CORPORATE PRESENTATION The information and financial projections of this presentation have been prepared by the management of the Company (“Company”). • The information and financial projections of this presentation are Pro forma to provide a forecast of the integration of the e-commerce business Cnova Brazil into the Company‟s business (“Reorganization”) as if the transaction for the combination of offline and online platforms businesses have already occurred. • The Company has prepared this presentation based on information available to it, including information that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. These projections should not be considered a comprehensive representation of the Company‟s present or future financials. • The financial information included in this presentation is preliminary, unaudited and subject to revision. All forward–looking statements attributable to the Company or persons acting on its behalf apply only as of the date of this document, and are expressly qualified in their entirety by the cautionary statements included elsewhere in this document. The financial projections are preliminary and subject to change; the Company undertakes no obligation to update or revise these forward–looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections may be inaccurate in any material respect. Therefore, the actual results achieved may vary significantly from the forecasts, and the variations may be material. THE
COMPANY Via Varejo has been a major player in the Brazilian electronic and TIMELINE furniture market over the past 60 years
Ponto Frio acquires Globex acquires 81 Foundation of Casas Buri, which stores from Disapel Foundation of Casas Bahia in had presence in Pont Frio inaugurates Ponto Frio in São Caetano São Paulo and the a Mega Store Rio de Janeiro do Sul Southern part of Brazil in São Paulo
1946 1957 1992 2000
1950 1970 1996 2003
Beginning of national Opening of the Casas Bahia First edition expansion opening the first Casas Bahia inaugurates the of Super Casas first Ponto Frio store in store in São Paulo word’s second largest Bahia opening Rio de Janeiro distribution center of a Ponto Frio Ponto Frio launches Mega Store in its website Rio de Janeiro
Source: Company Via Varejo consolidates Cnova Brazil from Cnova NV Pão de Açúcar acquires Ponto to create the largest Frio and merges with Casas The Company Brazilian retailer with Bahia, with a simultaneous is re-named ~R$30bn pro-forma expansion to Bahia State Via Varejo sales in 2016. + 2009 2012 2016
2010 2015
Nova Pontocom is created, Creation of Cnova, a merging Ponto Frio and global ecommerce Extra websites player with presence GPA assumes management in Latin America, of Via Varejo France and Asia. Via Varejo holds 21.9% SHAREHOLDER Klein Family Free float STRUCTURE (founders of CB) 62.6% ON 17.9% ON 19.5% ON 23.5% PN 37.0% PN 39.5% PN Main shareholders, 43.3% Units 27.4% Units 29.3% Units GPA and Klein Family, with solid retail expertise 100% 100%
Largest furniture One of the largest factory/producer ecommerce players in Latin America in Brazil Board of Directors
Board Member Vice Chairman Board Member Chairman Independent Board Member Board Member Independent Board Member Hervé Daudin Arnaud Strasser Roberto Fulcherberguer Ronaldo Iabrudi Renato Carvalho Christophe Hidalgo Líbano Barroso Alberto Guth Michael Klein
HR Committe Finance Committe Expansion Committe
CORPORATE GOVERNANCE
Executive Team
CEO Peter Estermann
CFO COO Furniture Online CCO Logistics HR Felipe Negrão Paulo Naliato Vitor Faga Flavio Dias Henrique Vendramini Marcelo Lopes Izabel Branco
7 Via Varejo Foundation is responsible for investments in actions that encourage and promote Brazilian culture, social and human development, and quality of life More than R$5.3m were invested and more than 210 thousand benefited from the program. http://www.viavarejo.com.br/ REVERSE LOGISTICS FOR fundacao-via-varejo PACKAGING MATERIAL
Reviva Program recycles cardboard boxes, styrofoam, plastic and other packaging SUSTAINABILITY discarded by customers at the time of merchandise’s delivery & SOCIAL PROGRAMS Via Varejo is committed with Reviva also promotes the separation of recyclable solid environmental sustainability and FOUNDATION waste throughout the stores supports initiatives in education, and company’s offices health, and community giving http://www.viavarejo.com.br/reviva Macro remains BRAZIL MACRO challenging
SELIC (benchmark rate) X Inflation Unemployment Rate (%)
14,2% 13,8% 11,9% 11,7% 12,0% 10,7% 9,9% 9,3% 9,0% 7,3% 8,0% 6,4% 6,3% 4,4% 4,5% 5,8% 5,9% 4,0% 2012 2013 2014 2015 2016 2017E 2018E 0,0%
SELIC YE IPCA
Dec-14 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-15 Dec-16 Consumer Confidence Index Family Consumption Growth (YoY) 140 12,0% 130
120 8,0% Dec, 2014 110 Optmist 4,0% Dec, 2014 100
90 Pessimist 0,0% 81 80 (3,4%) (4,0%) 70
60 (8,0%)
fev-07 fev-08 fev-09 fev-10 fev-11 fev-12 fev-13 fev-14 fev-15 fev-16 fev-17
Sep-07 Sep-15 Sep-06 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-16 Source: IBGE, FGV, Focus Report (03/03/2017) 63,1% Dishwashers 2,5% 2,3% 1,9% 0,4%
USA Brazil Chile Argentina Mexico B R A Z I L I S Automatic 81,4% 80,7% 54,6% 50,9% 45,5% UNDERPENETRATED IN washing machines MOST OF HOUSEHOLD Chile USA Mexico Brazil Argentina
APPLIANCES 84,9% 61,9% 55,5% 30,0% 29,1% Microwaves
USA Chile Brazil Mexico Argentina
102,1% 79,1% Fridge 52,6% 49,0% 45,8%
freezers USA Chile Mexico Brazil Argentina
154,6% Coffee 29,7% 25,7% 15,2% 13,1% machines USA Argentina Brazil Chile Mexico
47,1% 21,0% Mini 7,6% 2,8% 0,7% ovens USA Chile Mexico Argentina Brazil
Source: Euromonitor (Household Penetration, 2015) Ecommerce 26% Sales VIA VAREJO AT (Pro-forma 2016)
Bricks & Mortar GLANCE 74%
Key Figures R$30bn Pro-Forma Gross Merchandise Value in 2016 975 stores throughout Brazil* Long Tail ~ 1,100 thousand sqm sales area* 4% Furniture 14% 26 DCs and warehouses* GMV Mix White goods (Pro-forma 2016) ~ 986 thousand sqm storage area* and portable ~ 46,000 employees* Apliances 27% *As of 4Q16 Source: Via Varejo Technology 55% Mobile phones yearly sales equivalent to the population of Portugal VIA VAREJO AT GLANCE We sell more than 4 thousand TVs per day
Key Facts Largest smartphone retailer in Brazil Largest TV retailer 10th largest “insurer” in Brazil (if we were one)¹ Largest extended warranty retailer Largest storage area for a retailer 26 distribution centers with storage area Largest proprietary logistic operator for a retailer equivalent to 138 soccer fields
We currently make one delivery per second
Source: Via Varejo ¹Susep and Mackinsey ,includes banks and insurers High-level execution at the store (movve project) and online (lower MAIN COMPETITIVE cost and better service level) Professional and Qualified Senior ADVANTAGES Management
Best positioned for omni - channel
Powerful business model Business combination maximizes combining leadership and scale operating leverage
Most valuable brands in the brazilian retail market covering full spectrum of income levels
Broadest distribution network and storage capacity
SALES 23 [ (2016, R$ bn) [
4,5 [ 2.5x [ 18,9
9,5 8,6
VVAR Pro-forma MGLU BTOW POWERFUL BUSINESS MODEL COMBINING LEADERSHIP AND SCALE
Notes: 1) Company estimates; 2) Includes We have been awarded by LG In 2014, we were the TOP 3 only specialized retailers (does not consider as the largest electronics buyer largest electronics buyer for Samsung in supermarkets and pure-online players) Source: Via Varejo, GFK in the world in 2014 and 2013. the world. In 2015, we were the TOP 3 largest In 2015 we were the TOP 5 and currently electronics buyer in the world we are their world largest TV buyer
VIA VAREJO REACHES ALL INCOME CLASSES
INCOM E CLASS (2016E)
52 MM
99 MM
56 MM
Source: Via Varejo, IBGE (2016) e ABEP – Associação Brasileira de Estatística e Pesquisa (2016) Best Brazilian Retail Brands in the Bricks and Mortar Segment (US$ MM, value brand increase)1
567
TOP OF 147
-30% MIND -11% -18% BRANDS [ +10% ] 420 357 320 -22% IN THE 263 BRAZILIAN 147 MARKET 2nd Player 3rd Player 4th Player 5th Player
Note: 1) Company business market Source: Interbrand, 2014
Casas Bahia is the 6th best retail brand in Latin America VIA VAREJO HAS THE 14 distribution centers and 12 strategic warehouses BROADEST DISTRIBUTION
NETWORK… # of Via Varejo DCs 1 1 1 # of strategic warehouses 1 1 1 1 Coverage area 1 1 1 1
More than Total fleet with over Total storage area of One of the largest in Latin 1 1 23,000 2,600 986 thousand America, with an area of 255 1 daily deliveries vehicles square meters 2 1 1 thousand square meters Source: Via Varejo 3 2 1 1 Jundiaí 1 Distribution Center …with a best in class service…
By advancing inventory to regional DCs, we improved delivery time for customers and reduced freight costs
2,5x
34,0%
27,1% 28,0% MALHA DE PE 23,8%
15,3% 13,8% MG
RJ
jan/16 fev/16 mar/16 abr/16 mai/16 jun/16 SP
S. J. Pinhais Fonte: Via Varejo …with high-level execution
DELIVERY TIME CUT BY HALF
-50%
-50% Up to 5 days
80% Up to 2.5 days Sales
PRIOR ACTUAL STATE CAPITALS
Source: Via Varejo VIA VAREJO IS BEST POSITIONATED FOR OMNI -CHANNEL…
% of the online sales
Sales synergies are generated in cities between online with Via Varejo stores vs. offline
No synergy Between 0,1% and 30% Between 30% and 50% Between 50% and 60% Between 60 and 80% More 80%
Cnova Delivery figures from Jan – Oct 2015 ….WITH THE BROADEST BUSINESS
Player
Brick & Mortar Stores (975)¹ (855)¹ (679)² (239)³ (90)³
E-commerce
Omni Channel
(1) 31/03/2016; (2) 31/03/2016, without virtual stores; (3) co’s website E-COMMERCE IMPROVES ASSET STORES LEVERAGE + WEBSITE Access to a broader range of customers (numerically and geographically) Optmize store base (Click & Collect) Boost logistics Leverage marketing expenses...... as well as, G&A BUSINESS COMBINATION A more powerful business combining offline and online platforms
Share’s swap Equity Value R$1.6bn Net Debt R$1.1bn 21.9% 100% EV R$2.7bn
France R$16mm cash Global Ecommerce Brazil Brazil BUSINESS COMBINATION
Online business taken to another level Brazil Brazil Multi-Channel Commercial Strategy Pure Player Commercial Strategy 26 Distribution Centers 4 Distribution Centers 1,300 pick-up points 100% Outsourced Logistics Proprietary Logistic Model Inactive Marketing Initiatives Multi-channel advertising Gross Merchandise Value Combined Gross Merchandise of R$8bn in 2015 Value of R$30bn in 2016 BUSINESS COMBINATION
R$570mn R$425mn Identified Captured Synergies Implemented Synergies Action Plans “One-off” Inventory reduction of R$325mn captured in the 4Q16 R$ 325mn Started back in Nov,2016 Out of the R$245mn, Operational Efficiency of considering the actual run rate R$ 245mn/year in cost reduction that the Company is running today, we believe that we are Logistics above this value. In the 4Q16, Multichannel Financial Results we captured 20% of the Human Resources ammount. BRICKS & MORTAR North Northeast Midwest 5 stores 91 stores 88 stores GDP R$292bn GDP R$723bn GDP R$485bn FOOTPRINT (5%) (14%) (9%) Sales Mix AND SALES MIX (2016) South Southeast 93 stores 698 stores GDP R$878bn GDP R$2.9Tn Largest store base in (17%) (55%) the country, with one fifth of the total Technology market 18% 29% Furniture
White goods 53% and portable appliances
Stores by Brand 752 223
975
Source: Via Varejo, IBGE, Gfk (Market Share) as of 9M16 Main Websites ECOMMERCE GMV Mix 5% Technology (2016) 14%
Furniture 21% White goods and portable appliances Discount Websites 60% Long tail
GMV Breakdown (2016) 21%
Cnova
E-commerce platform Marketplace
79% FINANCIAL BUSINESS Credit products widens Payment Book Co-branded Card customer’s base 14% of our sales 16% of our sales 30% of our gross revenues comes from 13% penetration among clients* 15% penetration among clients* means of payment 1.7 million active customers ~3 million¹ active customers exclusive from Via Varejo – Payment Book and the 5 million customers pre-approved 11 months average term Special co-branded credit cards 12 months average term sales conditions Proprietary scorecard PAYMENT BOOK Via Varejo holds the 24th credit direct to consumer portfolio in Brazil
Direct to Consumer Credit Portfolio -2015 [R$ Bi] Ranking BR 12,6 10º 9,2 11º 7,8 12º 7,6 13º 6,7 14º 6,2 15º 6,2 16º 6,0 17º 5,0 18º 4,8 19º 2,6 24º
source: Austin; Via Varejo; McKinsey PAYMENT BOOK What we did to maximize the payment book results?
What actions should we take to maximize payment book results? Centralization of credit approval process using the FICO® platform, enabling Via Varejo to:
• Actively offer consumer credit • Adopt better criteria for approving credit • Expedite the credit approval process • Improve collections efficiency PAYMENT BOOK The share of payment book increased at both brands despite the lower approval rate....
Share of payment books in sales Consolidated consumer credit approval rate (% of sales of merchandise) (% of applications)
64,0% +40.3% -4,1% 18,8%
13,4%
61,4%
2015 2016 Dec/15 Dec/16 PAYMENT BOOK ...resulting in a higher-quality portfolio.
Portfolio risk mix o The new, more-selective credit approval model (% of total portfolio at start of month) led to:
o Approval of more customers with lower risk
o Denial of higher-risk customers 75% 78%
22% 22% 3%
Dec/15 Dec/16
C B A
source: Via Varejo CO-BRANDED Value proposition for both customer and Via Varejo
Customer Via Varejo o Access to exclusive promotions o Lower MDR rate o Access to better conditions for payment in installments o Special fees (card anniversary, additional card, etc.)
Monthly sales of cards increased ...despite the lower approval rate. significantly...
New Accounts (‘000) Bradesco Card approval rate +21.1% -34.9%
35,8% 193 290 23,3%
649 405
2015 2016 Dec/15 Dec/16
Bradesco FIC
Source: Via Varejo SERVICES’ PORTFOLIO (Largest in the retail market)
Gift Card Theft Insurance Life Insurance Home Insurance
FINANCIAL Home Insurance Credit Insurance Refill your Pre-paid SERVICES For money Prizes Good value proposition for our customers and the company Multi Assist Technical Services Extended Warranty 7% of our gross revenues VARIETY OF PARTNERS Via Varejo would be one of Brazil's top 10 insurers
Insurer Ranking 1 Gross Insurance Premium – 2015 (R$bn) FINANCIAL 3,8 2º 2,6 5º
SERVICES 2,5 6º
2,4 7º
2,0 9º
1,6 10º
1,3 11º
0,4 19º
Source: SUSEP (01-2015/12-2015); 1) Includes banks and insurers Value Proposition for both costumers and Via Varejo
Customer Via Varejo o Access to differentiated products o Sales commission o Accessible prices o Zero risk o Offer can be made during after-sale FINANCIAL Insurance premium increasing in relation to SERVICES revenue from sales of goods +45.6%
9,5% 8,8%
6,5%
Dec-14 Dec-15 Dec-16 Source: Via Varejo We recently announced additional synergies from the business combination of R$435 million
Competitiveness boosted by expansion of co-branded card to e-commerce
Advance on commissions of R$60 million upon signing the agreement Extension of existing conditions at Via Varejo to Cnova Brasil, such as: o significant reduction in MDR rates o payment in 14 installments without interest and 24 installments with interest FINANCIAL after the new agreement
SERVICES Extension of multi-assistance services portfolio to e- commerce
o Advance on commissions of R$105 million, R$60 million of which was paid already in 4Q16 o Inclusion of e-commerce platform
Insurance agreement with Zurich
o Anticipated comission in the amount of R$270 million o insurance against robbery, theft and accidental breaking of cell phones, for both channels and banners; o loan insurance, personal injury and o residential insurance for both channels of the Pontofrio banner. IMPROVING OPERATIONAL EFFICIENCY Project Drivers
o Improve in-store customer experience o Boost sales conversion rate o Leverage sales team productivity o Improve service efficiency and penetration of consumer
credit Project Goals
Improve operating efficiency at stores and sales team productivity to ensure:
Increased sales of Higher sales services and Greater with Increased more customer sustainable employee payment satisfaction market share engagement means with gains higher store profitability
Productivity gain should be equivalent to 50 new stores Improve Sales and Profitability
Consumer Credit Revenue from Goods Services Penetration Penetration
PROJETO MOVVE Onda 1 – 20 Lojas: Share de Vendas Onda 1 – 20 Lojas : Eficiência Serviços PROJETO MOVVE Onda 1 – 20 Lojas: Participação CDC PROJETO MOVVE 15,8% Participação Venda Lojas MOVVE na Grande SP (R$ MM) Penetração de Serviços Lojas MOVVE vs. Via Varejo Venda CDC Lojas MOVVE vs. Via Varejo MOVVE 11,5% MOVVE Grande SP (Sem MOVVE) 15,3% 15,6% 15,3% 15,5% Grande SP (Sem MOVVE) 20,6% Ganho de 0,4 pp 11,1% na maturação 19,6% Média 2º Trimestre: 15,4% 19,5% 19,4% 10,9% 19,9% 10,9% 19,5% 19,6%
Abril Maio Junho Julho Agosto 17,7% 17,7% 10,4% Venda Pedido Grande SP (R$ MM) 16,9% 16,7% 16,9% MOVVE Outras Lojas 16,4% + + 16,8% 10,2% 10,2% 9,9% 378 393 10,1% 353 358 337 15,9% 58 60 15,0% 55 56 53 9,8% 14,3% 321 332 298 302 9,6% 284 9,4% 9,4% 13,3% 13,3% 9,2% 13,0% Abril Maio Junho Julho Agosto Abril Maio Junho Julho Agosto Setembro Outubro Janeiro Fevereiro Março Abril Maio Junho Julho Agosto Setembro Outubro
Movve aims to maximize Gross Profit at Via Varejo stores Store Operation Model
Implementation of WebSales: greater agility and quality in sales process (customer leaves store in 15min/3min)
Review and simplification of processes: o Increased autonomy at stores (less dependence on Regional Office) for negotiations/discounts o Simplification of screens in sales process (> complex. 36/20, < complex. 12/6 – 10min) o A screen with a ranking of top promotions by category and price path Store Operation Model
Regional Princing From 5 regions to micro-regions: should bring opportunities to gain market share and improve margins
MG/Northeast RJ/ES São Paulo State/Middle West/MG/Northeast SP City/North South IMPROVING OPERATIONAL EFFICIENCY
Store Manager New Toolkits Productivity 1 Routine Review 3 For Sales Force 5 Gains Rationalizing the store Software for performance Admin support: releasing manager’s routine measurement managers from admin tasks Job Functions merger (i.e. Sales planning routine Improving sales front- cashier and “crediário”) (“Check-in”) and office software structured follow-up Increasing the training meetings volume about new products and technologies Increasing Sales New sales 2 Force Readiness 4 incentive model Customer approach Best balance between Sales force leader sales and results Multi-category Meritocracy focus sales force Store results focus, decreasing sales force dispersion Increasing gross margin focus and customer satisfaction FURNITURE MARKET AN IMPORTANT GROWTH VENUE
o High sales volume a. Furniture Industry posted sales of ~R$35.7 million in o Vertically-oriented production 2015¹ o Nationwide footprint b. Furniture at Via Varejo o Broad mix accounted for ~R$3.2billion in o After-sales services 2016
Source: Via Varejo; ¹Movergs FURNITURE Largest seller in category and with clear competitive advantages
o High sales volume o Vertically-oriented production o Nationwide footprint o Broad mix Highlights o After-sales services (2015) o 21% of sales at Via Varejo o Bartira accounted for 35% of furniture sales o 100+ active suppliers o 2,200 SKUs o Delivery to 2,900 cities o 11.3 MM pieces of furniture sold o 4.9 MM pieces assembled FURNITURE Bedroom and kitchen are the sales leaders in furniture
Share of furniture by category (% of sales 2015)
BEDROOM & KITCHEN BEDROOM 36% 58% OF FURNITURE
KITCHEN 22% REVENUE are Bartira's main MATTRESSES 17% categories LIVING ROOM 16%
OCCASIONALS 6%
DINING ROOM 2%
OTHER 1% FURNITURE Vertically-oriented furniture business: Bartira is an industry reference
BRAZIL’S BIGGEST FURNITURE MANUFACTURER
o 110,000 m² of built-up area
o 1,500 employees
o Transformation of 28 MM m² of wood board (800 Assembly/After-sales ton/day) o 400,000 pieces
o 14,000 SKUs produced every day assembled/month o 200 assembly offices FURNITURE Accompanying the evolution in consumers is key to capturing opportunities
Consumers are evolving and migrating to new references and new kinds of shopping
PROFILE NEW DEMAND
o Consumers with higher choice o Design, quality and innovation power o "C" income class with new o High-quality services and references and greater access to shopping experience information o Assessing demand from specific o Decor gains importance in niches decision-making process FURNITURE 5 fronts with furniture opportunities for Via Varejo
Standardized Furniture Sales Model
Product, Pricing & Assortment
Integrated Management
After-sales Opportunities
New Markets FURNITURE Implementation of new "Standard Model" for furniture sales, fully linked to MOVVE
Standard Furniture Sales Model o More specialized sales team o Better in-store displays What to sell o Higher sales efficiency
Differentiated Performance commissioning monitoring o Better shopping experience for customers
Furniture Training displays FURNITURE Review of mix and regionalized pricing are important short-term opportunities
Product, Pricing & Assortment AFTER o Regionalized pricing o Review of mix and assortment based on new consumer references o Making available products to meet the demands of different regions
BEFORE FURNITURE Integrated management with optimization of all aspects is key to maximizing value for Via Varejo
Integrated Management
o Integrated management of the results of Bartira and Via Varejo o Integrated inventory management and capture of efficiency gains in production
BARTIRA DC STORES CUSTOMER FURNITURE After-sales opportunities combined with broad footprint and expansion of distribution and assembly model
Reviewing the after-sales model
o Maximizing sales of products and services via cross-selling in after-sales 1 1 1 1 1 o Optimizing delivery and assembly lead 1 1 1 1 time strengthens the competitive 1 1 advantage 1 1 1 2 1 1 3 2 1 1 1
o 26 Distribution Centers o 200 Assembly Offices FURNITURE Opportunities in New Markets
New Markets
o Knowledge of clients throughout their shopping cycle at Via Varejo
o Maximizing opportunities in custom furniture
o Developing "Easy Assembly" furniture models Braziliam E-commerce Market (R$ Bn)
+11.3% +12.4% 49 45 40 36 32
2015 2016 2017 2018 2019 E-commerce relevance in the Brazilian Retail Market % of Total Retail 4,3% 4,2% E-COMMERCE 4,0% 3,9% IN BRAZIL 3,6%
Source: Euromonitor 2015 2016 2017 2018 2019 E-COMMERCE STRATEGY COMBINED ASSETS ASSET LEVERAGE
LARGE STORE Offer a unique multichannel experience BROUGHT BY THE 1 CHAIN among websites and store chain COMBINATION WITH VV LARGE DC Faster delivery with lower costs and more 2 NETWORK delivery options than our competitors thanks to the combined network of 27 DCs in 22 states
INCOMPARABLE Offer special promotions and exclusive 3 BARGAINING POWER products thanks to the combined volume and negotiation levers
TOP-OF-MIND BRANDS Leverage the values of the brands, benefiting WITH STRONG from our existing communication strength in 4 INFLUENCE the offline channel
SPECIAL PAYMENT 5 OPTIONS & FINANCIAL Offer special payment and credit methods to SERVICES facilitate customers' purchases The customer's journey is the main factor driving business E-COMMERCE decisions & initiatives to maximize conversion and NPS SCALE-UP: MAIN PURCHASE SUCCESS FACTOR IN E-COMMERCE Accompany Add to cart purchase
Add to cart CUSTOMER Conversion MULTICHANNEL Contact Delivery rate JOURNEY rate NPS Find product / promotion
Attract high- Leverage CRM quality traffic
VISIT
Customers satisfied with the unique and high-value multichannel experience return to websites and stores at no cost E-COMMERCE HOW DO YOU MAXIMIZE MARKETPLACE VALUE? Best option for customers, with lowest service cost GROWING IMPORTANCE OF THE MARKETPLACE TRADITIONAL B2C RETAIL CUSTOMERS
RETAILERS MARKETPLACE bilateral platform 1 2 3 MAXIMIZE NUMBER OF MAXIMIZE TRANSACTIONS BETWEEN PARTIES MAXIMIZE CUSTOMER VISITS COMPETITIVE & RELIABLE TO PRODUCT PAGES OFFERS + Effective browser & search + Efficient placement of orders + tool + Product offering: variety of + + Visits, product views selection, competitive prices Technological integration Communication tools + + + Competitive delivery times & Support for sellers Easy & secure transactions delivery options + + Solutions for sending & + delivering High quality service Supervision of sellers' conduct E-COMMERCE MOBILE AS THE MAIN CHANNEL FOR INTERACTING WITH CUSTOMERS 1 Share of mobile visits CULTURAL CHALLENGING OF THINKING "MOBILE FIRST” 60% 56% 55% 2 50% 44% SPEED & SIMPLICITY 45% 43%
40% 35% 35% 3 30% ENCOURAGE APP USE 25% 20% J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 4 ENABLE IN-STORE FUNCTIONS E-COMMERCE Conclusion o Despite the challenging economic scenario, e-commerce in Brazil will continue to post double-digit growth over the coming years o The current e-commerce model is unsustainable and the biggest pressures on P&L come from margin compression, customer acquisition cost and logistics costs o Via Varejo has exclusive assets that position it to mitigate these pressures and support strong and sustainable growth o These existing assets and competencies will be complemented by highly advanced new capabilities available in the Digital world o A new company was born with the challenge of creating a new culture that combines the best in online and offline experiences at the service of the customer RESULTS Bricks & Mortar Stores Online Business Creation of Premium’ Stores Unit Marketplace’s Strategic Evolution
36 stores under Casas Bahia e 4,000 sellers, 2 million SKUs selected in viavarejo accordance with their service level and Pontofrio banner. ~30% growth in aligned with our approach. March TRANSFORMATION Click&Collect expansion
Logistics 60% exapansion, representing 30% of sales of eligible products (55% in important Optimization of logistics categories) expenses Best delivery times in e-commerce
31% below average logistics costs More efficient than the market by 1 day. in the sector*
* Survey of logistics Costs in Brazil 2015 – Dom Cabral Foundation Significant growth in Company's profitability, combined with an increase of R$ 1 334 million in Net Income
Growth in consolidated gross margin by 431bps to 31.2% and consolidated adjusted EBITDA margin of 2 5.5%, up 490bps from 1Q16. EBITDA from Online business marginally positive in 1Q17
Reinforcing Marketplace strategy in Online 3 Business with focus on quality improvement Click&Collect available at all our stores, enabling HIGHLIGHTS clients to pick up products the next day (in main state capitals), already representing 30% of eligible products. OF 1Q17 4 In March, the Click&Collect orders were above 4 RESULTS orders per minute. Growth in GMV from Online Business of 2.0% in 1Q17 (compared to -10.5% in 1Q16), outperforming 5 market growth
Maintenance of strong financial position with net 6 cash of R$2.9 billion in 1Q17. Pro-forma = The consolidation of the online business for the full year, meanwhile the accounting numbers considers consolidation starting on November, 1st “Brick & Mortar” SSS Recovery
2,5%
(11,8%) 1Q16 1Q17
1Q17 Online Sale Recovey SALES 2,0% Offline and Online with impressive sales recovery compared to 1Q16. (10,5%)
1Q16 1Q17
Note: 1) Source: Retail Monthly Research (PMC/IBGE) Adjusted pro-forma Gross Profit (R$ mn, % net revenue)
Lei do Bem represents 1,868 Adjusted pro-forma EBITDA 170 bps of gross margin (R$ mn, % net revenue) growth 31% 329 1,569 +430bps
27% 5.5% 1Q16 1Q17
+4,2 p.p. 0.6% Adjusted pro-forma SG&A (R$ mn, % net revenue) 35
1T161Q16 1T171Q17 (26,2%) Lei do bem represents (1.519) 120 bps of EBITDA +0,5 p.p. Margin growt 1Q17 (26,6%) Lei do bem represents OPERATING (1.568) 126 bps of SG&A PERFORMANCE 1Q16 1Q17 improvement
*Adjusted EBITDA Margin of the Brick & Mortars = Adjusted EBITDA Margin excluding Equity Income 66 Cash and Equivalents¹ (R$ MM) SOLID (R$mm) -461 Net Cash Position
2,610 Net Cash 3,056 (R$ MM)
1,429 • (+) Strong recovery in operating cash flow during 1Q17; 522 +618 • (+) Working capital dynamics in the quarter, with cash 1Q16 1Q17 generation of R$957 million;
² Gross Debt - 2,610 • (-) Payment of loan from Cnova N.V. in the amount of (R$ MM) 3,056 R$583 million.
(166) (334) 1Q16 1Q17 (688)
(1.763) 1Q17 +1,075 1Q16 1Q17
Note: 1) Includes credit card receivables not discounted Credit Card „s receivables not discounted* 2) Does not include consumer financing debt (CDCI). 1Q17 PRO-FORMA NET INCOME (R$mm)
97
+334 (237)
1Q16 1Q17 CORPORATE PRESENTATION