L O J A S A M E R I C A N A S S. A. M A N A G E M E N T R E P O R T

Transcription

1 L O J A S A M E R I C A N A S S. A. M A N A G E M E N T R E P O R T In compliance with legal requirements and current Brazilian corporate legislation, Lojas Americanas S.A. is hereby presenting its Management Report containing the Parent Company and Consolidated financial and operating results for the fiscal year ending December 31 of We are also presenting in this report information regarding our B2W Companhia Global do Varejo subsidiary, which offers products and services via the Internet, television, telephone, catalogs and kiosks, and FAI Financeira Americanas Itaú, which offers financial products. Lojas Americanas owns 56.6% and 50% of the capital stock of B2W and FAI, respectively. Shares issued by Lojas Americanas and B2W are listed on the São Paulo Stock, Merchandise and Futures Exchange (BM&FBOVESPA) under ticker symbols LAME4 (preferred) LAME3 (common), and BTOW3, respectively. It should be noted that B2W only has common shares and is on the Novo Mercado (New Market), the listing of the companies with the highest corporate governance practices in Brazil. 1/ 33

2 1. COMPANY OVERVIEW Multichannel Retailer structure Lojas Americanas operates through a multichannel service structure. Besides a chain of brickand-mortar stores, the Company reaches its clients with a wide assortment of products and services, sold via the Internet, television, telephone sales, catalogs and kiosks. Lojas Americanas S.A. Lojas Americanas was founded in 1929, in Niterói (RJ), and is present in all regions of the country (23 states plus the Federal District), with 541 stores 329 in the Traditional format and 212 and the Express format equivalent to 564,000 square meters of selling space. The traditional stores have an average sales area of 1,500 square meters of space, daily replacement of inventories consisting of approximately 60,000 items. The Express model follows the smaller store concept, with an average selling area of 400 square meters, just-intime logistics and a selected assortment of about 15,000 items, adjusted to the characteristics of each one of the locations in the profile of the clients of each store. The company guarantees its clients prices that are competitive compared to the competition and offers quality products, found in its Home, Leisure, Beauty, Infant, Confectionery and Convenience Foods worlds. Lojas Americanas also operates three distribution centers, located in São Paulo/SP, Rio de Janeiro/RJ and Recife/PE. 2/ 33

3 Lojas Americanas Distribution Map (12/31/2010) North 15 Midwest South 54 Northeast 80 Southeast 348 DC RJ DC SP DC PE B2W Companhia Global do Varejo B2W is Brazil s leading e-commerce company and currently sells goods and services through multiple channels, including the Internet, telephone sales, television, catalogues and kiosks. B2W owns Americanas.com, Submarino, Shoptime and Blockbuster Online, a brand whose operating license B2W purchased in 2007 for online operations in Brazil. The company also has three subsidiaries: B2W Viagens, Ingresso.com and Submarino Finance. Americanas.com In 2010, Americanas.com ( completed its 11th year in operation. The site offers 37 product categories through Internet, telephone sales and more than 500 Internet-connected kiosks located at Americanas stores that offer more than 500,000 different items, including computer and technology products, appliances, electronics, cell phones, toys, 3/ 33

4 furniture, household appliances, DVDs, books and more. The new Americanas.com site was launched in the second half of 2010 and included a faster and more flexible platform with new functions and a more powerful search engine. The new site offers sharper images, faster services and new functions, such as super zoom, which allows Internet browsers to see images with a resolution up to six times greater, and a more details button, which the client can use to find more information on a product without opening a new browser pane. In the begginnig of 2011 was launched the Caixa Expresso tool, this way, the fastest online purchasing system is now available on Brazil s largest e-commerce site. Caixa Expresso allows the client to provide his or her delivery address and credit card information just once; and after identification, buyers can complete their purchases in a single step, which ensures a faster and easier online buying experience. Americanas.com also provides travel services through Americanas Viagens (viagens.americanas.com.br) and digital services like photo developing, wedding registries, adding pre-paid cell phone credit and others. Submarino Submarino ( which in 2010 celebrated 11 years in operation, is reknowned for its leadership in technological innovation, having implemented, for example, a customer relationship management (CRM) tool that customizes pages according to clients individual profiles. Submarino offers 29 product categories through its different sales channels: Internet, telephone sales and catalogues. It places heavy emphasis on sales of books, CDs, DVDs, electronics, computer and technology products, telephone products, games and online services. In 2010, Submarino sponsored the Book Biennial, that occurred in August in São Paulo. Submarino, also operates a travel agency through Submarino Viagens ( and further offers business-to-business (B2B) services. Every year, Submarino s clients receive four special editions of product and special-offer catalogues whose printed editions number in the hundreds of thousands. The site includes a highly attractive loyalty program that operates in partnership with Submarino Finance. As part of its continuous pursuit of innovation, Submarino implemented a series of new tools throughout 2010, including Drag and Buy and Augmented Reality, with the purpose of improve consumers purchasing experience. Drag and Buy tool facilitates the inclusion of various products in buyers shopping carts without the need to browse away from the page, while Augmented Reality is a pioneering service that allows clients to virtually try out art and decoration on the walls of their own homes. In addition, Submarino has developed iphone and 4/ 33

5 Android applications to access the site. This way, Submarino s thousands of products and offers are now available wherever our clients find themselves. Shoptime Shoptime ( Brazil s first home shopping (television sales) channel that currently sells products online, through phone and catalogues, celebrated its 15th birthday in The Shoptime channel reaches more than 20 million Brazilian households, comprised of more than 5 million homes with pay-tv subscriptions (Sky 19, Net 31 and Neo TV channels) and more than 18 million homes connected to satellite television (Vertical 5B). Shoptime s interactive transmission includes more than 11 hours of live programming seven days a week. In 2007, the television channel began broadcasting 24 hours a day, ensuring speed and improved interaction for clients shopping experiences. The catalogue is distributed seven times a year throughout Brazil with a printing run of 400,000 copies each. Shoptime currently offers 23 product categories to more than 3.5 million clients. Shoptime s assortment focus is on articles marketed under the Shoptime brand, with an emphasis on portable appliances (Fun Kitchen), bed, bath and dining products (Casa & Conforto), house wares (La Cuisine) and sports and leisure products (Life Zone). The computer and technology department also plays an important role in the brand s product mix. Furthermore, Shoptime operates a travel agency through Shoptime Viagens (viagens.shoptime.com.br). B2W Viagens B2W Viagens operates under the following brands: Americanas Viagens, Submarino Viagens and Shoptime Viagens. It offers tour packages, plane tickets, online hotel reservations, cruises, travel insurance and car rentals in Brazil and abroad. The company markets its services through the Internet, telephone sales, television and kiosks and had been working to expand product assortment. B2W Viagens s goal is to build a platform that allows each brand s clients to quickly and easily plan and purchase their travel packages, driving the company to a leadership position in Brazil s online travel market on account of the company s innovation, excellent customer service, outstanding content and competitive prices. As such, 2010 saw the launch of Submarino Viagens new site, which included new hotel, flight and risk-analysis tools and thus made purchasing online faster and safer for our clients. As part of its strategy for continuous innovation, in 2010 B2W Viagens launched Milevo ( a social travel network. The new site allows users to add comments concerning their travel experiences, which enables B2W Viagens to gain access to a qualified traveling public with guaranteed travel knowledge and experience also included a new 5/ 33

6 partnership with Bradesco bank in which B2W Viagens launched the first online platform for redeeming loyalty program points, allowing clients to apply their points to any airline or hotel. Ingresso.com Ingresso.com provides technology and services to purchase tickets online for movies, theater productions, concerts, soccer games and cultural events. With more than 2.5 million registered clients, Ingresso.com is the biggest online ticket seller in Brazil. The company also allows clients to make seat assignments online, which enables the client to comfortably choose his or her preferred movie or theater seat. In addition, the company has invested heavily in ticket sales for concerts, and in 2010 was the exclusive seller for Paul McCartney s three concerts in Brazil, corresponding to more than 140,000 ticket sales. In addition to the main site ( which includes an exclusive version for mobile devices and an iphone application, Ingresso.com is also available on the Americanas.com, Submarino and Shoptime websites. Another area in which Ingresso.com operates involves marketing its ticketing software in Brazil. The company is currently responsible for computerizing various movie theaters, playhouses, sports stadiums and concert venues. Ingresso.com continued to expand throughout Latin America in 2010 and currently operates in Mexico, Argentina and Chile through movie ticket sales in partnership with Cinemark. This initiative has allowed B2W to explore and study new markets where expansion will require at low entry costs. Submarino Finance As part of its joint venture with Cetelem, Submarino Finance offers the Submarino credit card, which provides financing in up to 24 installments for purchases on Submarino s site as well as an exclusive rewards and special-offers program, such as product discounts and points for the Submarino s loyalty program (Léguas Submarinas). The Submarino credit card represents an opportunity for B2W to leverage sales, especially high-cost items, to reduce the costs associated with credit-card administrative fees, to increase discounts for accounts receivable, and to improve business revenue resulting from consumer financing. In 2010, the company issued more than 590,000 cards, and cards were used in 30% of the sales on the Submarino site. Blockbuster Online B2W acquired the right to use the Blockbuster trademark online in Brazil and, in 2008, and started offering online DVD and Blu-ray disk rentals on Blockbuster Online is a rental store that allows online clients to choose the movies they want to watch, to 6/ 33

7 create their wish list, and to receive and return movie rentals from the comfort of their homes. It offers monthly plans that allow clients to always have movies at home without worrying about return dates and late-return fines. Blockbuster Online currently includes the largest online selection of movies in Brazil, with more than 20,000 titles, and it provides services to more than 145 cities throughout the states of São Paulo, Rio de Janeiro, Minas Gerais, Paraná, Santa Catarina and Rio Grande do Sul, with Sunday and same-day delivery services available in the cities of São Paulo and Rio de Janeiro. It also has the largest Blu-ray disk collection available for rent in Latin America, with more than 2,000 titles. FAI Financeira Americanas Itaú Financeira Americanas Itaú (FAI) is dedicated to financing purchases through own brand credit cards (private label) and Visa and Mastercard (co-branded) cards, offering personal credit and other financial products and services. It operates through points of sale in Lojas Americanas, the Internet (Americanas.com and Shoptime) and the TV Shoptime television channel. FAI offers two types of cards: private label and co-branded. The private label cards offer different payment methods and can be used to finance purchases immediately after they have been issued. The co-branded cards are partnerships between FAI and the Mastercard and Visa card companies, and can be issued in domestic and international versions. 7/ 33

8 2. MESSAGE FROM MANAGEMENT TO O U R C U S T O M E R S, S H A R E H O L D E R S, A S S O C I A T E S A N D S U P P L I E R S : In 2010, we opened 70 new stores and grew in our principal operational indicators. In this context, following the international standards of financial reporting (IFRS), our Annual Consolidated Net Revenues, which includes Bricks-and-Mortar Stores, the subsidiaries B2W Companhia Global do Varejo and FAI Financeira Americanas Itaú rose 14.8%, totaling R$ billion. EBITDA was R$ billion, which represents a growth of 24.0% and an EBITDA margin of 14.4%, an increase of 1.0 p.p. in relation to the previous year. The consolidated net income for the period was R$ million, an increase of 75.8%. In bricks-and-mortar stores, Net Revenues rose 15.9%, reaching R$ billion. In the same stores concept, Net Revenues increased 11% when compared to B2W the company that offers products and services via the Internet, television, telephone, catalogs and kiosks, reached consolidated net sales of R$ billion, a growth of 12.1%, and an EBITDA margin of 13.4%. B2W s net income for the period was R$ 33.6 million. For 2011, just as in previous years, we will continue to pursue our learning path and to overcome obstacles to pursue our learning path and to overcome obstacles, and this makes us enthusiastic since it will enable us to achieve new levels of results, always seeking to better meet our customer s needs. Finally, we would like to thank our Associates for the dedication and efforts, as well as our suppliers, customers and shareholders for their trust and support. THE MANAGEMENT We Always Want More 8/ 33

9 3. ECONOMIC LANDSCAPE According to the Brazilian Geography and Statistics Institute (IBGE), 2010 inflation as measured by the Extended Consumer Price Index (IPCA) came to 5.91%, up from 4.31% in The General Market Price Index (IGP-M), as measured by the Getúlio Vargas Foundation (FGV) registered an annual inflation rate of 11.32%, compared to 1.71% deflation the preceding year. In 2010, there was a 4.3% devaluation of the US dollar against the Brazil real. The Central Bank s Overnight Lending Rate (SELIC) was 10.75% per year at the close of 2010, up from 8.75% reported at the close of Retail commerce sales volume in 2010 grew 10.9% (IBGE). Lojas Americanas firmly believes in the country s economic development and in the growth opportunities of the retail sector. The company will continue to focus on expanding its businesses as well as its product and service assortment, driven primarily by growth expectations from an increase in the number of e-commerce adherents and greater overall retail penetration in Brazil. 9/ 33

10 Sales Area (thousand m²) Number of Stores 4. STRATEGY AND INVESTMENTS In 2010, Lojas Americanas consolidated gross revenue totaled R$ billion, the equivalent to the growth of 14.8% over the previous year. Of this total, R$ billion referred to the performance of the Parent Company (brick-and-mortar stores), which sold 15.9% more than in In the same stores concept, that is, excluding stores inaugurated less than one year ago, accumulated net sales in 2010 rose by 11%. In the past nine years, Lojas Americanas expanded its store network by a factor of five through its natural expansion program and the acquisition of BWU, the company that owned the BLOCKBUSTER trademark in the country. In 2010, in line with its SEMPRE MAIS BRASIL program, the Company set a new record, opening 70 stores 49 in the Traditional and 21 in the Express model. Besides the stores inaugurated until the close of 2010, we opened 8 stores in 2011, until the current date, and we have another 52 scheduled openings and 30 stores in the contract negotiating phase for their inauguration, leading us to be optimistic about reaching 90 new store openings in At the end of the year, Lojas Americanas had 541 stores, divided in the following formats: Format Number of Stores % Traditional % Express % TOTAL % Evolution of Sales Area x Number of stores Position at December Stores 193 Stores Stores Stores Stores Stores Stores / 33

11 The following table shows the profile of the stores opened during 2010: Region Format Number of stores Sales Area Average thousand m² thousand m² As of 12/31/ Southeast Traditional Express Northeast Traditional Express South Traditional Express Norte Express Tradicional Midwest Traditional Express Total Traditional Express Deactivation/Remodel (5) (1.2) 0.2 As of 12/31/ In 2010, from the Parent Company s viewpoint, Lojas Americanas invested a total of R$ million, with emphasis on: expansion and refurbishment of the store network and technological upgrade. Included in this total are investments in goods for rental in the amount of R$ 21.2 million. The following table shows the details of Lojas Americanas Parent Company investments in 2010: R$ million % Openings / Refurbishment % Technology / Logistics / Operation % Goods for rental % TOTAL % Expansion Plan for the Next Four Years SEMPRE MAIS BRASIL For the 2010 and 2013 period, we plan to open 400 new stores in Brazil. Currently, all the Company s stores are located in only 176 of the more than 5,500 cities in the country, which demonstrates the opportunity Lojas Americanas has for opening new stores in cities that are at a greater distance from Brazil s large urban centers. As illustrated in the following chart, based on economic feasibility studies and analysis conducted internally using the EVA (Economic Value Added) tool, together with socioeconomic data (population, income, access to basic services, access to consumer goods, among others), we believe that at this moment there is the possibility that our brick-and-mortar retail stores could be present in approximately 180 additional cities. 11/ 33

12 Current cities with Lojas Americanas Cities with potential for opening a new store Nationwide distribution At the end of 2009 our stores were located in 23 states of the country plus the Federal District, with distribution as follows: 66% in the Southeast region, 19% in the South/Midwest and 15% in the North/Northeast. Coupled with our confidence in the development of the country, the expansion plan for these new cities could especially benefit the North/Northeast/Midwest regions, as demonstrated in the projection of our openings that follows. Store Distribution by Region Dec/2009 % Openings % Dec/2013* % Southeast % % % Northeast 61 13% 90 22% % North 9 2% 40 10% 49 6% Midwest 38 8% 40 10% 78 9% South 52 11% 30 8% 82 9% TOTAL % % % *Estimate of the number of stores by region by the end of As has occurred historically, the growth should be in the proportion of 70% Traditional stores (average sales area between 1,300 m 2 and 1,500 m 2 ) and 30% Express stores (average sales area between 300 m 2 and 500 m 2 ). The following table shows the number of stores inaugurated in 2010 and the estimate of stores in the period from 2011 to 2013: Year Number of Stores to to to 130 Moreover, to support the distribution of merchandise for the stores, we are planning the inauguration of two new Distribution Centers in the Midwest and South regions. It is important to mention that the Company s current cash position and the future cash generation, together with the elongation of the debt profile, leave us in a comfortable position to 12/ 33

13 make the expected investments, which should be approximately R$ 1.0 billion. Investment (2010 to 2013) - R$MM Openings/Refurbishment 720 Technology/Logistics/Operation 280 Total 1,000 In 2006, a loan for approximately R$ 220 million was approved by the BNDES, earmarked for expansion, refurbishment and standardization of the store network along with technological modernization during the last three years. As we have done in the past, we are presenting a project to the BNDES for the expansion program between 2010 and 2013, which we are calling SEMPRE MAIS BRASIL. Finally, we would like to underscore that We will continue to pursue our learning path and to overcome obstacles, and this makes us enthusiastic since it will enable us to achieve new levels of results, always seeking to better meet our customer s needs. FAI Financeira Americanas Itaú Financeira Americanas Itaú s (FAI) strategy has emphasized expanding the offer of credit and financial services to Lojas Americanas clients and to facilitate the form of payment inside the brick-and-mortar stores, in Americanas.com and Shoptime, representing another client relationship and loyalty instrument. During the second half of 2008, a new strategy was implemented for the supply of private-label and co-branded products as one of the main means of payment inside Lojas Americanas and our Internet operations, as well as reducing the offer a personal loans. At the end of the fourth quarter of 2010, FAI had issued about 2.6 million cards, of which 1.1 million were private label, 1.5 million were co-branded guards, which permits use of inside and outside of Lojas Americanas and 16,000 were for personal loans. In 2010, FAI cards share of the Parent Company s sales (private label and co-branded) totaled 13% of the Parent Company s sales. The receivables portfolio in December 2010 totaled R$ billion, growing 35% over December The mix of the current portfolio is made up of 3% personal loans and 97% cards, with the portfolio s loss ratio remains stable at 5%, when compared to the 4Q09 and 4Q10 periods. During this same period, we observed growth in the operation, resulting from a 31% increase in Gross Financial Mediation Income added together with Service Revenues. 13/ 33

14 P ortfolio of R ec eivables F AI (R $ million) 35% , Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Private Label + Co-Branded Pers onal Loans Glossary: Receivables portfolio: Amounts to receive from billing. Billing: Purchases conducted using Americanas cards, either cash or installments, and liberation of personal loans. Gross financial and services revenues: Revenues from the receivables portfolio stemming from the allocation of interest, and services and insurance tariffs, net of financial mediation expenses and the provision for doubtful accounts. People Following our motto of We Always Want More and in order to achieve our growth targets as confirmed through the SEMPRE MAIS BRASIL program, Lojas Americanas intensified training, qualification and integration programs focusing on the hiring and developing of talented young people who are being trained to take on important responsibilities in a short amount of time. Our emphasis is on fostering the growth of the associates within the Company through a policy of internal promotion and a meritocracy system. At the end of 2010, the Parent Company had 14,244 associates. Training and Development In its fourth year of operations, the Americanas Development Center (CDA) consolidated the training schedule that had been established the previous year. In 2010, we further increased the number of man/hours of training offered, hitting the mark of 45,000 associates/training hours. In 2010, we reached the mark of 13 CDAs, located in large Brazilian cities, expanding our capacity for the in-company training and development of our associates. Our emphasis on the training of our associates and their internal development includes the establishment of increasingly challenging targets and culminates in our slogan: We always want more. Recruiting Talent B2W s policy is to develop talent from within by hiring associates for our internship and trainee programs and for jobs at our business facilities. Thus, we enfasize the recruitment of young university students from the country s top universities and we provide specific training that 14/ 33

15 accounts for challenges particular to the retail sector and immerses the associate in the company s organizational culture. Internship Program The objective of the Internship Program is to recruit university students with an entrepreneurial spirit. Thus, we look for young people whose profile fits with a resultsoriented team. During their participation in the program, interns are introduced to daily work routines in various departments at headquarters, distribution centers and other business facilities. Monthly training models are also offered during this period, and interns are given the opportunity to better understand the company s vision, mission and values, its primary features and its respective departments, as well as the technical tools necessary to work in a specific field. The countrywide program has brought many young professionals into the Company. Trainee Program The objective of the 18-month Trainee Program is to hire recent university graduates for company management positions. During the program, trainees are given specific training and are introduced to all company departments by the respective executive directors. Following such, once the new hires are settled into their new department, they are given the opportunity to pursue challenging projects right from the beginning of their careers. 15/ 33

16 5. RESULTS OVERVIEW General considerations The comparison of the information presented refers to Lojas Americanas results during the fiscal years ending December 31, 2010 and 2009, except where otherwise indicated. The accounting information that serves as the basis for the comments below are presented according to the accounting practices adopted in Brazil, based upon Publicly-Held Corporation Law, the rules and regulations of the Securities Exchange Commission (CVM), the listing regulations of the BM&FBOVESPA s Novo Mercado and the accounting standards and rules established by the Institute of Independent Auditors of Brazil ( Brazilian GAAP ). Parent Company Consolidated Var. (%) Financial Highlights (R$ MM) Var. (%) 6, , % Gross Revenues 10, , % 5, , % Net Revenues 9, , % 1, , % Gross Profit 2, , % 30.4% 30.2% +0.2 p.p. Gross Margin (%NR) 31.2% 31.5% -0.3 p.p % EBITDA 1, , % 15.2% 14.0% +1.2 p.p. EBITDA Margin (%NR) 14.4% 13.4% +1.0 p.p % Net Income % 5.4% 3.3% +2.1 p.p. Net Margin (%NR) 3.3% 2.2% +1.1 p.p. Net Revenues In 4Q10, consolidated net revenues of Lojas Americanas and its subsidiaries reached R$ billion, compared to R$ billion registered in 4Q09, equivalent to a growth of 13.1%. The Parent Company s net revenues in 4Q10 totaled R$ billion, compared to R$ billion in 4Q09, equivalent to a growth of 18.5%. In 2010, net consolidated revenues of Lojas Americanas and its subsidiaries totaled R$ billion, 14.8% higher than the previous year. The Parent Company s net revenues in 2010 reached R$ billion and grew 15.9% in relation to Under the same number of stores concept, that is, excluding the new stores with less than a year of operation, the increase of net revenue in 4Q10 was 11% in relation to 4Q09. The growth of net revenues in same stores in 2010 likewise was 11%. Consolidated Net Revenue (R$ million) Parent Company Net Revenue (R$ million) 2,278 CAGR = 26.6% 8,175 6,975 5,731 3,784 2,767 9,389 1,923 CAGR = 18.6% 2,132 2,630 3,210 3,933 4,610 5, / 33

17 Gross Profit Consolidated gross profit in 4Q10 reached R$ million. Consolidated gross margin in 4Q10 was 33.6% of net revenues (NR), compared to the 32.9% margin in 4Q09, representing a 0.7 p.p. improvement. In the Parent Company, the gross margin in 4Q10 was 33.7% of the NR, compared to the 33.2% gross margin of NR in 4Q09. Consolidated gross profit for the year reached R$ 2,929.8 million, 13.7% above the previous year. The consolidated gross margin in 2010 was 31.2% of net revenues (NR), compared to the margin of 31.5% in In the Parent Company, gross profit reached R$ 1,625.0 million for the year, 16.8% over the previously year. The Parent Company s gross margin in 2010 was 30.4% of NR, compared to a 30.2% margin the previous year. In 2010, as well as throughout 2009, new categories were introduced in the tax substitution regime that affect the gross margin because under the tax substitution regime the ICMS tax incurs on the Cost of Goods Sold (COGS) and no longer on the sales tax line. Consolidated Gross Profit 2, , ,233.82, , Gross Prof it (R$ million) Gross Margin (% NR) Parent Company Gross Profit 1, , , Gross Prof it (R$ million) Gross Margin (% NR) Operating Expenses In 4Q10, consolidated selling, general and administrative expenses totaled R$ million, or 13.7% of the net revenues (NR), against R$ million, or 14.6% of NR in 4Q09. In the Parent Company, the operating expenses (selling, general and administrative expenses) in 4Q10 totaled R$ million, or 12.5% of NR, a reduction of 0.6 p.p. (%NR) in relation to 4Q09. In 2010, consolidated sales, general and administrative expenses reached R$ 1,574.4 million, or 16.8% of net revenues, a drop of 1.3 p.p. in relation to the previous year. This analysis must take into account the opening of 70 stores during the year, the growth of the net sales of our e-commerce, which grew 12% over the year 2010, and Financeira Americanas 17/ 33

18 Itaú, whose receivables portfolio increased by 35%, reaching a level of R$ 1,079 million (50% consolidated in Lojas Americanas). The Parent Company s sales, general and administrative expenses in 2010 were R$ million, or 15.2% of net revenues, a reduction of 1.0 p.p. in relation to the previous year. Consolidated Selling, General and Administrative Expenses (%NR) Parent Company Selling, General and Administrative Expenses (%NR) EBITDA In 4Q10, the consolidated EBITDA totaled R$ million, representing a 23.0% growth in relation to the same period in The consolidated EBITDA margin was 19.9% of net revenues in 4Q10 compared to 18.3% of NR in 4Q09, an improvement of 1.6 p.p. In 4Q10, the Parent Company s EBITDA reached R$ million, an increase of 25.2% when compared to the same period of The EBITDA margin of the Parent Company in 4Q10 was 21.2%, 1.1 p.p. above that of 4Q09. In 2010, consolidated EBITDA totaled R$ 1,355.4 million, representing 24.0% growth in relation to The consolidated EBITDA margin for the year was 14.4% of net revenues, compared to 13.4% of NR in In 2010, the Parent Company s EBITDA reached R$ millions, the equivalent of a 25.9% growth compared to The Parent Company s EBITDA margin for the period was 15.2% of NR, 1.2 p.p. above that of The following table shows EBITDA per company: EBITDA 2010 %NR 2009 %NR R$ % 1, % 1, % % LOJAS AMERICANAS % % % B2W % % % FAI, BWU and OTHERS (2.6) - (38.5) % It is important to observe that the EBITDA has grown constantly at a pace that is higher than the increase registered in net revenues. During the period comprising 2004 to 2010, the compound annual growth rate (CAGR) in the consolidated EBITDA was 30.5% compared to a rate of 26.6% in consolidated net revenues. For the Parent Company, for the same period, the CAGR 18/ 33

19 was 24.0% in the EBITDA and 18.6% in Net Revenues % 12.0 % 12.0 % Consolidated EBITDA CAGR = 30.5% % 1, % 13.4 % 1, % EBITDA (R$ million) EBITDA (% NR) Parent Company EBITDA CAGR = 24.0% % 13.8 % 14.0 % 12.3 % 11.6 % 11.5% 11.6 % EBITDA (R$ million) EBITDA (% NR) Financial Result In 4Q10, the consolidated net financial expenses totaled R$ million. In 4Q09, this same indicator was R$ million. In the Parent Company, the net financial expenses in 4Q10 was R$ 79.5 million against R$ 73.7 million in 4Q09. For the year 2010, the consolidated net financial expense was R$ million, against R$ million in From the Parent Company viewpoint, the net financial expenses in 2010 totaled R$ million, or 5.2% of net revenues (NR). In 2009, this same indicator was R$ million, or 6.2% of the NR. It is important to emphasize that, for a better evaluation of the Parent Company s net financial result, we must consolidate the revenues and financial expenses of the non-operating subsidiaries (Klanil, Louise, BWU and others). Thus, in the following table we present a view of the financial result with the aforementioned effects: Breakdown of the Net Financial Result - R$MM % (+) Net Financial Result without PV adjustments (222.9) (244.2) -8.7% (=) Net Financial Result without PV Adjustments (222.9) (244.2) -8.7% (+) Reversion of PV Adjust. on Sales and Taxes % (+) Reversion of PV Adjust. on suppliers (98.7) (89.6) 10.2% (=) Reversions of PV Adjustments (54.3) (43.7) 24.3% Parent Company Net Financial Result (before non-operating subsidiaries and FAI) (277.2) (287.9) -3.7% (+) Net Financial Result of Non-Operating Subsidiaries and FAI % Parent Company Net Financial Result (after non-operating subsidiaries and FAI) (245.5) (253.5) -3.2% (+) B2W Net Financial Result - Consolidated (360.9) (279.5) 29.1% Consolidated Net Financial Result (606.4) (533.0) 13.8% The Parent Company s net financial expenses in 2010, taking into account the aforementioned effects and before B2W, totaled R$ million, representing a 3.2% reduction over the 19/ 33

20 R$ million in expenses registered in The Company continues to reaffirm its commitment to a conservative cash investment policy, manifested by the use of hedge instruments in foreign currencies, to offset eventual exchanges fluctuations, whether relative to financial liabilities or total cash position. These instruments offset the foreign exchange risk, transforming the cost of the debt to local currency and interest rates (as a percentage of CDI*). Similarly, it is worth mentioning that the Company s cash is invested with Brazil s largest financial institutions. * CDI - Interbank Deposit Certificate: average rate of funding through the interbank market. Fundo de Investimento em Direitos Creditórios (FIDC) By the end of February 2011, the structuring of the Fênix Fundo de Investimento em Direitos Creditórios do Varejo ( Fênix FIDC do Varejo ), a credit rights investment fund, was concluded. The purpose of this fund is to acquire the receivables held by Lojas Americanas and by B2W they are electronic transactions that are received and processed by acquiring systems and are originated from credit cards used in buying and selling products and services carried out between the Companies and their customers. The Fênix FIDC do Varejo is a new financial instrument of the Company that has a more attractive cost and a longer financing term for receivables discount operations. Resultado Líquido e Resultado por Ação The consolidated 4Q10 net income was R$ million, compared to R$ million for the same period in The Parent Company net income in 4Q10 was R$ million, compared to R$ million in 4Q09. In 2010, consolidated net income was R$ million, compared to R$ million in 2009, an increase of 75.8%. The Parent Company s net income in 2010 was R$ million, compared to R$ million in 2009, an increase of 90.2%. It is important to emphasize that in 2010 the consolidated net income per outstanding share (excluding shares in treasury) was R$ , 74.7% greater than the amount of R$ presented in the previous year. Net income per outstanding share (excluding shares in treasury) of the Parent Company was R$ , 88.9% greater than the R$ from the previous year. The following table shows the main variations from EBITDA to net profit in the Parent Company: 20/ 33

21 Reconciliation of the Net Income - R$ MM % % EBITDA % 1, , % (+) Depreciation / Amortization (103.2) (120.9) -14.6% (130.4) (138.5) -5.8% (+) Parent Company Net Financial Result (277.2) (287.9) -3.7% (606.4) (533.0) 13.8% (+) Equity Accounting (B2W) % (+) Equity Accounting (FAI) (12.3) (26.5) -53.6% (+) Equity Acc. (other subsidiaries) / Other Operat. Income* (4.6) (22.4) -79.5% (124.2) (115.9) 7.2% (+) Minority / Statutory Participation (17.2) (7.4) 132.4% (31.9) (34.4) -7.3% (+) Income tax and social contribution (122.7) (57.1) 114.9% (152.9) (95.0) 60.9% (=) Net Income % % Earnings per share R$ R$ % R$ R$ % Outstanding shares (thousand) 730, , , ,934 * In the old accounting rules, considered as "non-operating income". Parent Company Consolidated It is worth noting that the Present Value Adjustments (PV adjustments) in 2010 in the Parent Company had a net positive effect of R$ 1.4 million, compared to a negative R$ 0.8 million effect in In the consolidated, this effective was negative in R$ 9.8 million, against a negative adjustment of R$ 1.5 million in This was due to the effect of PV adjustments reversions in the financial result reached throughout 2009 in the consolidated. Thus, it is observed in the table below that, excluding the PV adjustments in the result, the Net Income of the Parent Company in 2010 was R$ million, showing an increase of 88.3% in relation to the R$ million of the same period of 2009, on the same basis. As an analogy, we also see that the consolidated net income excluding the PV adjustments effect in the 2010 result was R$ million, showing an increase of 79.8% in relation to the R$ million of 2009, on the same basis. Parent Company Consolidated Present Value Effects % % Accounted Net Income % % (A) Operational Present Value Adjustments % % (B) Financial Present Value Adjustments (54.3) (43.7) 24.3% (37.5) (20.8) 80.3% Net Present Value Adjustments (A + B) 2.1 (1.2) % (14.9) (2.3) 547.8% Fiscal Effects (0.7) % % Present Value Adjustments in Net Income 1.4 (0.8) % (9.8) (1.5) 553.3% Net Income excluding Present Value Adjust % % Net Margin (%NR) 5.3% 3.3% +2 p.p. 3.4% 2.2% +1.2 p.p. Endividamento Lojas Americanas uses its cash flow to prioritize investments that generate the best returns for shareholders. Thus, we have listed below the main actions carried out in 2010: Investments made by Lojas Americanas and B2W in property and intangible assets (website and systems development) of R$ million; Payment of interest on own equity and gross dividends in the amount of R$ 38.4 million. Lojas Americanas consolidated short- and long-term loans and debentures on December 31, 2010 totaled R$ 4,143.3 million. If we deduct the cash position of R$ 3,829.8 million (cash + money market investments + accounts receivable from credit and debit cards + 50% of FAI s consumer financing) from total loans, we arrive at a net debt position of R$ million. 21/ 33

22 R$ million Consolidated Indebtedness 12/31/ /31/2009 Short Term Debt 1, Shot Term Debentures Shot Term Indebtedness 1, Long Term Debt 2, ,225.3 Long Term Debentures Long Term Indebtedness 2, ,954.8 Total Debt (1) 4, ,854.0 Cash and banks Money market investments 1, ,072.5 Accounts Receivables 1, Customers financing - FAI Total Cash (2) 3, ,087.3 Net Cash (Debt) (2) - (1) (313.5) (766.7) Net Debt / EBITDA LTM Average Maturity of Debt As can be seen in the previous table, the Company s net consolidated debt declined by 59% or R$ million when compared to At the end of 2010, Company s net debt was 0.2x the EBITDA of the last 12 months, significantly better when compared to the end of The average maturity of the debt went from 800 days to 892 days (from 26 to 29 months). In order to face the uncertainties and the volatility of the financial market, Lojas Americanas is guided by the principle of preserving cash and extending its debt profile. During 2009 and 2010, a number of measures were taken with this objective in mind, which permits us to consolidate the Company s long-term growth plan. Accounts receivable are composed of receivables from credit cards, net discounted value, with immediate liquidity and that can be considered as cash. The breakdown of accounts receivable from the consolidated viewpoint of Lojas Americanas is shown in the following table: Accounts Receivable Conciliation 12/31/ /31/2009 Gross Credit-Cards Receivable 2, ,992.5 Electronic debits and checks Receivable Discounts (1,214.6) (1,534.6) Accounts Receivable from Credit / Debit Cards 1, Present value adjustment (32.5) (12.9) Customers financing - FAI Alowance for doubtful accounts (147.5) (107.9) Other accounts receivable Net Accounts Receivable 1, ,023.0 Due to the adoption of the new CPCs / IFRS, in particular the CPC 38 and its corresponding IAS 39, the Company now accounts back (derecognition) the receivables from the credit card administrators at the moment of its effective discount (as disclosed in the financial statements notes). However, for better disclosure of the volume of discounted receivables on the analyzed 22/ 33

23 periods, the Company demonstrates in the above table, the accounts receivables adjusted by the discounts made through the periods analyzed. No exposure to foreign exchange variations At the close of 4Q10, Lojas Americanas S.A. s balance sheet recorded foreign currency denominated debt. Such debt, however, is FULLY PROTECTED against any foreign exchange fluctuations through derivative (swap) operations that replace the exchange risk for the variation in the basic Brazilian interest rate (CDI). Sales by means of payment Sales by means of payment in 2010 and 2009 can be seen in the following table: Parent Company Means of Payment Var Var. Cash 56% 54% +2 pp 42% 39% +3 pp Credit Cards 31% 32% -1 pp 46% 50% -4 pp Private Label Cards* 13% 14% -1 pp 12% 11% +1 pp *Considers the Financeira Americanas Itaú and Submarino Finance private label cards. Consolidated Parent Company net working capital The Parent Company s net working capital was negative 16 days in 4Q10, representing an improvement of 15 days compared to the negative 1 day shown in 4Q days BETTER -1 4Q Q10 (Net Working Capital = Days of Stock + Days of Accounts Receivable Days of Suppliers) The change in Lojas Americanas net working capital in 4Q10 demonstrates the constant striving to improve our operating processes and the development of our partnership with our suppliers. 23/ 33

24 Consolidated Financial Statement Lojas Americanas S.A. Income Statements Consolidated Periods ended in December, 31 Consolidated Periods ended in December, 31 (in million of Brazilian reais, except earnings per share) 4Q10 4Q09 Delta Delta Gross Sales and Services Revenues 3, , % 11, , % PV adjustment on sales (61.2) (51.2) (214.3) (203.7) Taxes, returns and discounts on sales and services (460.2) (433.6) 6.7% (1,454.4) (1,583.0) -8.2% PV adjustments on taxes Net Sales and Services Revenues 2, , % 9, , % Cost of goods and services sold (2,019.1) (1,796.4) 12.0% (6,644.5) (5,766.2) 15.4% PV adjustments on inventories Gross Profit % 2, , % Gross Margin (% of NR) 33.6% 32.9% +0.7 p.p. 31.2% 31.5% -0.3 p.p. Operating Revenues (expenses) (439.9) (416.8) 5.5% (1,704.8) (1,621.8) 5.1% Selling expenses (368.7) (352.6) 4.6% (1,434.8) (1,353.3) 6.0% General and administrative expenses (31.7) (26.9) 22.3% (135.0) (127.3) 7.4% Expenses with stock options plan (SOP) (1.8) (0.5) (4.6) (2.7) Depreciation and amortization (37.7) (36.8) 2.4% (130.4) (138.5) -5.8% Operating Income before financial expenses and equity accounting % 1, % Net Financial Result (199.8) (135.1) 66.2% (568.9) (512.2) 13.8% Reversion of PV adjustments on sales and taxes Reversion of PV adjustments. on suppliers (67.1) (45.1) (177.8) (166.4) Other operating income (expenses)* (90.3) (83.4) 8.3% (124.2) (115.9) 7.2% Profit sharing for employees / minority interest (11.0) (18.1) -39.2% (31.9) (34.4) -7.3% Income Tax and Social Contribution (70.4) (68.3) 5.3% (154.0) (87.6) 60.9% Fiscal effects by Law 11, (7.4) Net Income % % Net Margin (% of NR) 5.4% 5.4% - 3.3% 2.2% +1.1 p.p. EBITDA % 1, , % EBITDA Margin (% of NR) 19.9% 18.3% +1.6 p.p. 14.4% 13.4% +1,0 p.p. Total outstanding shares (thousand) 730, , , ,934 Net Income per Outstanding Share R$ R$ % R$ R$ % * In the old accounting rules, considered as "non-operating income". 24/ 33

25 Parent Company Financial Statement Lojas Americanas S.A. Income Statements Parent Company Periods ended in December, 31 Parent Company Periods ended in December, 31 (in million of Brazilian reais, except earnings per share) 4Q10 4Q09 Delta Delta Gross Sales and Services Revenues 2, , % 6, , % PV adjustment on sales (23.3) (17.6) (63.8) (59.8) Taxes, returns and discounts on sales and services (327.0) (307.1) 6.4% (983.6) (980.9) 0.4% PV adjustments on taxes Net Sales and Services Revenues 1, , % 5, , % Cost of goods and services sold (1,243.9) (1,052.1) 17.5% (3,829.6) (3,309.5) 15.6% PV adjustments on inventories Gross Profit % 1, , % Gross Margin (% of NR) 33.7% 33.2% +0.5 p.p. 30.4% 30.2% +0.2 p.p. Operating Revenues (expenses) (258.9) (236.4) 9.5% (917.2) (868.0) 5.7% Selling expenses (213.8) (189.1) 13.1% (754.8) (693.5) 8.8% General and administrative expenses (12.9) (11.6) 16.9% (57.2) (52.6) 10.4% Expenses with stock options plan (SOP) (0.9) (0.2) (2.0) (1.0) Depreciation and amortization (31.3) (35.5) -11.8% (103.2) (120.9) -14.6% Operating Income before financial expenses and equity accounting % % Net Financial Result (60.5) (61.6) 7.9% (222.9) (244.2) -3.7% Reversion of PV adjustments on sales and taxes Reversion of PV adjustments. on suppliers (35.7) (24.8) (98.7) (89.6) Equity accounting (3.1) % % Other operating income (expenses)* (32.8) (26.5) 23.8% (33.8) (32.2) 5.0% Profit sharing for employees / minority interest (17.2) (7.4) 132.4% (17.2) (7.4) 132.4% Income Tax and Social Contribution (69.2) (46.2) 50.0% (120.3) (54.8) 114.9% Fiscal effects by Law 11, (2.4) (2.3) Net Income % % Net Margin (% of NR) 8.4% 8.8% -0.4 p.p. 5.4% 3.3% +2.1 p.p. EBITDA % % EBITDA Margin (% of NR) 21.2% 20.1% +1.1 p.p. 15.2% 14.0% +1.2 p.p. Total outstanding shares (thousand) 730, , , ,934 Net Income per Outstanding Share R$ R$ % R$ R$ % * In the old accounting rules, considered as "non-operating income". 25/ 33

26 Initial Adoption of International Accounting (IFRS) As of December 31, 2009, the Company s financial statements (parent company and consolidated) were presented in accordance with accounting practices adopted in Brazil, complementary to regulations of the CVM, through technical pronouncements the Accounting Pronouncements Committee (CPC) of December 31, 2008, and provisions contained in the Brazilian Corporate Law (BR GAAP). The Company prepared its opening balance sheet with a transition date of January 1, 2009, applying the mandatory exceptions and certain optional exemptions from full retrospective application as set out in Pronouncements, Interpretations and Guidelines issued by the CPC and approved by CVM for financial statements (parent company and consolidated), and in accordance with international accounting standards (IFRS) issued by the International Accounting Standards Board (IASB) for consolidated financial statements. The CPC 37R (IFRS 1) requires an entity to develop accounting policies based on standards and interpretations of the CPC and the IASB on the date of closure of its first financial statements of the parent company and consolidated, and that those policies are applied at the time of transition and during all periods presented in statements in conformity with the CPC (application of all standards) and the IFRS, and we adopted the transition date of January 1, The Company has adopted all the pronouncements, guidelines and interpretations issued by the CPC as of December 31, 2010 and, consequently, the consolidated financial statements are in accordance with international accounting standards issued by the IASB and approved by the CPC. The main differences between the accounting practices at the time of transition, with those adopted in the presentation of comparative financial information are described below: a) Discounted receivables: Receivables discounted at credit card operators, previously registered as reductions in the outstanding accounts receivable until their original due date, were treated as not recognized, in accordance with CPC 38. As a result, the adjustment to present value, formerly calculated over the total amount receivable from the credit card administrators, was recalculated without regard to that part of the unrecognized assets, resulting in the acceleration of their realization, which was registered as Financial Revenue. Similarly, interest incurred upon the advancement of receivables with credit card administrators, formerly registered as prepaid expenses and included in the annual results together with the original due date of the discounted receivables, was completely recognized as a Financial Expense. b) Bonuses: According to CPC 16, commercial discounts, reductions, bonuses and/or other amounts received from suppliers are to be deducted in the determination of the cost of inventory and will only be recognized in the results at the time of sale of the product with which they are connected. The Company reversed from its results the amounts received from suppliers, where 26/ 33