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Merchandise Sales up at LOJAS RENNER
19
Feb '09
LOJAS RENNER S.A., the second largest department store chain merchandising apparel in Brazil announces its results for the fiscal year 2008.

HIGHLIGHTS:
• Total Net Revenue reported growth of 3.9%, increasing from R$ 648.5 million in 4Q07 to R$ 673.5 million in 4Q08.
• Net Revenue from Merchandise Sales posted an increase of 2.0% from R$ 601,7 million in 4Q07 to R$ 613.8 million in 4Q08. Same Store Sales registered a decline of 5.4% between October and December.
• Gross Profit from Merchandise Sales was R$ 275.4 million in 4Q08 and the Gross Margin from the Retailing Operation was 44.9% compared with 46.2% recorded in 4Q07.
• EBITDA1 reached R$ 102.4 million in 4Q08, with an EBITDA Margin on Net Revenue from Merchandise Sales of 16.7%, against 16.9% in 4Q07 (15.2% if calculated on the Company's Total Net Revenue against 15.6% in 4Q07). Excluding non-recurring items, EBITDA would have reached R$ 103.4 million in 4Q08 with an EBITDA Margin on Net Revenue from Merchandise Sales of 16.8% compared with 16.9% in 4Q07.
• Capital Expenditures in Fixed Assets in 4Q08 amounted to R$ 51.6 million. Investments in large part were allocated to the rollout of new stores as well as the remodeling of existing installations and the modernization of systems and IT equipment. In the October – December period, Lojas Renner unveiled seven new units, the total nationwide network now totaling 110 stores in operation.
• Transactions conducted using the Renner Card accounted for 61.9% of sales in 4Q08. The average ticket reported growth of 4.0% in the period, increasing from R$ 116.48, recorded in 4Q07, to R$ 121.09.

STORE OPERATING PERFORMANCE:
The fourth quarter is the peak selling season. In addition to the Christmas holidays, the principal commemorative date of the year, the period also coincides with the payment of the socalled thirteenth month bonus salary, which boosts retail sales as a whole during the months from October through December.

This year however the fourth quarter failed to follow the usual pattern of events, impacted by a less favorable macroeconomic environment as well as unseasonable temperatures. In 4Q08, Net Revenue from Merchandise Sales reported a year-on-year increase of 2.0% while Same Store Sales registered a decline of 5.4%.

This performance largely reflects the deceleration in post-September sales due to the global economic crisis, which affected consumer confidence and introduced an element of caution in relation to purchasing decisions. Lojas Renner targets the Brazilian middle and upper middle classes, social groupings that have lived through severe economic crises in the past and which are better informed of the global situation and its consequences. As a result, with the onset of the crisis at the end of the third quarter, a change in habits took place among this clientele, manifested in the postponement of purchases.

Weaker sales and unseasonable temperatures were also reflected in the Gross Margin from the Retailing Operation, which was 44.9% in 4Q08 against 46.2% in 4Q07. Despite the Company adjusting its inventory in the face of a changing market scenario, temperatures which were lower than the historical average and persistent rain in some states also translated into a higher level of markdowns in 4Q08 than is usual for this time of the year.

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