j.p. morgan 6th annual – brazil retail & healthcare check up

August, 2012

J.P. Morgan 6th Annual – Brazil Retail & Healthcare Check Up

2

Agenda

Overview – Magazine Luiza

Highlights of 2Q12

Financial Performance of 2Q12

Operational Performance of 2Q12

Expectations for the Next Quarters

3

Market Leadership

One of Brazil’s largest durable goods retail chains with 731 stores nation-wide

− Gross revenues of R$7.6 billion and EBITDA ajusted of R$346 million in 2011

− More than 20 thousand employees serving 30 million customers

Strong corporate culture and focus on people and innovation

Unique multi-channel model under a single brand

Physical stores, virtual stores and e-commerce

Focus on Brazil’s fastest growing socioeconomic segment

The “C” (emerging middle class) represents 53% of Brazil’s population or more than 102 million people

History of successful organic growth and acquisitions

8 acquisitions in the last 10 years and recent entry in the high growth northeast market

July 2011, conclusion of the acquisition of 121 stores of Baú da Felicidade

Pioneer in Financial Services for retail

First retail chain to establish JVs with financial institutions focusing on consumer credit

Financial discipline focused on results


4

Proven history of strong organic growth and successful aquisition even throughout adverse economic scenarios

0,5 0,6 0,7 0,9 1,4 1,9 2,2 2,63,2

3,8

5,3

7,1

96 111 127 174253

351 346391

444 455

604

728

-300

-100

100

300

500

700

900

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Upstate SP:+5 stores

Rede Wanel

Lojas Líder

Campinas:+20 stores

Rio Grande Sul+51 stores

Madol, Killar

Santa Catarina:+100 stores

São Paulo (Capital):+46 stores

Nordeste:+136 stores

Gross Revenue – Retail Operation (R$ Billion) Number of Stores

Baú:+ 104 stores

5

Broad geographic footprint including in the Northeast of Brazil

Distribution Center (8)States with Stores

% of stores per region (2011)

Cabedelo

Simões Filho

ContagemRibeirão Preto

LoureiraIbiporã

NavegantesCaxias

Geographic footprint

31%

24%30%

South

2%

Mid-West

20%

Northeast

48%Southeast

731 stores

Gross Revenue evolution – Northeast

R$ MM

651,8

992,1

2010 2011

52%

6

Focus on the best product mix...

Mix % of sales, 2011

31%

24%

20%

15%

10%Household Appliances

Sound & Image

Technology

Furniture & Kitchen Appliance

Others

7

Strong corporate culture, focused on valuing people1

Large customer base, with relationship management targeting customer loyalty and retention

2 Integrated sales platform with multiple sales channels

3

4 Broad, competitive portfolio of services and financial products

Unique Business Model

Differentiated positioning to capitalize on industry growth

8

Corporate Structure

1 2

100%50%40.55%100%

9.45%

100%

(1) JV with Itaú Unibanco(2) JV with Cardif(3) Corporate integration of both companies concluded

3 3

9

Ownership Structure

Pre – IPO Post – IPO

75.4%

5.6%

6.7%

12.5%

LTD Administração e Part. S.A.

Wagner Garcia Part. S.A.

Founding Family Members

Capital Int’l Inc. (Private Equity Fund)

2.5%

2.7%

4.5%

60.6%

29.7%

Capital Int’l Inc. (Private Equity Fund)

Founding Family Members

Wagner Garcia Part. S.A.

LTD Administração e Part. S.A.

Free Float

186,494,467 shares150,000,000 shares

10

High influence of service and credit on purchasing decision

15 years among the Best Places to Work

Communication: Luiza TV, Radio Luiza, Town Halls

Transparency: Availability of management information and frequently alingment – Monthly store P&L avaliable on the internet

Empowerment: Sales staff and managers have flexibility to negotiate sales conditions within a range

Compensation: based on gross profit, financial margin and sales

Strong corporate culture assisted by a sales model that is supported by enthusiastic teams

Price39.8%

37.0%

Service/Credit

8.4%Product Variety

4.5%

Punctuality of Delivery

3.2%

Offered brands7.1%

Others

11

Ranked the 23th most valuable brand in Brazil

1) Source: Ranking Istoé Dinheiro, Milward Brown/Brandanalytics

1. Petrobras

2. Bradesco

3. Itaú

4. SKOL

5. Banco do Brasil

First 5

most

valuable

21 – 35 most valuable

36 – 50 most valuable brands

6 – 20 most valuable

6. Natura

7. Brahma

8. Vale

9. Sadia

10. Antartica

11. Vivo

12. Perdigão

13. Lojas Americanas

14. Bohemia

15. Ipiranga

16. OI

17. Casas Bahia

18. Totvs

19. TAM

20. Cielo

21. Multiplus

22. Porto Seguro

23. Magazine Luiza24. GOL

25. Redecard

26. Net

27. Extra

28. BM&F

29. Banrisul

30. Hering

36. Anhanguera

37. Amil

38. Lojas Renner

39. MRV

40. Marisa

31. Iguatemi

32. Odontoprev

33. Pão de Açúcar

34. União

35. Embratel

41. Durafloor

42. Arezzo

43. Gerdau

44. Drogasil

45. Swift

46. Havaianas

47. Deca

48. PDG

49. Localiza

50. Riachuelo

Ranking published on Istoé Dinheiro Magazine – May 2012

Magazine Luiza brand values USD 479 MM

12

TOP 10 costumer service in Brazil

1) Source: Ranking Exame, Instituto Ibero-Brasileiro de Relacionamento com o Cliente (IBRC)

Ranking published on Exame Magazine – Aug 2012

13

Agenda


Highlights of 2Q12




14

Highlights of 2Q12

Initiatives and Achievements Impacts on Financial Results

Significant sales growth versus 2Q11• Total sales growth of 21.6%• Same store sales growth of 13.0%

o E-commerce growth of 45.0% o Physical stores sales growth of 9.0%

Sustainable growth• Consolidated gross margin evolution – 33.5% over net

revenueso Increased by 0.7pp over 2Q11 o Increased by 1.7pp over 1Q12

• Financial discipline ( limited sales with no interest)• Conservative credit approval rate

Continuation of Lojas Maia integration process• Corporate merger – April, 30th

• Systems integration – began in 2Q12

Reduction and Rationalization of Costs and Expenses• Rationalization of costs and expenses program –

Company’s main focus in 2012• 0.6pp reduction on SG&A expenses of retail segment

o 24.7% of net revenues versus 25.3% in 2Q11

Investments in infrastructure and expansion• Total investments: R$35.1 million

o 1 new conventional store inaugurated in the Northeast

o Stores remodelingo Investments in IT and Logistics (concluded the

expansion of Louveira distribution center)

Extraordinary expenses - integration:• Totaled only R$3.3 million (as expected)

Luizacred results• Improved overdue indicators• Maintenance of conservative approach

o Reduction of credit approval rateo Substantial provisions for loan losses

• Participation in the rationalization of costs and expenses program

Magazine Luiza results• Results in line with budget, despite the slowdown in

the economy activityo Sustainable growtho Program of rationalization of costs and expenses

• Positive results – retail and consolidated business

15

Agenda


Highlights of 2Q12




16

Gross Revenues (R$ billion)

Retail

Consolidated

1,1

% of growth over the same quarter of 2011

1H12

3.9

2Q12

2.0

1Q12

2.0

1H112Q11

1.6

1Q11

1.6

3.2

• 19.7% growth in the retail segment versus 2Q11 and 13.0% same store sales growth, driven by:

— Stores maturation

— Increased productivity in renovated stores

— Accelerated growth in the Northeast (R$301 million – 15.4% of total retail sales)

• 22.3% growth in the retail segment versus 1H11

• 21.6% growth in the consolidated gross revenues versus 2Q11:

— 44.5% growth in revenues from the consumer financing segment (chiefly influenced by the increase in service revenues, direct credit to consumer and personal loans at Luizacred)

• Increase in store count – from 613 in the end of 2Q11 to 731 stores in the end of 2Q12

Comments

22.3%19.7%

% of growth over the same half of 2011

1H12

4.3

2Q12

2.1

1Q12

2.1

1H11

3.4

2Q11

1.7

1Q11

1.7

23.6%21.6%

25.0%

25.7%

17

Gross Revenues – Internet (R$ million)

1H12

512.0

2Q12

263.5

1Q12

248.5

1H11

355.7

2Q11

181.7

1Q11

174.0

• Internet sales climbed 45.0% in 2Q12 versus2Q11 and 43.9% versus 1H11 influenced by:

— Increase in product mix

— Innovations in content

— Multi-channel approach: infrastructure shared with other channels

CommentsInternet

43.9%45.0%

% of growth over the same quarter of 2011 % of growth over the same half of 2011

42.8%

18

Net Revenues and Gross Profit (R$ billion)

33.2% 32.8% 33.0% 31.8% 33.5%

Gross Margin (%)

• Strong growth due to advancement of gross revenues (retail segment and consumer finance)

• Net revenues growth outpaced gross revenues growth – higher volume of products subject to tax substitution (booked under COGS)

CommentsNet Revenues - Consolidated

• Improve of 0.7% of gross margin in 2Q12 versus 2Q11 and 1.7% versus 1Q12 due to:

— Increase in gross margin from the consumer finance (Luizacred)

— Slight decrease in retail segment margin (higher share of Internet sales, integration of Lojas Maia and AVP adjustments)

• Gross margin in the Northeast: from 21.2% in 1Q12 to 25.0% in 2Q12

Comments

32.7%

Gross Profit - Consolidated

1H12

3.6

2Q12

1.8

1Q12

1.8

1H11

2.9

2Q11

1.5

1Q11

1.4

24.9%22.3%

1H12

1.2

2Q12

0.6

1Q12

0.6

1H112Q11

1.00.5

1Q11

0.5

23.7%25.0%

% of growth over the same quarter of 2011 % of growth over the same half of 2011

27.5%

22.4%

19

Operating Expenses – Consolidated (R$ million)

Operating Expenses (R$ MM)

• Reduction of 0.5% on Sales, General and Administrative Expenses versus 2Q11:

— Adjustments made to stores’ expenses in order to increase productivity

— Result of the integration of the offices of Baú stores and of rationalization of expenses

• Provisions for Loan Losses:

— Substantial provisions (Luizacred conservative approach)

• Other Operating Expenses (Revenues):

— See next slide

Comments

-26.0% -3.6%

% Net Revenue

Total

410.7

Other Oper.

Expenses (Revenues)

24.3

Provisions

52.7

SG&A

382.4

2Q11

SG&A

88.4

Total

531.3

Other Oper.

Expenses (Revenues)

16.1

Provisions

459.0

2Q12

-27.9%1.7% -25.5% -4.9% -29.5%0.9%

20

Other Operating Expenses (Revenues) – Consolidated

Other Operating Expenses (Revenues) (R$ MM)

• Other Operating Expenses (Revenues) :

— Deferred revenues:

o Reduction in the booking of deferred revenues (straight-line method)

o In 2Q12, other deferred revenues of R$18.0 million (R$10.5 million from the retail segment and R$7.5 million from Luizacred) – renewal of the Agreement with Cardif

— Non-recurring expenses with the integration of the store chains of R$3.3 million

— Change in the booking of personal loans, which are now recognized under financial intermediation result, thereby reducing revenues from profit sharing from R$17.5 million to R$4.1 million

— Expenses with the introduction of chips in Luiza cards totaled R$5.4 million in 2Q12

Comments

17,55,5 24,3

12,4

TotalOthersIntroduction of chips in

Luiza Cards

Personal Loans

Integration Expenses

Booking of Deferred Revenues

2Q11

16,1

23,8

TotalOthers

3.2

Introduction of chips in

Luiza Cards

5.4

Personal Loans

4.1

Integration Expenses

3.3

Booking of Deferred Revenues

2Q12

21

• EBITDA impacted by:

— Sales and gross profit growth

— Non-recurring costs, revenues and expenses

— Higher provisions for loan losses

EBITDA and Adjusted EBITDA (R$ million)

Margin EBITDA (%)

Comments

5.9% 4.9% 5.4% 0.5% 4.0%

EBITDA

2.3%

Adjusted EBITDA

2Q11 2Q12

1H12

81.2

2Q12

71.9

1Q12

9.3

1H11

155.9

2Q11

71.9

1Q11

84.0

66,571,9

Adjusted EBITDA

Deferred Revenues

5.4

Extraord. Expenses

0.0

Extraord. Costs

0.0

Current

74,071,9

Adjusted EBITDA

Deferred Revenues

8.8

Extraord. Expenses

3.3

Extraord. Costs

7.5

Current

4.9% 4.5% 4.0% 4.1%

22

Financial Expenses – Consolidated (R$ million)

Financial Expenses (R$ MM)

% Net Revenue

• Financial Results:

— Decline from 2.9% of net revenue in 2Q11 to 2.5% in 2Q12:

o Positively impacted by the reduction in CDI rate

o Partially offset by the increase in working capital requirements

o Change in the estimated discount rate used in the adjustment to present value of extended warranty operations

o Change in the appropriation of the costs of prepayment of receivables on third-party cards, which is now recognized on the date of the discount operation

Comments

2Q12

45.4

2Q11

42.4

Financial Expenses

-2.9% -2.5%

23

Adjusted Net Income

Net Income and Adjusted Net Income (R$ million)

2Q11 2Q12

Net Income

0.9% 0.3% 0.6% -2.3% 1.2%

• Net Income impacted by:

— Non-recurring costs, revenues and expenses

— Change in the appropriation of the costs of prepayment of receivables

— Changes in accounting practices in the financial result

— Non-recurring tax credits

Comments

-0.5%

Net Margin (%)

1H11

40.7

1H12

18.8

2Q12

21.9

1Q12

16.9

2Q11

4.6

1Q11

12.3

1,0

4,6

Extraord. Fin.

Results

0.0

Extraord. Ops.

Results

5.4

Net Income Adjusted Income

Tax Credits

0.0

Extraord.Taxes

1.89,5

20,72,121,9

Extraord.Taxes

Adjusted Income

Extraord. Fin.

Results

Tax Credits

4.310.6

Extraord. Ops.

Results

Net Income

0.3% 0.1% 1.2% 0.5%

24

Investments (R$ million)

11,5

28,918,4 18,0

15,1

19,3

37,8

11,08,1

7,5

7,5

25,1

6,5

3,9

5,135.1

1Q12

43.2

7.3

4Q11

97.6

5.8

3Q11 2Q12

50.2

11.8

2Q11

40.0

1.9

15.4

• Stores remodeling

• New stores (inaugurated and to be) – 1 new conventional store inaugurated in the Northeast

• Other investments include the conclusion of expansion of the Louveira distribution center and other investments in logistics, which totaled R$9.6 million in 2Q12

CommentsInvestments

OthersInfrastructureStore RefitNew Stores

25


Highlights of 2Q12




26

Operational Performance – Stores

Number of Stores (unit) Same Store Sales Growth (%)

69

69103 106 106

111

1

2Q12

731

624

1

1Q12

730

623

4Q11

728

624

3Q11

684

614

2Q11

613

543

Conventional StoresVirtual Stores

2Q11

39.4%

14.4%11.3%

2Q12

Same Stores Sale Growth - Physical StoresSame Store Sales Growth (includes e-commerce)

Total Retail Growth

19.7%13.0%9.0%

Average Age – Stores

More than 3 years453

2 to 3 years6

1 to 2 years158

Up to 1 year

114

+ 118 stores

27

Operational Performance – Luizacred

Financed Mix Sales (%) Luizacred’s Revenues (R$ MM)

293

923 1.297

150

2,085

2Q12

21.5%

450

45

2Q11

1,716

572

71

CDC

Personal Loan

Luiza Card - Inside Luiza Stores

Luiza Card - Outside Luiza Stores

11%

18%

32%

23% 28%

30%

37%

2Q12

100%

22%

2Q11

100%

Luiza Card

CDC

Third Party Credit Card

Cash Sales/Down Payment

28

Operational Performance – Portfolio’s composition

Luiza Card – Total Credit Card Base (MM) Portfolio (R$ MM)

4,24,34,44,2

4,0

4Q113Q112Q11 2Q121Q12

376

661

2,655

2Q12

3,442

2,668

+29%

2,292

2Q11

126

CDC Credit cardPersonal Loans

29

Luizacred Portfolio (% of portfolio)

• Differently from the market in general, the portfolio’s overdue indicators continue to improve both in relation to the previous year and the previous quarter, due to:

— Conservative approach in the credit approval rate

— Constant control of delinquency per store

• Provisions should be proportionally lower in 2H12

CommentsPortfolio Overdue

11.6%

10%

20%

Jun-12

15.9%17.4%

12.7%

4.7%

Dec-11

16.8%

12.4%

4.4%

Sep-11

17.7%

13.6%

4.1%

Jun-11

19.2%

12.5%

6.7%

Mar-12

4.3%

Overdue above 90 daysOverdue 15-90 days Total overdue

112% 111% 114% 111% 117%

Coverage Ratio(%)

30


Highlights of 2Q12




31

Expectations for the next quarters

Sales Growth

Consistent sales growth:

• Maturation of new stores

• Northeast stores

• Internet

• Better performance by the Brazilian economy, especially in 4Q12

Lojas Maia Integration Process

Integration of Lojas Maia’s systems – conclusion: oct/12

Fully integrated management – 2013

• Dilution of administrative and logistics expenses

• Benefits to working capital and price management – increasing the gross margin

Investments

Investments in technology, logistics and store remodeling, which includes changing the Lojas Maia brand to Magazine Luiza

The Company plans the organic opening of 17 more stores in 2H12, 10 of them in the Northeast

Results

Continuality of cost and expense reduction and rationalization program

Capture of synergies from the integration of Lojas do Baú and Lojas Maia

Better productivity indicators and positive results in 2012

1

2

3

4

32

Investor [email protected]/ir

Any statement made in this presentation referring to the Company’s business outlook. projections and financial and operating goals

represent beliefs. expectations about the future of the business. as well as assumptions of Magazine Luiza’s management and are

solely based on information currently available to the Company. Future considerations are not a guarantee of performance. These

involve risks. uncertainties and assumptions since they refer to forward-looking events and. therefore depend on circumstances that

may not occur. These forward-looking statements depend substantially on the approvals and other necessary procedures for the

projects. market conditions. and performance of the Brazilian economy. the sector and international markets and hence are subject to

change without prior notice. Thus. it is important to understand that such changes in conditions. as well as other operating factors

may affect the Company’s future results and lead to outcomes that may be materially different from those expressed in such future

considerations. This presentation also includes accounting data and non-accounting data such as operating. pro forma financial data

and projections based on the Management’s expectations. Non-accounting data has not been reviewed by the Company’s

independent auditors.

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j.p. morgan 6th annual – brazil retail & healthcare check up

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