2. Agenda
Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20
Break 10h20 – 10h30
Roundtable with the Directors of Magazine Luiza 10h30 – 12h00
Lunch 12h00 – 12h30
Store and Distribution Center Visits 12h30 – 16h30
2
3. • Opening Event
Luiza Helena Trajano, President
• Highlights of 2012 and Expectations for 2013
Marcelo Silva, CEO
• E-commerce: Sustainable Growth and Future Outlook
Frederico Trajano, Sales and Marketing Executive Director
3
4. • Opening Event
Luiza Helena Trajano, President
• Highlights of 2012 and Expectations for 2013
Marcelo Silva, CEO
• E-commerce: Sustainable Growth and Future Outlook
Frederico Trajano, Sales and Marketing Executive Director
4
5. Overview of the Main Indicators of Magazine Luiza
Revenue Growth and Number of Stores Stores Channels Average Age of Stores
Up to 1 year
117 1 to 2 years
629
Conventional stores 21
456 142
736 1 More than 2 to 3
728 Website 106
Virtual stores 3 years years
604
455 736 stores
444 7.6
351 346 391
6.4
253 5.7 Geographical Footprint
174
111 127 4.1
3.4
2.2 2.6
1.9
1.4
0.6 0.7 0.9
Cabedelo
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9M2012
Gross Revenues bi) billion)
Receita Bruta¹ (R$ (Rs Nº Lojas
Number of Stores Simões Filho
Overview - Magazine Luiza Mix (% of Sales)
Contagem
Ribeirão Preto
Over 22 thousand employees 7% 30% Ibiporã Louveira
Others
31% South
Over 30 million customers (30% active) 16%
Furniture Household
48% Navegantes
Southeast Caxias
appliances
15 years: the best companies to work for 20%
23% Northeast
Multi-channel under single brand Technoloy
23%
Sound & Image
2%
Competitive portfolio of financial products Mid-West
5
6. Corporate Governance
Corporate Governance Considerations
New Market
General Meeting Controlling shareholders with
more than 50 years in the industry
Board of Directors with
independent members since 2005
External Audit Firm Fiscal Council
Audit Committee conducted by an
independent member
Other Committee Financial Statements audited for
Audit Committee Board of Directors over 10 years by one of the
(Finance)
country’s biggest audit firms
Senior Management: retention
plan (stock options)
Risk Management Fiscal Council in 2012
Board
Internal Audit and Standards and
Ethics and Conduct
Risk Control Procedures
6
7. Current Scenario (9M12) and Expectations for 2013
Financial Indicators for Channel – Sep, 2012
New VS 2012 Ilustrative
New CS 2012
E-com 2012
Total Growth (%)
ML 2012
Mature CS 2012
Mature VS 2012
EBITDA Margin (%)
Total Sales R$ CS: Conventional Stores VS: Virtual Stores
7
8. Current Scenario (9M12) and Expectations for 2013
Financial Indicators for Channel – Sep, 2012
New VS 2012 Ilustrative
New CS 2012
E-com 2012
Total Growth (%)
ML 2012
ML 2013E
Mature CS 2012
Mature VS 2012
EBITDA Margin (%)
Total Sales R$ CS: Conventional Stores VS: Virtual Stores
8
9. Main Achievements in 2012
• Integration of more than 250 stores in 12 months
Baú Maia
Project Beginning August, 2011 March, 2012
Time 7 months 8 months
Scope (integration) 104 stores 150 stores, 2 DCs and 3 cross dockings
National Footprint 2 states (SP and PR) 9 states (PI, CE, PB, PE, SE, MA, RN, AL and BA)
Executive Meetings 20 18
IT Committe 32 32
• Sustainable growth in online and offline channels
• Delinquency under control
9
10. 2013 Strategic Planning
1
Strategic Development
Management of Career Plan
Employees Retention
Customers
2 Service, Delivery, Loyalty,
Inventory Management Brand
Supply Chain Price Management
Management Business Processes
Logistics
3 Results
Rationalization Project “More with Less” SSS, Margin,
of Expenses Dilution of fixed costs EBITDA and Net Income
10
11. • Opening Event
Luiza Helena Trajano, President
• Highlights of 2012 and Expectations for 2013
Marcelo Silva, CEO
• E-commerce: Sustainable Growth and Future Outlook
Frederico Trajano, Sales and Marketing Executive Director
11
12. Multi-Channel Strategy
Multi-channel Strategy
Conventional
To be where, when and how Stores
customers want
Consistency of multichannel customer loyalty (spends 97%
more than one that buys only in the store and 98% more than
one that buys only on the website)
Virtual
Stores
Expansion of the product portfolio (the integration of
channels allows sharing of product mix for all points of sale)
Cross marketing and cross selling opportunities (using CRM
tools to leverage the customer base across all channels)
E-commerce /
Dilution of fixed costs Mobile
(operating leverage)
12
13. Customers who buy at the two channels have higher frequency,
which is equivalent an annual spend of ~2x higher
Decomposition of annual expenditure per customer, 2010-12 Customers
from 2012
AVERAGE VALUE OF # ITEMS PER AVERAGE TICKET ANNUAL FREQUENCY ANNUAL SPENDING
THE ITEM x SALE = x OF PURCHASE = PER CLIENT
Only Only Only Only Only
stores stores stores stores stores +97%
Purchase Channel
Only e- Only e- Only e- Only e- Only e-
com com com com com
+98%
Both Both Both Both Both
Note: Consider a universe of 2.9 million customers who made the first purchase with ML in 2010
Data: Magazine Luiza, Market Data, Bain analysis
13
14. Virtual Stores
Size 150m²
15% less investment than a conventional store
Potential to leverage 50% of revenues from sales of a conventional store
Account for 5% of company’s revenues
14
15. E-commerce Magazine Luiza
The biggest store: representing 13% of all revenues
Unique visitors: 9 million
Page views: 83 million/month
Customers: 1.3 million
15
16. Examples of multi-channel actions
To sell products from website
The virtual saleswoman
at the stores
Lu “humanizes” the
website and gives
relevant information to
our customers Physical
Stores
7,000 SKUs
Website
31,000
SKUs
Gifts list 100% integrated
Currently 80% of the lists are created and registered on the
website, but 60% of the revenue is done at the store
16
18. Economics of the Channel
Financial Indicator Drivers of value Comparative versus physical store
Gross Revenue Multichannel platform that serves Interactivity between e-commerce and
nationwide and search for customer loyalty physical store is a differentiator for the
customer
Gross Margin The focus is not "every day low price" but Gross margin below physical stores due to the
competitive prices and quality of service channel characteristics that support
profitability with lower prices
EBITDA Margin High productivity combined with shared EBITDA higher than physical stores because of
expenses lower operating expenses
Net Income Profitability partially offset by higher working Net performance over physical stores
capital
Working Capital Efficient inventory and payment management Higher third card sales versus physical stores, so
e-commerce is more intensive in working capital
Investiments Focus on innovation Low investment requirements compared to
physical stores
ROIC High level of return on invested capital Well above physical stores
18
20. Project Objective
To enable the delivery of e-commerce and
telesales orders by the DC located closest to the
customer’ region (i) reduction of delivery costs, (ii)
reduction of delivery and collection times and (iii)
increased customer satisfaction and revenues
20
21. General Concept
Current Situation Proposed Model
Cabedelo
Cabedelo
Simões Filho
Simões Filho
Contagem Contagem
Ribeirão Preto Ribeirão Preto
Ibiporã Louveira Ibiporã Louveira
Navegantes Navegantes
Caxias Caxias
From Louveira DC to Brasil From any DC to Brasil
21
22. Benefits
Reduction of
• Reduction of delivery time by 56%
Delivery and • Reduction of collection time by 56%
Collection Times
• Faster delivery time than the competition
Reduction of • Reduction of delivery price by 60 %
Delivery Price • More competitive delivery price, lower than the market
• Quicker delivery
Increasing Sales • More competitive prices
• Customer Satisfaction
Customer • Reduction in complaints and PROCON
Satisfaction • Award: Diamond in E-Commerce (E-Bit)
22
23. Benefits
1 Reduction of Delivery and Collection Times
Delivery Time Collection Time
Days
Northeast Northeast
Current Proposed % Reduction Current Proposed % Reduction
Faster delivery time than the competition
23
24. Benefits
1 Reduction of Delivery Time
Competitors Delivery Time (Proposed)
Days
Northeast
Faster delivery time than the competition
24
25. Benefits
2 Reduction of Delivery Price
Price
Northeast
Current Proposed % Reduction
Reduction of delivery price by 60%
More competitive delivery price
1) Análise sem Courrier e Setor 20.
25
27. In a world of
fragmentation
and change,
we took our multichannel strategy to a
new level
27
28. Personalized service increases business
Global direct sales industry in
2010:
US$ 132 billion
Brazil is the fourth largest market
for direct sales:
R$ 26 billion in 2010
Number of resellers in Brazil:
2.74 million
28
32. Fast
Create your own store selecting up to 60 products of
Magazine Luiza website and share with your friends in
Facebook and Orkut
Easy
Gain from 2.5 to 4.5% bonus for each product sold through
MagazineVocê
Free
No investment is required. Magazine Luiza is responsible
for the all the operation
32
33. Anyone can get a store
55,000
stores
12,100,000
friends
Conversion rate
40% higher
the website
blogs
33
35. What is it?
• Chip co-branded: partnership between Magazine Luiza and Claro
• First co-branded chip in Brazilian retail
• Magazine Luiza is not an operator
– Claro gives benefits of voice and data
– Magazine Luiza gives content and exclusive promotions
35
36. What are the benefits?
• Double recharge for calls from Claro to Claro
• Free access to social networks
• Free acces to email + Magazine Luiza and Claro websites
• Special promotions and news
36
37. Strategy
• New communication channel: enhanced multichannel strategy
• Prepaid: focus on low-income customers
• We hope:
– To be closer with our consumers
– Differentiation in the mobile category
37
38. My Chip Luiza
• Luiza Promotions: especial and segmented
promotions
• Recharge: benefit in a practical and fast way
• My Magazine: news, store locator, target
messages
• Luiza Internet: free access to social networks,
email and Magazine Luiza website
• Luiza Card: card request and quick access to call
center
38
40. Agenda
Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20
Break 10h20 – 10h30
Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00
Lunch 12h00 – 12h30
Store and Distribution Center Visits 12h30 – 16h30
40
41. Agenda
Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20
Break 10h20 – 10h30
Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00
Lunch 12h00 – 12h30
Store and Distribution Center Visits 12h30 – 16h30
41
42. • Roundtable with the Directors of Magazine Luiza:
• Fabrício Garcia, Commercial Executive Director
• André Monlevade, Supply Chain Director
• Decio Sonohara, IT Director (CIO)
• Marcelo Barp, Luizacred Director
• Moderator: Tatiana Santos, M&A, New Business and IR Manager
42
43. Topics of discussion
Management of Commercial Process
Commercial, Planning and Logistic
Customer Focus
Ensuring excellence in
service, availability of Supply Chain Management
product mix, delivery
assertiveness, competitive Category Management
prices and payment terms
consistent with client needs
Supply and Logistics
Pricing Management
Ensuring sustainable gross Inventory and Working Capital Management
Profitability
margins, excellence in
operations, efficient costs
structure that result in IT Infrastructure and System Integration IT
profitability and operational
cash flow
Luiza
Consumer Finance
Cred
43
44. Topics of discussion roundtable
Management of Commercial Process
Commercial, Planning and Logistic
Customer Focus
Ensuring excellence in
service, availability of Supply Chain Management
product mix, delivery
assertiveness, competitive Category Management
prices and payment terms
consistent with client needs
Supply and Logistics
Pricing Management
Ensuring sustainable gross Inventory and Working Capital Management
Profitability
margins, excellence in
operations, efficient costs
structure that result in IT Infrastructure and System Integration IT
profitability and operational
cash flow
Luiza
Consumer Finance
Cred
44
45. General view of the main initiatives in 2012
Continuous
Improvement of
Continuous improvement of processes
Commercial
Processes
Gain
of market share in all
categories
Supply Chain
Assortment
xx
Demand
Planning
Stores
supply
Lifecycle
Manage-
Price
Manage- Maintenance
Management ment ment
of profitability
Improvement
of “unhealthy” stock
Focus on authority categories (appliances, furniture and
Categories technology)
Management Strengthening of “light” categories
Intensity promotional activities
45
46. Significant gains of market share in all categories
Evolution of Market Share of ML by Product Category
+290bps
Personal Care
+260bps
House ware
+240bps
TV and Sound
+270bps
White Goods
+180bps
Technoloy
Gains of market share
+190bps while maintaining
Mobile profitability
3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 10,0%
Market Share (%)
Sep.11 ML Sep.12 ML Sep.12 ML + Maia
Data: GFK
46
47. Main Opportunities for 2013
Opportunity with increased penetration of products and upgrade
of consumption
Gain of market Mobitec Project - Technology
share,
maintaining
profitability and Furniture Project
improving
operational
efficiency Price Management
Capturing Synergies in the NE
47
48. Growth Opportunities for 2013
1 Increased penetration...
Penetration (% Brazil’s households)
Smartphone 10%
Flat screen TV 17%
Laptop/Notebook 22%
Refrigerador frost free1 45%
Digital Camera 49%
Washing machine 53%
1) Northeast: 21%
Data: TGI Ibope 2011; Nilsen – Estudo Especial de Duráveis 2012
48
49. Growth Opportunities for 2013
1 ... and upgrade of consumption at Magazine Luiza
Television Cell phone Computers
Financial Volume (%) Financial Volume (%) Financial Volume (%)
3% 5% 0%
10%
19%
37% 36% 20%
97% 95%
81%
64% 70%
63%
2010 2012 2010 2012 2010 2012
Tube TV Flatscreen TV Smartphone Cell phone Tablet Desktop Notebook
49
50. Growth Opportunities for 2013
2 Mobitec Project - Technology
Before... After...
Implemented in 72 stores, potential for sales growth of 15% - 20% of the
categories revenues
50
51. Growth Opportunities for 2013
3 Furniture Project
Objectives:
Increased revenues
Opportunity to increase cross selling
Market share gain
Improved profitability
Initiatives
Ambiance Design - Furniture
Investment in design - partnership with Marcelo Rosembaum
51
52. Growth Opportunities for 2013
3 Furniture Project
Before... After...
Tested in 11 stores, potential for increased profitability (greater participation of
furniture and cross selling) given the ambiance
52
53. Growth Opportunities for 2013
5 Price Management
Strategy of pricing by category/ region
Quick reaction to competition
6 Capturing gains in the NE
Integration of management systems (price, margin and inventory)
Implementation of the entire commercial strategy in the NE
Increased profitability (gross margin) – potential increase of 400bps
53
55. Overview – Supply Chain
Main Achievements 2012 Main Opportunities for 2013
• Reduced unhealthy stock • Improving unhealthy stock indicators
• Reduced shortage of products AA • Systematization of tools and processes,
gaining agility and productivity
• Better consistency in the operations
• Implementation of the Price Management
• Better availability of correct products per Project
stores
• Improving the operations of the Northeast
to the levels achieved in the Southeast
• Commercial support for objectives as a
whole
55
56. Topics of discussion roundtable
Management of Commercial Process
Commercial, Planning and Logistic
Customer Focus
Ensuring excellence in
service, availability of Supply Chain Management
product mix, delivery
assertiveness, competitive Category Management
prices and payment terms
consistent with client needs
Supply and Logistics
Pricing Management
Ensuring sustainable gross Inventory and Working Capital Management
Profitability
margins, excellence in
operations, efficient costs
structure that result in IT Infrastructure and System Integration IT
profitability and operational
cash flow
Luiza
Consumer Finance
Cred
56
57. IT: Integration and Multichannel Pillar
1 2 3
Short, Medium and
Network Integration Multichannel
Long Term Planning
Strategic Plan for Information Integration of two chains Developing tecnology platform
Technology (PETI) finalized in acquired (Maia and Baú), for deployment of
2011 with participation of one finalized between Aug-11 and multichannel:
Consulting Technology Firm: Oct-12 Sales multichannel
IT Governance (Process and Delivery multichannel
Organization)
Customer relations
Infrastructure(Migration of Processes and systems unified (integrated view of the
the Data Center to SP) in all stores and distribution various channels)
Systems (revision of the centers
architecture of applications, Zero impact to customers,
preparation of systems for suppliers and partners
growth)
Creating a pole with technically
skilled resources in the
Northeast
57
58. Conventional stores Virtual stores E-commerce Telesales Mobile
Sales
Relationship
Channels with the integrated
multi Delivery
Store and distribution center
view of the customers
channel closest to the customer’s home
• Customer Service • Delivery time reduced
• Social media • Delivery price reduced
• Promotions
58
59. Topics of discussion roundtable
Management of Commercial Process
Commercial, Planning and Logistic
Customer Focus
Ensuring excellence in
service, availability of Supply Chain Management
product mix, delivery
assertiveness, competitive Category Management
prices and payment terms
consistent with client needs
Supply and Logistics
Pricing Management
Ensuring sustainable gross Inventory and Working Capital Management
Profitability
margins, excellence in
operations, efficient costs
structure that result in IT Infrastructure and System Integration IT
profitability and operational
cash flow
Luiza
Consumer Finance
cred
59
63. Agenda
Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20
Break 10h20 – 10h30
Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00
Lunch 12h00 – 12h30
Store and Distribution Center Visits 12h30 – 16h30
63
64. Agenda
Overview of Magazine Luiza and 2013 Strategy 09h00 – 10h20
Break 10h20 – 10h30
Roundtable with the Directors of the Magazine Luiza 10h30 – 12h00
Lunch 12h00 – 12h30
Store and Distribution Center Visits 12h30 – 16h30
64
