9654 Magazine Luiza | Investor Relations - 2Q16



  • Additional market share gains. In 2Q16, consolidated gross sales rose by 4.8% to R$2.6 billion YoY. Same-store-sales keep on improving gradually every quarter and posted 2.4% growth in 2Q16, mainly as a result of a good performance in our online channel (+33.6% rise in e-commerce sales) and slight sequential improvement in brick and mortar store sales. Based on data of monthly survey published by IBGE (Brazilian Institute for Statistics and Geography) and GFK data for the five months of the year, we gained market share in the main categories that we participate in both channels.
  • Another strong quarterly performance for our e-commerce. In 2Q16, e-commerce sales were up by 33.6%, one of the highest growth rates of the last seven quarters and reached 22.5% of total sales. In 1H16, e-commerce sales were up by 30.6%, compared with industry growth of 5.2% during the same period, according to E-bit data. The market share gain that we achieved in 2Q16 reflects our multichannel strategy, better assortment and increase in sales conversion on purchases done via our mobile app.
  • Higher gross margin. Gross margin was 120 bps and 170 bps higher YoY to 31.8% and to 31.0%, respectively in 2Q16 and 1H16. This performance stems from: (i) better sales mix, (ii) charging for freight and assembly and (iii) more rational pricing in e-commerce.
  • Tight expense control. SG&A expense were about 1% and 2% lower YoY in 2Q16 and 1H16, respectively, as a result of close expense review. Even with the increase in payroll taxes, SG&A expenses showed some dilution of 40 and 50 bps, respectively in 2Q16 and 1H16, accounting for 25.0% and 24.4% of net sales, respectively.
  • Rise in net income. Higher gross margin combined with tighter SG&A expense management contributed to 28.9% jump in EBITDA to R$163.2 million (margin of 7.6%) and net income reached R$10.4 million (margin of 0.5%). In 1H16, EBITDA and net income were R$307.3 million (margin of 7.0%) and R$15.7 million (margin of 0.4%), respectively.
  • Lower net debt. Adjusted net debt (net of discounted credit card receivables) decreased from R$1,206.9 million in June 2015 to R$854.3 million in June 2016, therefore reducing the adjusted net debt/adjusted EBITDA ratio from 2.0x to 1.5x, respectively. In the last 12 months, the Company lowered its net debt by R$352.6 million
  • Better working capital management and operating cash flow generation. In 2Q16, the Company experienced an improvement in its operating cash flow with positive result of R$98.7 million, compared with a result of R$3.4 million in 2Q15. The Company achieved an important reduction in working capital needs and the highlight was the higher supplier terms, an increase of R$252.0 million compared with 2Q15.
  • Investments to support the digital transformation strategy. In 1H16, the Company invested R$49.9 million, the greater portion of this capex was applied in technology and logistics upgrades. The Company opened 25 new stores in the last twelve months and should concentrate new store openings in the 2H16.

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