financial Service Revenues
Financial Revenue from interest-bearing sales, late fines and interest on arreas
Revenue from Personal Loans and Saque Fácil
Revenue from Financial Product Commissions
Revenue from Commissions from Branded Cards
Allowance for Doubtful Accounts
Personal Loans and Saque Fácil Provision For Doubtful Accounts (PDA)
Interest-bearing and Non-interest Bearing Sales Provision For Doubtful Accounts (PDA)
Expenditure Securities
Expenses with Card Brand Fees
400,152
288,694
57,529
30,071
23,857
(159,074)
(32,543)
(126,531)
(52,221)
(3,852)
313,072
201,809
69,687
22,699
18,878
(77,241)
(17,596)
(59,646)
(28,231)
(2,779)
Gross Revenue from Financial Operations
185,005
204,822
Revenue From Services Rendered to Riachuelo
Other Operating Income
Taxes Expenses
Operating Expenses
6,950
1
(21,403)
(88,701)
6,889
36
(17,095)
(67,820)
Operating Result
81,851
126,831
Financial Revenue (Expenses)
Non-operating Result
(7,220)
16
Earnings Before Income Tax
Income and Social Contribution Taxes
Net Income (Loss)
1Q15
(1,482)
(831)
Chg. (%)
27.8%
43.1%
-17.4%
32.5%
26.4%
105.9%
85.0%
112.1%
85.0%
38.6%
Location in the Consolidated Income Statement
Gross revenue
Gross revenue
Gross revenue
Gross revenue
Allowance for Doubtful Accounts
Allowance for Doubtful Accounts
Cost of Goods and Services Sold
Cost of Goods and Services Sold
-9.7%
0.9%
-98.4%
25.2%
30.8%
Other Operating Income/Expenses
Other Operating Income/Expenses
Deductions
General and Administrative Expenses
-35.5%
387.2% Financial Income/Expenses
n.m. Other Operating Income/Expenses
74,648
124,518
-40.1%
(33,581)
(49,795)
-32.6% Provision for Income and Social Contribution Taxes
41,067
74,723
-45.0%
Operating expenses totaled R$88.7 million in 1Q16, 30.8% higher than R$67.8 million posted in 1Q15. In order to facilitate
understanding, administrative and other operating expenses are consolidated under “Operating Expenses”. The increase of
operating expenses reported in the period is mainly due to the growth of expenses with debt collection companies, which aims
to improve the recovery of expired credits.
Throughout the quarter, the Company continued to manage its balance of provisions for doubtful accounts (PDA) in order to
maintain the PDA/Portfolio Volume ratio at levels appropriate for the level of risk of its operations. In order to better illustrate
the process of constituting the provision for doubtful accounts, the table below gives a breakdown of the portfolio by overdue
period and the respective amounts provisioned, as well as a comparison of the PDA/portfolio volume ratio with the minimum
levels required by Central Bank Resolution 2682.
In R$ thousand
March-2016
Period of Overdue (days)
performing
15-30
31-60
61-90
91-120
121-150
151-180
181-360
March 2016 Total
Risk
A
B
C
D
E
F
G
H
Up to 180 days
Portfolio
1,547,704
136,771
139,844
121,065
81,664
72,250
78,579
437,655
2,615,532
2,177,877
Coverage ratio (overdue more than 90 days) *
PDA X Minimum Required by Central Bank
PDA Balance PDA Balance (%)
24,887
1.6%
7,511
5.5%
14,672
10.5%
18,759
15.5%
28,598
35.0%
43,621
60.4%
68,691
87.4%
437,655
100.0%
644,395
24.6%
206,740
PDA (%) Minimum Required by Central Bank
Risk
PDA Balance (%)
A
0.5%
B
1.0%
C
3.0%
D
10.0%
E
30.0%
F
50.0%
G
70.0%
H
100.0%
9.5%
96.2%
111.4%
* Total PDA for credits overdue more than 90 days (E-H)
As shown, Midway Financeira maintains provisions above the minimum required by the Central Bank for all the brackets (A-H) of
its portfolio. As a result, the Company closed the period with a PDA balance 11.4% above the Central Bank minimum, with total
1Q16 Results
4 of 16
provisions sufficient to cover 96.2% of credits overdue by more than 90 days. The provision ended the period at 9.5% of the
portfolio overdue by up to 180 days.
In R$ thousand
EBITDA from Financial Operations
1Q16
1Q15
Gross Revenue
Financial Revenue from Interest-Bearing Sales, Fines & Timely Interest Payments
Revenue from Personal Loans and Easy Withdrawal
Revenue from Commissions on Financial Products
Revenue from Commissions from Branded Cards
Tax Expenses
Net Revenue
Costs
Discounts on Loan Operations
Expenses with Card Brand Fees
Gross Profit
PDA Expenses
Financial Transaction Contribution Margin
Operating Expenses
Other Operating Income/Expenses
EBITDA from Financial Operations
% of Consolidated EBITDA
400,152
288,694
57,529
30,071
23,857
(21,403)
378,749
(56,073)
(52,221)
(3,852)
322,676
(159,074)
163,602
(88,701)
1
74,902
86.8%
313,072
201,809
69,687
22,699
18,878
(17,095)
295,978
(31,010)
(28,231)
(2,779)
264,968
(77,241)
187,727
(67,820)
(814)
119,093
67.9%
Var. (%)
27.8%
43.1%
-17.4%
32.5%
26.4%
25.2%
28.0%
80.8%
85.0%
38.6%
21.8%
105.9%
-12.9%
30.8%
n.m.
-37.1%
18.9 p.p.
Expenses with losses and PDA came to R$159.1 million in 1Q16, 105.9% more than the R$77.2 million recorded in 1Q15. The
current provisioning level (9.5%) is consistent with the Company’s loss expectations for the coming months. It is worth noting
that these expenses include losses from branded card and personal loan operations.
As indicated, EBITDA from financial operations totaled R$74.9 million in 1Q16, 37.1% lower than the R$119.1 million recorded
in the same period last year, equivalent to 86.8% of consolidated adjusted EBITDA. The 1Q16 performance was the result of the
slower pace of gross profit growth due to the slowdown in credit operations and the sharp increase in expenses with losses and
provisioning.
The following chart shows loss level trends in Riachuelo Card (private label + branded) and personal loan operations. The figures
indicate the percentage overdue by more than 180 days in relation to total expected receivables in each period.
Loss Levels from Personal Loan and Riachuelo Card Operations
The level of losses from the Riachuelo Card, including branded cards, stood at 8.6% at the close of 1Q16, in line with the
Company’s expectations and in accordance with current provision levels. The loss ratio from personal loan operations came to
17.1% in 1Q16. The portfolio of this operation, including interest charges, declined by 18.0% over 1Q15, closing the period at
R$333.3 million (R$260.4 million excluding interest charges). The slight portfolio increase was due to the loss of momentum in
personal loan operations.
1Q16 Results
5 of 16
The Basel Index ended the first quarter of 2016 at 28.7%. This index is an international indicator created by the Basel Committee
on Banking Supervision, which recommends a minimum total capital/risk-weighted asset ratio of 8%. In Brazil, the minimum
required ratio is 11%, in accordance with the prevailing legislation (CMN Resolution 4,193/13 and Central Bank Circular Letters
3,644/13 and 3,477/09).
The Company reached 27.1 million private label cards, of which 332,100 were issued in the first quarter of 2016. The average
ticket of the Riachuelo card was R$156.04 in the quarter, up 5.1% from R$148.44 in the same period last year.
In 2010, Midway Financeira began to offer branded cards to its customers in association with Visa and MasterCard. At the end of
March 2016, the Company had a total of 4.8 million co-branded cards.
Sales Distribution – 1Q16
Thirdparty
Cards
26.5%
Cash
30.1%
PL
without
Interest
35.1%
PL with
Interest
8.4%
Sales Distribution – 1Q15
Private
Label
43.5%
Thirdparty
Cards
25.8%
Cash
30.0%
PL with
Interest
36.1%
Private
Label
44.2%
PL with
Interest
8.1%
The Riachuelo Card accounted for 43.5% of sales in the first quarter of 2016, below the 44.2% in 1Q15. The share of interestbearing installments sales in total sales stood at 8.4% in 1Q16 versus 8.1% in 1Q15.
Midway Mall and Own Stores
The Midway Mall is located at the most important junction in Natal (Rio Grande do Norte), formed by Avenida Senador Salgado
Filho and Avenida Bernardo Vieira, two of the city’s main thoroughfares. It is also highly accessible, located only 15 minutes from
the city’s main districts, ensuring that the entire city perimeter is within its catchment area.
Inaugurated on April 27, 2005, and currently with nearly all of its gross area leased, the mall comprises 231,000 sq.m. spread
over three floors, with 13 anchor stores, satellite stores, a food court and several service outlets. The third floor, expanded in
2010, includes a seven-screen movie theater (Cinemark), five new anchor stores, various satellite stores and a complete
gourmet area with renowned city restaurants.
1Q16 Results
6 of 16
Also on the third floor, the Midway Mall houses the Teatro Riachuelo, the most modern and comprehensive performing arts
venue in Brazil’s Northeast. Inaugurated in December 2010, it can hold up to 3,500 spectators, depending on its configuration.
The project exemplifies the mall’s consolidation of leisure, entertainment and the arts, providing the public with a wide range of
shows and performances, through a specialized management team in partnership with highly experienced segment operators.
The table below shows the evolution of the mall’s revenue and EBITDA. Note that revenue and expenses related to shopping
mall operations are booked under ‘Gross Revenue’ and ‘General and Administrative Expenses’, respectively.
Midway Results (R$ thousand)
1Q16
1Q15
Chg.(%)
Rental and Key Money Net Revenue (R$ '000)
14,985
13,450
EBITDA (R$ '000)
13,816
12,041
EBITDA Margin
92.2%
11.4%
14.7%
89.5%
2.7 p.p.
GLA (thousand m2)
65.7
65.7
0.0%
EBITDA/GLA (R$/m2)
210.4
183.3
14.7%
14,555
12,813
NOI (R$ '000)
NOI Margin
92.9%
Midway Mall (R$ mil)
1Q16
13.6%
90.9%
1Q15
2.0 p.p.
Chg.(%)
Gross Revenue - Midway Mall
15,662
14,097
11.1%
Rents
Assignment of Rights
15,204
457
13,649
448
11.4%
2.1%
Net revenue from Midway Mall totaled R$15.0 million in 1Q16, 11.4% higher than the R$13.5 million recorded in 1Q15.
In 1Q16, Midway Mall's EBITDA totaled R$13.8 million, 14.7% more than the R$12.0 million recorded in 1Q15. The EBITDA
margin came to 92.2%, 2.7 p.p. higher than the 89.5% recorded in 1Q15.
In addition to the mall operations, the Group also owns a large number of the properties where its stores are located – of the
285 active Riachuelo stores in 1Q16, 46 were installed on properties owned by the Group. In other words, 119,400 sq.m. (20%)
out of a total of 605,700 sq.m. refers to stores located in the Company’s own properties. If we add the two distribution centers
and six factories, the Company currently owns around 800,000 sq.m. of gross built-up area.
1Q16 Results
Quantity
(%)
Own Stores
Mall Stores
Street Stores
Rented Stores
Mall Stores
Street Stores
46
8
38
239
228
11
16%
3%
13%
84%
80%
4%
Total Stores
285
100%
7 of 16
Street stores located on own properties
State
Alagoas
Amazonas
Ceará
Distrito Federal
Goiás
Maranhão
Minas Gerais
Mato Grosso do Sul
Mato Grosso
Pernambuco
Piauí
Pará
Paraná
Rio Grande do Norte
Rio Grande do Sul
Sergipe
São Paulo
Total Street Stores
No. of Own Stores
1
1
1
2
2
1
1
2
1
1
2
1
5
2
1
1
13
38
Sales Area (m²)
1,968
3,101
2,562
3,901
3,888
3,886
2,895
4,109
2,310
7,176
2,765
3,830
10,761
7,902
1,996
3,202
25,534
91,786
Total Area
3,135
5,282
4,129
6,746
5,972
4,319
7,849
6,423
4,766
13,316
5,619
5,905
21,307
12,089
3,055
5,481
58,160
173,553
Sales Area (m²)
2,941
2,660
3,409
3,276
4,128
6,556
4,649
27,619
Total Area
4,172
3,926
4,560
4,446
5,384
10,230
7,639
40,357
Mall Stores located on Own Properties
State
Amazonas
Distrito Federal
Espírito Santo
Pernambuco
Rio de Janeiro
Rio Grande do Norte
São Paulo
Total Mall Stores
Total Own Stores
Guarulhos Distribution Center
Guarulhos DC land area
Total Built-up Area
No. of Own Stores
1
1
1
1
1
1
2
8
46
119,405
213,910
187,223
85,171
Natal Distribution Center
Total Built-up Area
57,552
Riachuelo São Paulo Head Office
Headquarters land area
Total Built-up Area
45,030
42,312
TCV
Transportadora Casa Verde (TCV) is responsible for part of the Group’s logistics and, thanks to the investments in recent years,
particularly in technology, TCV ensures that the Company’s products are delivered to the Riachuelo stores in a timely and
efficient manner.
Guararapes Group - Consolidated
The Company’s consolidated results include the results of the parent company and its subsidiaries.
Net Revenue
Consolidated net revenue totaled R$1,213.8 million in the first quarter of 2016, a 10.6% increase on the R$1,097.6 million
reported in the same period in 2015. Consolidated net revenue comprises net revenue from Midway Financeira (R$378.7 million
in 1Q16), Midway Mall net revenue (R$14.4 million in 1Q16) and net revenue from products (R$820.6 million in 1Q16).
1Q16 Results
8 of 16
Gross Profit and Gross Margin
In the first quarter, consolidated gross profit increased by 6.9%, from R$708.8 million in 1Q15 to R$757.9 million in 1Q16. In
the first quarter, the consolidated gross margin reached 62.4%, 2.1 p.p. less than the 64.6% reported in 1Q15.
Excluding the effects from Midway Financeira and Midway Mall, the consolidated gross product margin was 51.3% in 1Q16, 3.4
p.p. less than the 54.6% recorded in the same period last year.
(R$ thousand)
Consolidated Net Revenue
(-) Net Revenue - Midway Financeira
(-) Net Revenue - Midway Mall
(=) Consolidated Net Revenue of Products
Consolidated Gross Profit
(-) Gross Profit - Midway Financeira
(-) Gross Profit - Midway Mall
(=) Consolidated Gross Profit of Products
Consolidated Gross Margin of Products
1Q16
1Q15
Chg.(%)
1,213,775
(378,749)
(14,423)
820,603
1,097,607
(295,978)
(12,863)
788,766
10.6%
28.0%
12.1%
4.0%
757,903
(322,676)
(14,423)
420,804
51.3%
708,790
(264,968)
(12,863)
430,959
54.6%
6.9%
21.8%
12.1%
-2.4%
-3.4 p.p.
Operating Expenses
Selling expenses totaled R$388.8 million in 1Q16, 11.6% up on the R$348.5 million recorded in 1Q15. General and
administrative expenses increased by 20.7%, from R$116.9 million in 1Q15 to R$141.1 million in 1Q16.
All in all, SG&A expenses increased by 13.9% in the quarter to R$529.9 million, representing 43.7% of consolidated net revenue,
versus 42.4% in 1Q15. The good performance in expenses control in 1Q16 is consequence of the hard work the Company
implemented in 2014, and intensified in 2015 and 2016, aiming productivity gains. These gains partially offset the negative
impact of payroll expenses and electricity tariffs.
O bom desempenho no controle das despesas verificado no período é consequência do trabalho que a companhia vem
realizando desde 2014 e intensificado em 2015 e 2016 na busca por ganho de produtividade em suas operações. O ganho
alcançado neutralizou parte do impacto causado pelo aumento dos encargos da folha de pagamento e das tarifas de energia
elétrica.
Operating Expenses (R$ thousand)
1Q16
1Q15
Selling Expenses
General and Administrative Expenses
Total Operating Expenses
Total Operating Expenses / Consolidated Net Revenue
Total Operating Expenses per Store
(388,770)
(141,092)
(529,862)
43.7%
(1,859)
(348,465)
(116,875)
(465,341)
42.4%
(1,800)
11.6%
20.7%
13.9%
1.3 p.p.
3.3%
(875)
(832)
5.1%
Total Operating Expenses per Store per m²
Chg.(%)
Operating expenses per sq.m. and per store increased by 5.1% and 3.3%, respectively, compared to 1Q15. The slightly increase
on operating expenses per stores were due to the strong control of expenses and the result of productivity gain project in
company stores since the beginning of 2014. The graphic bellow shows the productivity gain in the period through the indicator
“sales area per headcount”.
1Q16 Results
9 of 16
GSA sq.m. / Headcount Trends
+ 32.4%
BETTER
46.2
45.2
37.9
38.3
38.4
Mar-14
Jun-14
Sep-14
41.9
42.3
Mar-15
Jun-15
44.2
39.4
Dec-14
Sep-15
Dec-15
Mar-16
Operating Income
In addition to its retail apparel operations, the Company also includes the results from Midway Mall and Midway Financeira as
part of its core operations.
EBITDA Reconciliation (R$ thousand)
1Q16
1Q15
Net Income (Loss)
(+) Income and Social Contribution Taxes
(+) Financial Revenue (Expense)
(+) Depreciation and Amortization (Expenses + Costs)
EBITDA
(+) IR Tax Benefits
EBITDA Adjusted
EBITDA Margin
EBITDA Margin Adjusted
11.051
(17.959)
22.126
68.114
83.332
2.964
86.296
7,1%
10,5%
84.925
15.273
8.345
59.298
167.842
7.677
175.519
16,0%
22,3%
Chg.(%)
-87,0%
n.m.
165,1%
14,9%
-50,4%
-61,4%
-50,8%
-8,9 p.p.
-11,7 p.p.
*The Company now reconciles EBITDA in line with CVM Instruction 527, i.e. EBITDA = net income plus income taxes, the net financial result, amortization, depreciation and depletion.
Also, in accordance with paragraph 4 of the same Instruction, we opted to use ADJUSTED EBITDA because we understand that the adjustment related to “income tax benefits”
contributes to the Company’s gross cash generation, since it does not represent any cash outflow.
In 1Q16, adjusted EBITDA came to R$86.3 million, 50.8% down from the R$175.5 million recorded in 1Q15. The adjusted
EBITDA margin on net product revenue was 10.5% in 1Q16 (7.1%, if calculated over the Company’s consolidated net revenue).
The resumption of payroll taxes decreased the adjusted EBITDA margin in 2.5p.p. in 1Q16, a R$19.0 million impact.
This performance was due to the combination of a decline in same-store sales; the gross product margin, which was impacted by
the need for markdowns; efficient control over operating expenses in recent years, which partially offset the impact of
additional expenses with new stores; the increase on payroll taxes; the increase on energy taxes and the pressure from the
increase in expenses with losses and provisioning, which reduced the performance of the financial operation in the quarter.
Net Income
Consolidated net income totaled R$11.1 million in 1Q16, 87.0% down from the R$84.9 million reported in 1Q15.
The net margin on net product revenue was 1.3% in 1Q16 (0.9% if calculated over the Company’s total net revenue), versus
10.8% in 1Q15 (7.7% if calculated over the Company’s total net revenue).
1Q16 Results
10 of 16
Net Debt
In 1Q16, cash and cash equivalents totaled R$648.7 million. Loans and financing totaled R$1,725.2 million, R$471.9 million of
which corresponded to loans from the Brazilian Development Bank (BNDES). As a result, the Company closed the first quarter of
2016 with net debt of R$1,076.6 million, versus R$933.5 million in 4Q15.
Indebtedness (R$ Thousand)
3/31/2016 12/31/2015 3/31/2015
Cash and Cash Equivalents
Loans and Financing
Short Term
Long Term
Net Debt
Net Debt/EBITDA (LTM)
648,683
589,491
346,894
(1,725,248) (1,522,957) (1,247,001)
(1,194,909)
(772,971)
(584,103)
(530,339)
(749,986)
(662,898)
(1,076,565)
(933,466)
(900,106)
1.6
1.2
1.0
Investments (CAPEX)
In 1Q16, the Group’s investments in fixed assets totaled R$44.3 million, versus R$99.5 million in the same period in 2015. Of
total period investments, R$39.8 million (90%) was allocated to Riachuelo, with R$16.7 million allocated to new store openings
and R$15.4 million to distribution centers.
Investments
New Stores
Remodelings
IT
General Rebuilding
Mobile Project
Distribution Center
Others
Total Riachuelo
Guararapes
Total
1Q16 Results
1Q16
16.7
0.2
0.9
0.7
3.9
15.4
2.0
39.8
4.5
44.3
(%)
38%
0%
2%
2%
9%
35%
5%
90%
10%
100%
1Q15
41.5
3.2
4.8
4.8
41.2
1.5
97.0
2.5
99.5
(%)
42%
3%
5%
5%
0%
41%
1%
97%
3%
100%
11 of 16
Contacts
For more information, contact:
Flávio Rocha
CEO
Email: [email protected]
Tulio Queiroz
CFO
Email: [email protected]
Marcelo Oscar
Controller and Investor Relations
Email: [email protected]
Phone: +55(11) 2281-2137
1Q16 Results
12 of 16
About Guararapes-Riachuelo
Guararapes is the largest fashion group in
Brazil and the parent company of the Lojas
Riachuelo retail chain, with 289 stores
nationwide.
In developed countries, large companies
account for 30% to 40% of the retail textile
market, whereas in Brazil the sum of the
biggest firms accounts for less than 10%.
The main competitive advantage of small
companies is the informality of their
operations.
However, the market of big chains has
expanded due to scale gains, investments in
product quality, fast inventory turnover and
their position as sellers of fashion, allowing
them to adapt rapidly to the season’s
trends.
In recent years, Guararapes has invested
heavily in its support operations by
modernizing
its
facilities,
opening
distribution centers in Natal and São Paulo
and implementing IT in the financial and
operational management of its operations.
289 stores: 26 states and Federal District
NE: 63 STORES
N: 22 STORES
AL: 5 Stores
BA: 13 Stores
CE: 11 Stores
MA: 6 Stores
PB: 4 Stores
PE: 12 Stores
PI: 5 Stores
RN: 4 Stores
SE: 3 Stores
AM: 7 Stores
PA: 8 Stores
TO: 1 Store
AC: 1 Store
AP: 2 Stores
RO: 1 Store
RR: 2 Stores
CO: 28 STORES
DF: 8 Stores
GO: 11 Stores
MS: 5 Stores
MT: 4 Stores
SE: 135 STORES
ES: 8 Stores
MG: 18 Stores
RJ: 27 Stores
SP: 82 Stores
S: 41 STORES
PR: 16 Stores
RS: 13 Stores
SC: 12 Stores
One of the Company’s most important advantages is this integration between its retail and manufacturing operations, a model
that has proved highly successful since it permits a rapid response to changes in the market.
Riachuelo’s private label card base is another major asset that establishes long-term relationships with a growing customer
base, currently over 27.1 million, of which 4.8 million are branded cards (March 2016). Another of the Company’s main
operations is financial services, which offer customers interest-bearing installment sales, personal loans and insurance and other
financial products.
This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and
those related to growth prospects of Guararapes Confecções S.A. and its subsidiaries. These are merely projections and as such are based
exclusively on the expectations of Guararapes' management concerning the future of the business and its continuous access to capital to
finance the Company's business plan. Such forward-looking statements depend substantially on changes in market conditions, government
regulations, competitive pressures and the performance of the Brazilian and international economies and the industry, and therefore are
subject to change without prior notice.
1Q16 Results
13 of 16
Consolidated Income Statement
R$ thousand
Income Statement (R$ Thousand)
Gross Revenue
Gross Revenue - Products
Gross Revenue - Midway Financeira
Gross Revenue - Midway Mall
Deductions
ICMS tax benefits
Net Revenue
Net Revenue - Products
Net Revenue - Midway Financeira
Net Revenue - Midway Mall
Cost of Goods and Services Sold
COGS - Products
Costs - Midway Financeira
Costs - Midway Mall
Gross Profit
Gross Profit - Products
Gross Profit - Midway Financeira
Gross Profit - Midway Mall
Gross Margin
Gross Margin - Products
Gross Margin - Midway Financeira
Selling Expenses
General and Administrative Expenses
Provision for Doubtful Accounts
Depreciation and Amortization Expenses
Other Operating Expenses/Income
EBIT
Financial Revenue (Expense)
Earnings Before Income Tax and Social Contribution
Income and Social Contribution Taxes
Net Income (Loss)
Net Margin on Consolidated Net revenue
Net Margin on Consolidated Net revenue from products
1Q16
1Q15
Chg. (%)
1,518,822
1,103,628
400,152
15,042
(320,988)
15,941
1,213,775
820,603
378,749
14,423
(455,872)
(399,799)
(56,073)
757,903
420,804
322,676
14,423
62.4%
51.3%
85.2%
(388,770)
(141,092)
(159,252)
(63,041)
9,470
15,218
(22,126)
(6,908)
17,959
11,051
0.9%
1.3%
1,404,247
1,077,665
313,072
13,510
(323,989)
17,349
1,097,607
788,766
295,978
12,863
(388,817)
(357,807)
(31,010)
708,790
430,959
264,968
12,863
64.6%
54.6%
89.5%
(348,465)
(116,875)
(77,454)
(54,342)
(3,111)
108,543
(8,345)
100,198
(15,273)
84,925
7.7%
10.8%
8.2%
2.4%
27.8%
11.3%
-0.9%
-8.1%
10.6%
4.0%
28.0%
12.1%
17.2%
11.7%
80.8%
6.9%
-2.4%
21.8%
12.1%
-2.1 p.p.
-3.4 p.p.
-4.3 p.p.
11.6%
20.7%
105.6%
16.0%
n.m.
-86.0%
165.1%
n.m.
n.m.
-87.0%
-6.8 p.p.
-9.4 p.p.
Depreciation and Amortization (Expenses + Costs)
EBITDA
IR Tax Benefits
Adjusted EBITDA *
Adjusted EBITDA margin on Consolidated Net revenue
Adjusted EBITDA margin on Consolidated Net revenue from products
68,114
83,332
2,964
86,296
7.1%
10.5%
59,298
167,842
7,677
175,519
16.0%
22.3%
14.9%
-50.4%
-61.4%
-50.8%
-8.9 p.p.
-11.7 p.p.
Total Common Shares
Total Preferred Shares
EPS (R$)
31,200
31,200
0.18
31,200
31,200
1.36
-87.0%
*The Company now reconciles EBITDA in line with CVM Instruction 527, i.e. EBITDA = net income plus income taxes, the net financial result, amortization, depreciation and depletion.
Also, in accordance with paragraph 4 of the same Instruction, we opted to use ADJUSTED EBITDA because we understand that the adjustment related to “income tax benefits”
contributes to the Company’s gross cash generation, since it does not represent any cash outflow.
1Q16 Results
14 of 16
Consolidated Balance Sheet
R$ thousand
Assets
Current Assets
Cash Equivalents
Derivatives Financial Instruments
Credits
Credits-Branded
Inventories
Deferred or Recoverable Taxes
Other Credits
Long Term Assets
Deferred or Recoverable Taxes
Judicial Deposits and Others
Permanent Assets
Investments
Property, plan and equipment
Intangible
Total Assets
3/31/2016
3,960,169
648,683
1,261,684
948,383
899,052
134,442
67,925
585,458
568,990
16,468
2,366,618
197,463
2,065,056
104,100
6,912,245
12/31/2015
4,131,788
589,491
63,528
1,529,986
968,567
744,888
154,522
80,807
516,947
501,912
15,035
2,384,101
199,094
2,082,115
102,892
7,032,835
3/31/2015
3,539,803
346,894
68,996
1,261,356
721,009
977,575
100,733
63,240
310,735
297,331
13,403
2,159,074
204,495
1,875,553
79,025
6,009,611
Liabilities
Current Liabilities
Suppliers
Loans and financing
Derivatives Financial Instruments
Dividends and Interest on Equity Payable
Wages, Benefits and Provisions
Taxes, Charges and Contributions
Liabilities from assigned credits
Other accounts payable
Long Term Liabilities
Loans and financing
Taxes and Contributions
Provision for eventual liabilities
Loans with related parties
Other
Shareholders' Equity
Paid-in Share Capital
Profit Reserve
Asset Valuation Adjustment
Total Liabilities
3/31/2016
2,848,807
557,818
1,192,091
2,818
170,082
164,220
114,868
575,467
71,442
723,045
357,398
62,239
123,029
172,941
7,438
3,340,393
2,900,000
290,067
150,326
6,912,245
12/31/2015
2,715,554
502,447
754,558
81,940
118,112
212,142
333,713
634,031
78,611
927,173
581,578
63,030
104,655
168,408
9,501
3,390,108
2,900,000
338,629
151,479
7,032,835
3/31/2015
1,943,519
264,492
574,841
78,259
151,438
195,003
137,371
483,258
58,858
846,912
509,443
63,884
111,846
153,455
8,285
3,219,180
2,600,000
464,378
154,802
6,009,611
1Q16 Results
15 of 16
Consolidated Cash Flow Statement
Cash Flow Statement - Indirect Method
Cash flows from operating activities
Net income for the period
Recording of provision for doubtful accounts
Depreciation and amortization
Proceeds (loss) from sale of property, plant and equipment
Deferred income tax and social contribution
Provision for inventory losses
Provision for labor, tax and civil risks
Interest and monetary and exchange variation expenses
Interest on securities
Other
Changes in assets and liabilities
Trade accounts receivable
Inventories
Recoverable taxes
Other assets
Escrow deposits and others
Trade accounts payable
Payroll, provisions and social contributions
Income tax and social contribution
Value-added tax on sales and services – ICMS
Payables to card managers
Other liabilities
Cash provided by operating activities
Payment of interests
Payment of income tax and social contribution
Income tax of interest on equity paid
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Mutual Loans
Dividends paid
Interest on Equity paid
New loans and financing
Repayment of loans and financing
Repayment of loans from related parties
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents, net
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
1Q16 Results
1Q16
1Q15
11,051
511
68,114
(1,415)
(56,413)
1,490
18,760
21,276
80,494
(1,140)
84,925
14,933
59,298
(401)
(43,644)
3,758
8,082
93,603
(68,464)
(48)
287,974
(155,654)
8,624
12,882
(920)
55,371
(47,922)
40,377
(53,169)
(58,563)
(8,092)
223,637
(307)
(206,052)
(8,753)
8,525
105,609
(207,249)
3,137
(37,528)
(297)
7,717
(31,064)
67,051
(55,191)
12,673
(18,094)
(1,192)
(19,107)
(161,120)
(5,904)
(187,323)
(44,270)
(7,178)
2,232
(49,217)
(99,514)
(15,824)
3,016
(112,322)
(500)
(0)
(1)
339,078
(244,961)
(878)
92,738
52,046
367,355
419,401
136,922
(47,442)
(3,582)
85,897
(213,749)
358,993
145,244
16 of 16