Annual Report | 1
Summary Message from the Management................. 4 Our Purpose ............................................... 8 Our Business Model ................................... 10
Product and Store.............................. 18
Network Management........................ 21
Brand Management............................ 27
Channel Management........................ 48
Economic Performance...................... 56
Our Relationships........................................ 60 Staff.................................................... 64 Suppliers............................................. 76
Franchises and Multi-brand Stores.... 84
Consumers......................................... 87
Environmental Management............... 91
Hermann Hering Foundation.............. 96
GRI Attachments......................................... 100
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About the Report................................ 102
Add-ons to Indicators......................... 106
Summary of Contents........................ 111
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Message from the Management
O
ur strategy focused on Product and Store, aimed at improving the shopping experience of our customers, moved
forward during 2016, and we are confident that it will boost a new cycle of growth in Cia. Hering. The maneuvers we have been performing in the company, including relevant improvements to the Management Model, strengthen our network performance in face of the challenging economic scenario. Our operational focus was the retail, after the continuous growth in the retail chain in recent years. We have successfully fulfilled the Hering Store Reform Plan – the largest in our history, with 100 outlets refurbished in 18 different states. The new stores feature improvements that impact the shopping experience, such as product exposure and ambiance, visual merchandising (VM), lighting, among others.
W
e also improved the supply of stores, making the inventory management smoother.
Accordingly, we reduced the volume of leftovers and old-collection items. With technological advances and the implementation of new functionalities, our webstores showed expressive sales revenue in 2016, representing a growth of 20.3%. Such improvements, aimed both at enhancing the flow of visits and increasing the conversion, contributed to the good result achieved for the period and provide us with an optimistic perspective of accelerated growth of the channel in the years to come. Focused on the multi-brand channel, we started an important project to create a point-of-sale segmentation model, considering different criteria, which will allow a better management of the relationship with shopkeepers. Our goal is to boost the sales and the investments we make in this channel. With regards to the product development, we launched the Product Lifecycle Management (PLM) in order to review the creation process of our collections, which will result
Management Development Annual Report | 4
GRI 102-14
in efficiency gains and further increase the synergy between Design, Research and Product Development teams.
GRI 102-14
Annual Report | 5
W
e also launched Redesign and Total Quality projects, which aim, respectively, to
I
n spite of these achievements, our results – especially our sales – were affected by the economic downturn
ensure the consistency and standardization
and its effects on the consumer environment.
of measurements in our products and to
Our investments for the year amounted to R$
enhance aspects related to the quality of our
51.3 million, and were mainly directed to the
products from the choice of raw materials,
industry and the stores. Regardless of the fall
production and training of suppliers, to
in EBITDA (earnings before interest, taxes,
delivery to the final consumer.
depreciation and amortization), the free cash
Hering held its ground as one of the 25 Most
generation was fostered by better working-
Valuable Brazilian Brands, according to
capital management and lower investments,
research by Interbrand. Regarding children’s
accumulating R$ 209.4 million in 2016,
brands, PUC established new partnerships
representing 82.5% increase if compared to
and Hering Kids was the brand with the
2015.
highest growth of stores and the best sales results of the company in 2016. The brand
We remain confident in our business strategy
Hering for you, after two years of testing and
and in our ability to resume the company’s
feasibility evaluations, stopped operating
growth history based on a distinguished
exclusive stores and became a product line
business model, strong brands and solid
within the brand Hering. While DZARM., with
base of management and leadership.
a new positioning, launched its first “light franchise”: smaller stores with lower costs involved in the operation. The project will be monitored and can become an important
Ivo Hering - Chairman of the Board of Directors Fabio Hering - President
path for growth outside big cities.
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GRI 102-14
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steps, recalling the emotion of the first stolen kiss, the joy of
the first party with friends, the greatest achievements. We wear the moments that are only yours. We dress life with contact and affection, life clothed with aliveness! That’s why our closet is filled up with emotions. We’re
“
essentially casual and always authentic! Our history, woven over a century ago, interlaces people who dream and make their dreams come true. People who accept the challenge of the unknown and undertake it. Dreams that take shape, color and texture in the hands of those who dare and transform.
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GRI 102-16
Dressing life is to be member of a group of people who dream, believe, make dreams come true and realize that, no matter what comes, we will live together another emotion.
“
H
ere, we dress life since its first
O
ur path was not invented. It was lived and learned! It was built from the relationship with
partners who believe in our choices and share our values. From industry to retail, we are currently the largest clothing franchise chain in Brazil. We are a casual lifestyle multi-brand organization with a strong product competitive differential. We manage brands and we know what to produce and deliver, because we know our consumers. We are who we are because we work in a large network. We are present all over Brazil and we spread our casual DNA to Latin America. We live the present with the mildness of knowing who we are, but committed to everything we believe. For us, dressing life is to take pride in our history and to preserve it in the form of a museum and of memories that interweave our people.
Here we dress up life! GRI 102-16
Annual Report | 9
Our Business Model
Our Brands Designing parts with the best cut is basic. Expressing your identity through clothing is unique. It’s basic. It’s unique. Hering
644 stores
*
www.hering.com.br
* We have 18 franchises of Hering in Uruguay, Bolivia and Paraguay.
Here we dress up life!
106 stores
Collections combining fun
We are a casual lifestyle multi-brand organization with a strong product competitive differential.
F
and style, targeting kids living childhood at its best. We believe children’s clothing should be at the service of play and a well-lived childhood, rich
**
www.heringkids.com.br
in discoveries and learning.
** In 2016, the three stores of Hering for you were converted into Hering Kids. The brand became a line within Hering and is available in Hering physical stores and in the webstore.
rom industry to retail, we are currently the largest clothing franchise chain in the country.
A striking brand that draws
With over 135-year history, our casual
attention and positively influences
DNA is present all over Brazil and also in
its surroundings.
Latin America, interlacing entrepreneurs
Simply letting children be children
who dream and make dreams come
in a cheerful, dynamic, fun and
true. Our network is formed by 834
very comfortable way.
63 stores
www.puc.com.br
stores among proprietary units and franchises, including those located in Uruguay, Bolivia and Paraguay. We know our consumers and we enable them to make smart purchases through our brands, aimed both at children and adults, offering distinguished, affordable and high-quality fashion products.
A brand that believes in the female sensuality and that woman is powerful by nature. It allows women to express all their power in a sophisticated way but with a hint of irreverence, without
3 stores
www.dzarm.com.br
being vulgar.
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GRI 102-2 | 102-6
GRI 102-2 | 102-6
Annual Report | 11
I
Our Numbers n addition to its proprietary stores
outsourcing and purchase of finished
and franchises, our complete
products from Brazilian and foreign
line of clothing and accessories
suppliers.
is marketed through 17,500 retailers
Thus, we evaluate the market
operating in multi-brand retail and six
opportunities and choose the best option,
webstores, in which consumers purchase
balancing aspects such as costs, logistics
all items with safety, technology,
operations and product quality.
convenience and innovation. We further
In our operational structure, we have
have 7 Hering Space proprietary stores,
nine manufacturing units, distributed in
which sell items of all our brands from
three production poles - Santa Catarina,
current and former collections in the outlet
Goiás and Rio Grande do Norte. In 2016,
format.
we closed the plant activities in the
O
municipality of Ibirama, relocating part of ur hybrid production model
the employees to other units in order to
is a competitive differential
expand our logistics capacity and optimize
because it guarantees flexibility
our operations.
and agility to meet our consumers’ needs. It combines our own production,
7,7
834
6
webstores
9
units
proprietary stores and franchises
thousand employees
17,5
thousand retailers in the multi-brand channel
1.527
supplier audits
Over
3.000 cities covered
2
distribution centers
6
R$
1.475
million net revenue
R$
51.3
million invested
collections per year
*In 2016
Santa Catarina
Rio Grande do Norte
* Headquarters in Blumenau * Industrial units: Bom Retiro; Itororó, in Blumenau and Encano, in Indaial * Distribution Center in Blumenau
Goiás
Goiás
* Industrial units in Goianésia, Santa Helena, Paraúna, Anápolis - Daia and São Luís de Montes Belos * Distribution Center in Anápolis Rio Grande do Norte * Industrial unit in Parnamirim São Paulo
São Paulo Santa Catarina
*Office in the city of São Paulo
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GRI 102-2 | 102-6 | 102-10
GRI 102-3 | 102-4 | 102-7
Annual Report | 13
Our History
For us, dressing life is to take pride in our history and to preserve it in the form of a museum and of memories that interweave our people.
T
o reinvent ourselves is a mark of our history. Our entrepreneurial
spirit and capacity for innovation has been present in the way we conduct our business since we were founded by the brothers Hermann and Bruno Hering, in 1880.
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We are constantly
ourselves TIMELINE
Here we face a new challenge. 1966 was the year of the IPO, and the year we spread the casual DNA outside Brazil, with the beginning of exports.
In Blumenau-SC, the brothers Hermann and Bruno Hering believed in a dream and wrote the first lines of a story filled with emotions.
1880
1935
1966 In order to dress up the lives of our staff with well-being and development, and in tribute to the centennial of Hermann, we created the Hermann Foundation.
Annual Report | 16
1979
We are entrepreneurs by nature, so here we undertake a new challenge: to start in retail, with our first Hering Family Store.
1993 To dress life since its first steps, we launched the children’s brand PUC.
1994 We decided to build a different way to be a retailer: the beginning of the first stores under the franchise model.
We joined the BM&FBovespa New Market segment.
We are essentially authentic, and here we start dressing up life with DZARM brand. Time to face a new challenge: our first e-commerce platform was launched.
1998
2000 A 2006 Ano de embarcar em um novo desafio: lançamos nossa primeira plataforma de e-commerce.
2007 Our way of making it happen was not invented. It was lived and learned. From 2000 to 2003 we went through a financial restructuring and from 2003 to 2006 we restructured our operations.
Always Reinventing! This is one of our greatest passions. We improved the management of our brands with a new team structure and the repositioning in the market.
2010 Check who arrived full of energy to dress up life in an spontaneous way: Hering Kids, after becoming a brand of the Company in 2005, launches its first proprietary store.
2013 A 2015
We completed the implementation of SAP systems and improved the shopping experience of consumers with the Hering Store Reform Plan.
2015
2016
was a year for great achievements! We celebrated in style the Company’s 135 years of history, inaugurated our new Industrial Unit in São Luís de Montes Belos (GO) and completed the implementation of the ERP system, which allowed for evolutions in stock management. Annual Report | 17
Product and Store
O
ur business growth strategy is
by operational and administrative areas.
based on two pillars: Product
The initiatives conducted in 2016 aimed
and Store. On these grounds, we
at speeding up the development of new
opened a new cycle of innovation, placing
collections, further improving the shopping
the consumer as the focus of all projects and
experience in physical stores, streamlining
investments made.
the sale of products in our webstores and
The most recent version of our strategic
ensuring the adequate supply of products
planning was defined in 2014, with objectives
according to the fashion trends as well as
and targets to be achieved by 2020, and
the delivery of value proposition for the
distributed in corporate projects developed
consumers of the brands.
Competitive advantages
Our path was not invented. It was lived and learned! It was built from the relationship with partners who believe in our choices and share our values.
I
n the textile retail industry, our
Financial soundness
network model has competitive
Cash generation capacity
advantages that leverage our growth
and the value generation. In 2016, Hering ranked 19th in the ranking of “Most Valuable Brazilian Brands�, according to a survey with more than one thousand interviewees conducted by Interbrand consulting. According to Guia Exame Maiores e Melhores - 2016, we are the second most profitable company in the industry.
Annual Report | 18
Power of the brands
Low debt
Wealth generation
Return to
for the network
shareholders
Annual Report | 19
Investments and free cash generation
A
mong the main achievements
82.5% compared to 2015. Investments
for 2016 is the extension of the
amounted R$ 51.3 million, representing a
company‘s integrated management
reduction of 47.1% on the same basis of
system for sales and logistics fronts provided
comparison – as a result of a smaller amount
by SAP, which makes operations more
allocated to technology implementations
dynamic and consistent. Additionally, the
and industrial facilities, after the completion
completion of the implementation allowed
of São Luís de Montes Belos (GO) unit. Two
for the reduction of the company’s average
of the main investment fronts in 2016 were
stock of products throughout the year,
the remodeling of proprietary stores and the
which minimized the need for investments
purchase of some points of sale. Additionally,
in working capital and improved cash
the Reform Plan also provided incentives
generation.
to franchisees in the form of subsidies and
Last year, R$ 209.4 million free cash was
financing by the company (see more on page
generated, representing an increase of
51).
Governance Here we dress up life! We live the present with the mildness of knowing who we are, but committed to everything we believe.
T
o support the development of our strategic planning and business growth initiatives, we have in place
a corporate governance structure, policies and practices that value transparency
Investments and free cash generation (R$ millions)
and ethics in our relationships with all our stakeholders. We are a publicly traded corporation and, for ten years, we have been part of BM&FBovespa New Market, a segment that gathers together the companies with the highest governance standards within the country. The Board of Directors is the highest body in our management structure, composed of nine members - five of which are independent - with a two-year mandate. The board members (8 men and 1 woman) were elected by the shareholders in the General Meetings. In order to ensure the alignment between governance discussions and operational strategies and activities, our President integrates the highest governance
T
he board member’s choice takes into account not only their professional history, but also their
skills and knowledge in different areas of activity with potential to generate value for the company. In 2016, two new members of the Board of Directors were elected representing shareholders with relevant interest in Cia. Hering’s capital stock. To see the members of the Board of Directors and the Executive Board, as well as their biographies and qualifications, access the Investors Relations website of Cia. Hering (www.ciahering.com. br/ri).
body and all advisory committees.
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GRI 102-5 | 102-18 | 102-22 | 102-24
Annual Report | 21
Stock ownership breakdown 12/31/16
Among its functions are the
Finance Committee
15,7%
2016
48,1%
evaluation of the business plan and the monitoring of the annual budget execution.
15,1%
People Management Committee
7,4% 7,3%
Among other attributions, it proposes the company’s organizational structure model and discuss strategies for attracting and retaining professional talents.
6,2%
Advises the Board of Directors,
0,2%
Gávea Investimentos 15,7%
Cambuhy Investimentos 6,2%
Coronation Fund Managers 15,1%
Treasury Stock 0,2%
Inv. e Partic. Inpasa S/A
Others
Ivo Hering
7,4%
Strategy Committee
proposing policies, guidelines and actions for the company and Gávea Investimentos 15.7% its business units.
48,1
7,3%
T
he Board of Directors activities are supported by three advisory committees,
2016 to improve evaluation and
O
management of strategic guidelines
The performance of our executive officers
all of which are coordinated by independent members. The Strategy Committee was established in
ur Executive Board is formed by
is evaluated once a year as to the effective
seven executives who leads and
delivery of the targets agreed upon, through
monitors the implementation of
a 360 review – a process applied to all Cia.
the strategic planning and related projects.
Hering employees (see more on page 70).
and investment opportunities.
Annual Report | 22
GRI 102-18
GRI 102-18
Annual Report | 23
Ethics and Compliance
T
Risk management structure
he Ethical principles and conduct
by audits, which minimizes the risk of fraud.
codes that guide our business and
This management structure also promotes
our relationship with stakeholders
the fight against corruption covering all our
are set forth in Hering’s Code of Ethics and
Senior
Management
operations.
the Code of Conduct for Suppliers. Both documents are available on the company’s
With regards to our supply chain, we conduct
Investor Relations website.
on-site supplier audits with our own teams to evaluate the regularity of documentation, the
External Audit
collection of taxes and the labor obligations,
1st defense line
Management Controls
2nd defense line
3rd defense line
Controllership Internal Controls
Internal Audit
Safety Internal control measures
Compliance
processes implement
T
compliance, safety and
T
By making use of these mechanisms, we
controls in the areas
quality, which help to
of governance, risk
identify, monitor and seek to mitigate the
for which they are
improve and monitor the
management and internal
This monitoring includes aspects related to
main risks related to economic, social and
responsible, aiming to
first defense line controls,
controls, including how
compliance with economic and social (people
environmental aspects that may impact on
mitigate the economic,
are responsible for
the first and second
management) rules and regulations. Where
our brand, reputation and value-generation
social and environmental
consolidating data and,
defense lines meet
nonconformities are identified, the audit
capacity – such as legal the compliance of
risks, supervising
therefore, evaluating the
management and control
teams assess the situation and define the
suppliers, compliance with environmental
processes and controls.
performance of targets
targets.
action plans. In purchasing operations, for
laws, among others.
The application of these ethical guidelines is
as well as the working environment
constantly by the audit area, which is divided
conditions (read more on page 76).
into internal auditing and supplier auditing teams.
example, significant price changes in orders
T
Quality
he operational managers that handle the
he areas of controllership, internal controls,
he internal audit provides for assessments
on the effectiveness
and indicators that help in the management.
placed to suppliers are immediately verified
Annual Report | 24
GRI 102-16 | 103-2 | 103-3 | 205-1
Annual Report | 25
W
ith regards to the market risks
The management of these risks is the
identified in our business, the
responsibility of the financial board, which
management is carried out
relays on external consulting support to
based on the Financial Risks Management
prepare reports of exposure to risks and
Policy and the Cash Management Policy.
adherence to the policy.
The risks for which we seek protection are:
• Credit risk: mitigation
• Interest rate risk:
of possible losses due to
minimization of possible
customer default.
losses arising from
Brand Management We manage brands and know what to produce and deliver because we know our consumers.
fluctuations in interest rates on financial assets and liabilities..
• Price risk: monitoring
• Exchange rate risk:
possible price fluctuations
protection against adverse
of inputs used in the
exchange rate fluctuations,
production process.
especially dollar, which may lead to an increase in the price of raw materials and products purchased by the company.
Annual Report | 26
GRI 102-16 | 205-1
Annual Report | 27
“G
ood Value for Money” is an English
summarizes our value proposition for the
expression commonly used to
consumers of all our brands: to develop
say that the quality of a product
differentiated garments featuring comfort,
makes the purchase worth. This sentence,
style and well-being at a price that is worth
without a literal translation into Portuguese,
paying.
Good Value for Money
PLM
Design
M PL
lue Va ey d o n Go Mo r o f
value for money
Seeks different product constructions that fit the style required (quality , finishing, cutting, etc.), ensuring margin and price strategy.
Go fo od Va r M l o n ue ey
good
Value proposition
P&D
PL M
Follow the trends, understands consumer and has a sell-out vision, assessing what works in the store.
Cost efficiency
DCO
Style
Innovation and alternatives in inputs Develops and brings innovation to the process, with new fibers, fabrics, etc., that make the brands differentiated and competitive.
consistency
Pillars of brand management
purchasing experience
Promotional Calendar
Communication
Innovation
Mix and Price Strategy
Proprietary Style
Branding
O
ne of the projects we carried
in turn, is shared by all brands to generate
out in 2016 in order to assure
synergy and efficiency gains in processes
the delivery of such value to
and innovations - such as the use of new raw
our consumers was the Product Lifecycle
materials, for example. This way, we ensure
Management (PLM), focused on product
that the pillars of brand management - our
lifecycle management. Through this initiative,
differentials and strengths - are applied
we restructured the product development
in all our collections in a consistent and
area to ensure the alignment of Style, DCO
continuous way. The consistency of these
(Product Development and Purchasing) and
pillars is important both for our customers
P&D (Product Research and Development)
who perceive Good Value for Money and for
teams. In Style and DCO teams, each brand
our franchisees and multi-brand customers
has a team of professionals focused on the
that trust in our brands’ value, our products’
development of collections. The P&D team,
attractiveness and the sales increase.
Annual Report | 28
W
e create six collections a year
from the project design to the delivery in
for our brands - Holidays,
stores. The PLM, the new organizational
Autumn, Winter, Spring,
structure and the improvement of the
Summer and High Summer – which arrive at
processes shall also bring us, as of 2017,
the stores in cycles of two to three weeks.
more and more agility to deliver to our
One of our challenges is to reduce the
customers and consumers news items of the
development time of such new products,
fashion trends.
Annual Report | 29
Performance of Brands Among the brands in our portfolio, Hering remained responsible for the largest share of our sales in 2016.
Quality and knowledge
A
nother two ongoing projects at Cia. Hering are also
Gross revenue in the domestic market by brand
aimed at strengthening the
delivery of Good Value for Money to our customers and consumers. One of tthem is the Total Quality, which aims to enhance the perception of the quality feature in our products. In this sense, we create strategies and actions that cover the entire production chain, such as refining the choice of inputs in the collections, selecting and training suppliers and evaluating production processes, so that clothing and accessories are free from any manufacturing failures or defects. We further operate a strong campaign of engagement and awareness among our employees.
The second initiative underway is Redesign, which broadens our knowledge about the consumer’s profile and the ability to develop products with a better fitting and standardized modeling.
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H
aving a T-shirt that fits everything is basic. Creating clothes
suitable to any occasion is unique. Always choosing the best fabrics is basic. Being recognized for that over a
IT’S BASIC. IT’S UNIQUE. HERING
century is unique. Designing parts with the best fitting is basic. Expressing the identity through clothing is unique.
Annual Report | 32
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4
IN 2016
tary proprieunched stores
1.3 bi
R$
la
revenue
#SelfiecomHering: consumers were invited
Where to find hering.com.br/store
facebook.com/CiaHering instagram.com/hering_oficial/ twitter.com/Hering_Oficial
best photos were awarded with a Hering
to post on Facebook and Instagram
Store gift card and an invitation to attend
pictures wearing our products taken in
the À La Garçonne runaway show at São
the fitting room of stores selling Hering
Paulo Fashion Week.
(franchises and multi-brands) - the most
Mother’s day promotional gift: For
creative ones have been awarded with
every R$ 149.99 purchase in our stores,
shopping vouchers. The action had the
consumers were given a scarf made from
engagement of 3,200 people.
leftover fabrics. 200 thousand printed
#HeringVintage: in order to promote the
units were produced and delivered, which
partnership between Hering and À La
contributed to the reduction of waste
Garçonne, consumers were invited to post
generation and stimulated conscious
pictures wearing their oldest Hering t-shirts,
consumption.
given that vintage was the theme of the À
#Diadabásica: action on Instagram to
La Garçonne collection. The authors of the
celebrate the brand’s 136 years. The two posts published had more than 120 thousand views and impacted about 180 thousand users of the Race and Walk against the Breast Cancer network: we participated as co-sponsors of two editions of the event (in Rio de
Hering brand, characterized by its wide acceptance in all social classes and age groups,
Janeiro and São Paulo). We produced and donated 9,630 t-shirts for the participants of the race in Rio and 11,880 in São Paulo.
presented a decrease of 10.2% in sales in 2016, influenced by the performance of multibrand channels and franchises.
Breast Cancer in the Blue Target of Fashion
R
enewal has always been
As the first Brazilian brand to support the
present in our DNA. In 2016,
campaign Breast Cancer in the Target of
we started the Hering Branding
Fashion, Hering refers R$ 6.50 of each item
Project, aimed at understanding the
with the blue target sold to the Brazilian
brand strengths and the changes in
Institute of Cancer Control (IBCC).
consumer behavior. The project supports
The partnership, which already has been
us in consolidating the evolutions in our
lasting for over 20 years, contributed
products and communication, preserving
significantly to investments in infrastructure
the contemporary and desired status of the
improvements and patient care.
brand.
Annual Report | 34
Annual Report | 35
S
mall and greater experiences from which children learn what they like, what makes them happy, what
enchants them. Being a child is a unique experience. Unique in time. Unique in life. Unique for each of them. And this is the phase of life that will leave a mark in each
The perfect childhood is that where the child exercises the freedom to be, to know, to explore. Because for the child everything is new. To be a child is to exercise the discovery. The fascination. The amusing attempt. The Selfknowledge, whenever they wish to do so.
Annual Report | 36
and every child the personal and nontransferable meaning of identity, personality and authenticity. Hering Kids believes that children’s clothing should be at the service of the full childhood, allowing children to be free, to discover themselves and discover the world through the use of their abilities, respecting their time and pace; always wearing what suits their way to explore and experience the world. Hering Kids, driving childhood discoveries.
Annual Report | 37
Hering Kids sales, focused
IN 2016
13
storesong
ed, am launch hises and franc ietary propr es stor
R$
2m1i8llio,n2
on children from all walks of life, grew by 6.6% in 2016, the best result among Cia. Hering’s brands. This performance was supported by a good product offer, store experience and communication. The brand has expanded its chain, accounting the net opening of 13 points of sale for the year.
revenue
Play Day: In partnership with the paid TV channel Nickelodeon, we encouraged kids to leave their
Where to find
homes and have a fun day during the June break. The event joined
heringkids.com.br/store
by over 5,400 people, was held at
facectomia/heringkidsoficial
TietĂŞ Sports Center, in SĂŁo Paulo.
instagram.com/heringkidsoficial
Annual Report | 38
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C
hildren symbolize life. They are the epitome of joy of living. Always with a smile on the
fac e and wondering eyes, children are enchantment in the form of people. It doesn’t matter what was going on before them. After their arrival, everything is changed.
Every child carries an energy that is unique and transforming. Children have a striking and vibrant presence. They have their own glow. Their energy can be sensed from afar. They radiate happiness.
Annual Report | 40
PUC believes that children’s clothing should intensify the colors of childhood, making this phase even more vibrant and energetic. With that in mind, PUC brings a creative, optimistic, and striking look to its pieces so as to express all the boiling energy children carry to their inner selves and to the world.
PUC. Because childhood is contagious.
Annual Report | 41
In 2016
R$
118illi,o7n mrevenue
7
tary proprsiaend 26 store ises in franch zil Bra
#PUCoficial: PUC invited parents to interact with the brand by posting pictures of their children wearing the clothes of the collections and published the images on its official website. During 2016, there were more than 1,500 mentions to the hashtag #PUCofficial on Facebook.
Where to find
Support to the Orientavida NGO:
puc.com.br/store
The organization maintains hundreds
instagram.com/puc_oficial
of artisans from Vale do ParaĂba in
facebook.com/pucoficial
continuous activity (SP), providing constant training, social and educational lectures, psychosocial support, labor gymnastics and food support. Orientavida has produced 380 articles
P
UC sales decreased 8.8% in 2016 compared to the previous year, mainly as a
result of the net closing of nine stores
with fabrics donated by Liberty Art Fabric, a traditional English brand of stamping, with which PUC has a cobranding partnership.
in the year and the sales downturn in the multi-brand channel. The brand, which underwent adjustments in its value proposition and distribution network, presented signs of stabilization in the results from the end of the year.
Annual Report | 42
Annual Report | 43
Focused on the female public, DZARM. is a brand with strong tradition and quality that was repositioned in the market in 2015. The brand inspires and is inspired by different types of women that want to be cool, fashion, urban and versatile.
Annual Report | 44
O
ur collections feature trends, distinguished modeling and exclusive prints, with a portfolio
that suggests different looks for various occasions. DZARM. Is present in more than 3,500 points of sale and has two proprietary stores in SĂŁo Paulo.
Annual Report | 45
IN 2016
R$
64illi,o6n
1
anchigshet r f w e n e li ed in th launch hise model franc
mrevenue
I
n 2016, the brand invited fashion bloggers to SĂŁo Paulo Fashion Week, to cover the biggest fashion event in
Brazil wearing a look from the collection.
Where to find
The Brand sales for the year decreased by 21.6%, if compared to 2015, as a result of
DZARM.com.br/store
the new positioning and stricter customer
facebook.com/dzarm.oficial
selection criteria in the multi-brand channel.
instagram.com/dzarmoficial/
In spite of the short-term impact, we believe that the strategy will bring good results to the brand in the long term.
In its new strategy, DZARM, a brand dedicated exclusively to the young female audience, has launched its first light franchise, a model with potential expansion outside large centers. The pilot store was launched in 2016 in the city of Alfenas (MG).
Annual Report | 46
Annual Report | 47
Channel Management
T
Here we dress up life
he continuous improvement of the
Among the main initiatives were the
relationship with franchises and
immersion of employees, including officers
multi-brand store owners is key
and managers, in the stores during the
to meet our strategic goals and to boost
Mother’s Day, Father’s Day and Christmas
value generation throughout all publics of
campaigns. Over 160 employees experienced
our chain. In this sense, we work to develop
the retail experience, assisting store teams in
and strengthen the retail culture among our
all activities - from inventory management to
employees, and the main tool to serve this
customer service.
purpose is the program named VAREJÁr.
VareJÁr Week, held in stores of Blumenau
Launched at the end of 2015, VareJÁr
and Goiás, was intended to provide retail
performed its main actions last year, focusing
knowledge to the administrative and
on the experience of retail employees.
industrial public. The purpose is to raise
By these means, our professionals could
awareness that consumer focus is our top
understand the main challenges in the
priority and drives the improvements in
ur chain is the core of our business
store operation and intensify the search
processes and products
model, involving people with an
for solutions and innovations favorable to
entrepreneurial spirit and that
our customers and improve the consumer
We are what we are because we work in a large network. We are present all over Brazil and we spread our casual DNA to Latin America.
O
Customer Focus and Retail culture
face challenges. As the grounds of our
purchasing experience.
business model, the channel management combines proprietary stores, franchises, multi-brands stores and webstores. This
Hering Stores, with incentives to franchisees
model ensures that our products obtain
in the form of subsidies (see more on
capillarity and reach more than 3,2 thousand
page 51) and financing part of the amount
municipalities, in all Brazilian states, in
invested. In the period, we inaugurated 26
addition to Uruguay, Bolivia and Paraguay.
units and closed another 32, closing the year
In our P&L (Product and Store) strategy,
with a total of 834 stores, considering our
the retail drives our business growth. In
own stores and the franchises of all brands.
2016, our investments and projects were
Another important initiative in 2016 was the
focused on improving operation and
development of a segmentation model for
customer’s experiences in our own stores
multi-brand retailers, taking into account
and franchises, thus building on a good
variables that impact on their business, such
relationship with multi-brand customers
as the establishment’s location and profile.
and training commercial audiences - store
The initiative aims to classify our partners
managers, franchisees, franchise consultants
since 2017 in different segments, which will
/ representatives acting for multi-brand
allow us to manage policies and guidelines
channels (read more on page 85). One of
customized to each identified group.
the main initiatives in 2016 was to refurbish
Annual Report | 48
Annual Report | 49
I
n 2016, franchises and the multi-
and the increase in unemployment levels
brand channel sales accounted for,
impacted the performance of our channels,
respectively, 38.6% and 43.2%. The
whose sales fell 8% compared to 2015.
downturn in the economy of the country
A
Domestic Gross Revenue per Channel 2,3%
15,9%
2016
43,2%
Refurbishing of stores s a priority in our performance
proprietary stores, we referred another R$ 8.4
strategy in 2016, Hering Store
million to support the refurbishment of stores
Stores Reform Plan aims to improve
owned by franchisees.
consumers’ purchasing experience in the
The cost of the works had an average
points of sale as well as boost our growth.
reduction of between 30% and 40%, due
During the last year, 100 stores in 18 Brazilian
to optimization of the use of items that are
states have been refurbished.
not visible to customers (such as inventory
The project, which selected points of sale
cabinets) and negotiation of prices and
on the street and in shopping malls, brought
payment terms with suppliers.
Multi-brand
developments in visual merchandising,
We further adjusted the project in order to
Franchises
storefront, and interior lighting of stores;
shorten the execution period for refurbishing
Proprietary stores
product organization per refurbished
– the average time for the closing of each
Webstores
sections for jeans and basics, among
unit for the refurbishment thereof was 17
other modernizations. In addition to
days.
38,6%
the investments in the refurbishment of
Multi-channel strategy Proprietary stores
P
rovides direct and permanent
Franchises
B
oosts the expansion of our brands
Multi-brand
T
akes our brands and products to
Webstores
P
resents full collections to consumers
contact with
• Encourages
all states of Brazil
• Generates
customers
entrepreneurship and
• Enables our
information and
• Allows pilot projects
job creation
presence in more
knowledge about
and standardized
• Maintains
than 3,2 thousand
consumer’s behavior
processes, which will
standardization
municipalities
and preferences
be a reference for
and enhances
• Ensures capillarity in
• Enables
franchises
differentiated
countryside towns
commercialization
• Generates
purchasing experience
• Creates value for
of items from old
visibility to brands
small and medium
collections
and differentiated
entrepreneurs
purchasing experience for the customers
Annual Report | 50
A
dding up the 87 stores that had
new architectural project. As of 2017,
already been refurbished in 2015
store refurbishing will return to the regular
and new stores already in the
implementation pace, without the subsidy
new format, we account for approximately
program implemented last year
30% of our base that is aligned to the
Annual Report | 51
Franchises Hering Store Performance
T
he performance of Hering Store
the stores and to a reduction in the volume of
chain, which includes sales to end
commercialized items. Considering the Same
users through proprietary stores
Store Sales (SSS) criterion, which measures
and franchises, decreased by 8.9% in 2016
the performance of stores opened 12 months
compared to the previous year, a result
ago and excludes the doesn’t consider the
impacted by the Brazilian economic scenario,
refurbishing periods, the reduction for the
which contributed to a fall in the movement in
period was equivalent to 8.6%.
S
ales for franchises amounted R$ 1.2 billion in 2016, representing a decrease of 11.1% compared to
Gross revenue in franchises (R$ million)
the previous year. This performance, resulting from lower orders throughout the year, reflects the
-11,1% 727,0 646,0
decrease in sales to final consumers observed in stores. The downturn was sharper in the fourth quarter, as a result of the greater volume invoiced from the High Summer collection in the third quarter, as part of the network’s preparation for the year-end sales season.
2015
2016
Proprietary stores
S
ales from proprietary stores grew by 2.9% compared to 2015. Hering Spaces (in
Gross revenue in proprietary stores (R$ millions)
the outlet format) contributed to this double-digit growth. The result was also
2,9%
positively influenced by the net addition of five stores in the year and the better
257,9
265,4
2015
2016
management of the stores, specially related to improvements in VM (visual merchandising) and supply.
Annual Report | 52
Annual Report | 53
Multi-brand The multi-brand channel dropped 11.4% in the last year, reflecting the net closing of approximately 700 points of sale in the country and the lower average volume of sales per customer. In order to improve our relationship with this channel, we started in 2016 the structuring of a new management model aimed at boosting the sales and investments made by the group.
T
Webstores
the commercial establishment, evaluating
S
is a result of the consolidation of a sound
also drove an approximate growth of 6%
the amount of consumption, the location of
digital platform, which supports features
in the number of new visitors and 30% in
the store, the size of the population of the
such as payment with two cards, look-book
recurrent visits. In 2017, we plan to invest
municipality and other aspects. The goal
(purchase of the complete look), wishlist,
in the optimization of the position of the
is that, as of 2017 our clients begin to be
inclusion of suggestion of articles, videos
pages on search tools (like Google) and
classified in different segments, for which
and images with models dressed with the
the improvement of consumer experience
different policies and guidelines will apply.
clothes for the consumer to check details
through tools like smartphone apps, which
With such categorization, we will be able,
of the pieces. Another tool is the unified
also make possible campaigns based on the
for example, to evaluate the customers that
checkout between all brands, which allows
geolocation.
need minimum stocks or where there are
consumers to shop in all of our virtual stores
he first step was the development of a segmentation model of store owners, according to the profile of
ales of products in our webstores
and make the payment in a single check-out
grew by 20.3% in 2016, compared to
process.
the previous year. This performance
The investments made in digital media
opportunities to explore cross-selling actions of our brands. Hence, we have increased the capacity to generate value for Cia. Hering and our chain.
Gross revenue in webstores (R$ million) 20,3%
Gross revenue in multi-brand stores (R$ million)
38,0 31,6
-11,4% 815,9 722,7
2015
2015
2016
2016
In the last year, we launched the Hering Space webstore, which is an outlet store in the same unified platform of all other Hering brands. www.outletespacociahering.com.br
Annual Report | 54
Annual Report | 55
Economic and Financial Performance
Net Profit (R$ million)
-29,1%
281,2
I
EBITDA (R$ million)
-21,0%
262,9
n 2016, our net income decreased by
result of the lower amount allocated to the
29.1% compared to the previous year,
industrial facilities after the cycle that resulted
closing at R$ 199.4 million. The 8%
in the launch of the plant in São Luís de
reduction in gross sales and a 4.7% increase
Montes Belos (GO) and the modernization
in operating expenses also impacted the
of the Distribution Center located in Goiás.
EBITDA (earnings before interest, taxes,
Additionally, upon the completion of SAP
depreciation and amortization), which
implementation in early 2016, there were
dropped 21% in the same period.
lower demands on information technology
In the last year, our investments amounted
and systems investments throughout the
R$ 51.3 million, a reduction of 47.1%
year.
207,6
199,4
2015
2016
2015
2016
compared to 2015. This difference is a
Total Gross Revenue (R$ million)
T
free cash, a number R$ 94.7 million higher
W
than that observed in 2015. At the end of the
implementation of the strategy based on
period, there was R$ 204.8 million in cash
Product and Store (P & L), which, together
and financial investments expenses, and net
with economic recovery, should contribute
cash of R$ 177.0 million.
to the recovery of the sales growth and
In the year, the portion intended to
consequent improvement of results
shareholder’s compensation amounted R$
throughout the year.
199.1 million, which represents 99.8% of the
The developments carried out in the Product
net profit for the period (payout ratio). Of this
fronts become more evident.
total, R$ 124.1 million had already been paid
All as brands add changes to the fall and
in 2016 as dividends and interest on own
winter collections of 2017, with innovations
capital (JCP).
in design and Good Value for Money, which
he lower need for investments and working capital favored the generation of R$ 209.4 million in the
e started 2017 expecting a steady improvement of the economy and growth
of the Brazilian GDP. Our focus is on the
is reflected in the growth of orders from both franchise channels and multi-brand stores in the latest showrooms.
Annual Report | 56
GRI 103-2 | 103-3
GRI 103-2 | 103-3
Annual Report | 57
Distribution of Added Value
C
ia. Hering’s added value in
From the total distributed, we highlight the
2016 amounted R$ 723 million,
portion intended for compensation, benefits
representing a decrease of 7.6%
and FGTS of employees, which accounted
compared to the previous year, mainly due to
for 34% of the amount.
the lower revenues in the period.
Distribution of Added Value (DVA) in 2016 (R$ thousand) 2016
R$ 75.350
10%
R$ 243.326
17%
2016
R$ 85.137
12%
R$ 192.967
27%
Distribution of Added Value (DVA) in 2015 (R$ thousand) 2015
R$ 149.131
19%
R$ 132.039
17%
R$ 74.906
10%
Annual Report | 58
R$ 247.809
32%
2015 R$ 176.085
23%
GRI 103-2 | 103-3 | 201-1
“
“
34%
R$ 124.067
Here we dress up life
Annual Report | 59
Annual Report | 60
“
Our history, woven over a century ago, interlaces people who dream and make their dreams come true. People who accept the challenge of the unknown and undertake it.
“
Dreams that take shape, color and texture in the hands of those who dare and transform.
Here we dress up life. Annual Report | 61
Our relationships With our network performance model, we share with all publics our purpose of Dressing Up Life, as well as the commitment to the construction of a fair and sustainable fashion chain.
T
hrough communication channels, programs and actions, we promote the engagement of our suppliers, employees, customers,
consumers and the communities surrounding our industrial sites, focusing on entrepreneurship and mitigation of social and environmental impacts. We support and encourage entrepreneurship by connecting suppliers, representatives, multi-brand retailers and franchisees that promote job creation and income generation in all regions of the country. In our network, we encourage the formal labor relations, the respect for human rights and the adoption of the best management practices to strengthen all businesses.
To enhance this positive interaction with
have six stores, our partnership with ADIAL
our chain, we take part in associations
(Association for the Industrial Development
and endorse external commitments that
of the State of Goiás) contributes to our
are aligned with our values and have the
performance as an agent for change and
capacity to provide greater capillarity to
development of the municipalities in which
the dissemination of the best practices. We
we operate. As a publicly-held company,
participate, for example, in the Management
we also participate in ABRASCA (Brazilian
Committee and in the Working Group (WG)
Association of Publicly-Held Companies),
Committee of ABVTEX (Brazilian Textile
an important space to exchange good
Retail Association), which brings together
accounting practices and service the
fashion retailers and promotes an extensive
investor’s market.
certification program as well as compliance
Our way of contributing to the sustainable
monitoring of suppliers. Learn more about
development is further optimized by the
how we operate on page 76.
activities of Hermann Hering Foundation,
We were one of the companies that, in
responsible for the management of Cia.
2005, founded the SCMC movement (Santa
Hering’s social investments. The institution
Catarina Fashion and Culture), with the
formalizes partnerships with organizations
purpose of sharing knowledge about fashion
and movements to carry out projects such
and design with educational institutions,
as the Affective Weave, which benefit local
students and other companies, strengthening
communities and foster entrepreneurship in
the textile segment and the fashion and
the fashion chain (read more on page 96).
design chain in the state. In Goiás, where we
ut ore abo m d a e R on ticipa ti our par ms an d in for u ge s on pa n o i t a i c asso 107
Annual Report | 62
GRI 102-12 | 102-13
Annual Report | 63
Employees We dress life with contact and affection, life clothed with aliveness! That’s why our closet is filled up with emotions. We’re essentially casual and always authentic!
“
D
ressing Life” is what connects us, is the purpose that directs us to build good
relationships with our partners. “Dress up Life” means to recognize that each of our 7,700 employees is important to generate value and to strengthen the relationships existing in our network. It is to value our history and build the future on a daily basis with commitment, partnership, dialogue and cooperation.
Our people management is based on three principles:
To establish a single culture, a single vision and a single purpose: Dress Up Life reflects the experiences of our employees over the 135 years of history of Hering Company. Connected to a large network, people who share our values and culture find opportunities to innovate, develop and share experiences.
To Ensure that people are trained and engaged in the chain and with the chain: the professional development occurs in face of new challenges and through continuous learning. To contribute to the growth of our employees strengthens their engagement in the chain and with the chain.
Annual Report | 64
Have the right person, in the right place and at the right moment: to evaluate and recognize employees for their skills and accomplishments broadens their engagement with our strategic objectives. To retain talents in our company boosts our growth and contributes to the development of professionals who know and connect to the business.
Annual Report | 65
Profile of our Employees
W
Development
e are more than 7,700
In the year, the number of temporary
employees working in the
contractors increased by 92%, due to the
South, Southeast, Midwest
extension of contracts for store teams in
and Northeast regions,
Natal. This variation in the year-end period,
where we have our industrial operations,
the most heated period for the retail, is the
administrative structures, management of
greater seasonality in our activities and
brands and products and proprietary stores.
occurs to guarantee the quality service to our
By the end of 2016, women represented
consumers.
about 72% of our employees.
Total employees
Dress Up Life is to be the owner of your own professional development and choose the paths and challenges that you want to face. We believe that Cia. Hering can offer learning and growth opportunities to all employees. When they match with the employees’ professional goals, we build an organization with the right people in the right place.
W
e understand that the perfect development model combines formal and
practical learning, which are experienced and faced in each new challenge and discovery. Such model can be divided as follows:
10% 2.116 is the learning that results from the
5.632
practice, in daily working activities.
70% 20%
314 7.434
is the formal education.
is the development that obtained from others.
re See mo on the details of our profile team on 6 page 10
Annual Report | 66
GRI 102-8
GRI 103-2 | 103-3
Annual Report | 67
Our training actions are designed and conducted aimed to supplement, support and speed-up the daily learning of our employees. In 2016, we conducted 35 thousand hours of in-company training. Technical-functional training for industrial operations and sales force employees represent the highest volume of hours and relates to the activities required for the function.
T
Average hours of classroom training per employee*
2016 Mulheres 0,0
Homens 5,3
Total 4,6
he contents for leadership
Hering’s succession process.
Board
positions are focused on business
The trainings conducted in-company are
Management
16,4
11,9
13,4
management and strategy. The
evaluated by the participants and the results
Coordination
4,7
4,5
4,6
greatest volume of hours intended to this
are used to make changes to the contents or
Administrative
2,1
2,4
2,2
public was mainly for managers, thus
to develop new actions.
Operational
4,4
6,2
4,9
Total
4,2
5,6
4,5
strengthening the leadership skills and Cia.
* Covers only training in company. Training hours for presidency and board are not considered, since they took place at events and external activities.
Annual Report | 68
GRI 103-2 | 103-3 | 404-1
GRI 103-2 | 103-3 | 404-1
Annual Report | 69
Talent management
G
Safety of Employees
evaluating employees’ performance. All
In 2016, we included in the GIP process the
D
that can not be done safely and with risk
five principles were also disseminated and
professionals hired at least 3 months before
operational staff from industrial plants. In
prevention.
reinforced in our internal communication
the beginning of the evaluation cycle take
this group, given the large number of people,
In 2016, we made significant advances in the
channels and in an explanatory booklet,
part in the process, which includes the 360
the feedbacks were made at the beginning
sense of avoiding accidents and increasing
additionally to the SIPAT (Internal Week for
evaluation (managers, pairs, colleagues from
of 2017. Additionally, the employees of
the safety of our employees in the worksite.
Occupational Accidents Prevention).
other areas and self-assessment), formal
administrative areas, brands and products
In this year, we launched the Occupational
feedback from the manager to the employee,
were evaluated, as well as the store teams,
definition of PDI (Individual Development
whose process is carried out on a semi-
Plan) and settlement of individual goals for
annual basis given the retail dynamics.
IP (Integrated Performance
ensuring the monitoring of all stages, as
Management), implemented since
well as the availability of information to the
2013, is our annual process for
employees evaluated and their managers.
ress Up Life also means wearing
Health and Safety Principles and our
health and safety in everything we
managers were trained to disseminate in
do. No activity or task is so urgent
their units the concepts proposed. The
the next cycle. GIP is fully registered in a specific system,
Principles of Occupational Health and Safety
Evolution of GIP in Cia. Hering 2013
2014
2015
252 1.162 employees evaluated
employees evaluated
New competency model.
Inclusion of store managers, analysts and process specialists.
360 evaluation for board members, managers and coordinators.
Cascading of goals to all managers.
2016
2.200 6.060 employees evaluated
employees evaluated
Inclusion of assistants in the process.
Inclusion of the operational teams of the industrial units in the process.
Implementation of pilot project with the operational public (quality area in SC). Cascading of goals to all publics evaluated. Coaching, mentoring and counseling process.
Annual Report | 70
GRI 103-2 | 103-3 | 404-3
Semi-annual evaluation for store teams.
1. Ensuring a safe
2. Training and
3. Complying with
and healthy work
development
safety policies and
environment
W
standards
4. Valuing the safe
5. Communicating,
behavior
informing and acting
e also implemented the Loss
guidelines of the OHSAS 18001 standard
Control program was also
to determine controls, liabilities, and safety
implemented in the period,
procedures in factories and offices.
which formalizes the physical and material
Another improvement registered in the year
losses incurred as a result of accidents
was the expansion of the Communication
as may occur in our sites. Although our
tool, launched as a pilot project at ItororĂł
operations are not certified, we follow the
unit in 2015, and later extended to all units. GRI 103-2 | 103-3
Annual Report | 71
The tool is a formal channel through which
performance and contribute to the
any employee can fill out a form to send
reduction of accidents. The indicators
questions, suggestions and complaints to
related to the theme are monitored
our occupational health and safety teams.
monthly, including the Safety Index, which
We also cherish and recognize good
combines frequency and severity rates. In
practices. The Record challenge is a
2016, the Security Index remained at 2.85.
celebration initiative for units that manage
Thus, we reach the goal set for the period –
to be four months without registering
to be below 3.27.
accidents requiring medical-leave. The celebration takes place in the cafeterias and encourages employees to adopt safer
A
Among the main types of occurrences
falls or slips. Neither fatalities nor cases of
recorded among our employees are
occupational diseases involving our staff or
injuries of low complexity, mainly due to
third parties were recorded for the period.
ll accidents requiring the employee’s medical-leave are communicated to the company
behaviors, as well as to be aware of risky
leaders by e-mail. Thus, we share the
situations to which colleagues may be
information on the causes of occurrences
exposed.
and cause managers to verify - and
In our management model, in addition
mitigate - similar risk situations in the other
to complying with all legal requirements,
units.
we adopt practices that improve our
Safety Index
(the lower, the better)
t how re abou o m d a f Re safety o itor the n o m e ir w th d ees an d y lo p m our e e 109 on pag parties
5,47
3,43 2,85
2014
2015
2016
In 2016, we registered improvement in all indicators of health and safety at work compared to the previous year:
Accidents frequency rate
Lost-Days Rate
(number of reportable accidents for every 200,000 man hours worked)
(days lost for every 200 thousand man hours worked)
4,19
53,7%
less accidents that do not require medical-leave
19,8%
less accidents that require medical-leave
15,88
17,7%
2,67 10,41
less days lost due to medical-leave
2014
Annual Report | 72
GRI 103-2 | 103-3 | 403-2
9,08
1,62
2015
2016
2014
2015
GRI 103-2 | 103-3 | 403-2
2016
Annual Report | 73
Volunteer Work
Communication
Dress Up Life also means to cooperate and to undertake collective works for a better society.
T
hrough Program A.GENTE QUE FAZ, we act to support and promote the volunteer work in our
units and stores, contributing to the formation
O
ur communication practices and management approaches contribute to the alignment of employees with the company’s strategies.
of professionals increasingly connected with the vision of acting in a network, besides encouraging the construction of a collaborative, entrepreneurial and learning space. A.GENTE QUE FAZ aims not only to stimulate a citizenship culture but also to develop competences useful to the company, such as teamwork and project leadership. Through the program, Cia. Hering is present and promote positive impacts in communities
Endomarketing
Management Approach
• Celebration of
• Coffee with the manager
commemorative dates
• Coffee with the director
• Extranet
(Mother’s Day, Father’s
• DSQ (Safety and Quality
• Digital Wall
Day, Labor Day and
Dialogue)
Christmas)
Communication Channels • Intranet
• Communication Agents
• Basic Day • Day of Kindness • Sweet Home Company
surrounding the industrial, administrative and store operations.
Over
55 actions
Over
200
volunteers
carried out
Over
700
hours
undertaken
Over
R$
100
thousand raised in charity bazars
12 institutions
benefited in 2016 (SC, SP, GO and RN)
Annual Report | 74
Annual Report | 75
B
Suppliers
T
y the end of 2016, we had 850
The volume of purchases increased by
active suppliers of inputs, 444 of
9% among the factions, especially on the
factions and 181 of sourcing. Our
Midwest region, where there are better
expenses with the suppliers of the three
competitive conditions for our operations.
groups in the last year amounted R$ 805.5
About 70.5% of purchases were ordered
he suppliers play an important role
consumers’ needs.
million, 14.3% less than in 2015, given the
with suppliers within Brazil, representing an
in our network complementing
Our supply chain is divided into three main
scenario of greater economic downturn. The
increase of 23% compared to 2015. This
our own production and ensuring
groups:
most significant reduction was in sourcing
result was driven by the greater participation
purchases, because we directed part of the
of national partners in the purchases of
production to our own units.
inputs and sourcing and by the increase
About 50% of the total expenses was
on the percentage spent with factions - all
directed to the suppliers of inputs, 27% to
national suppliers located near the industrial
the sourcing and 23% to the factions.
units.
that the collections of all brands meet our
Inputs, raw material and services: suppliers of fabrics, jersey, buttons, lines, among other materials, and suppliers of services
tion informa e r o m See asing r purch u o t u o ab local e nt with m e g a n ma ge 108 s on pa r ie l p p su
that enable the logistics or support areas of the company.
Proportion of expenses with local suppliers (%)*
Factions: small-sized partners located near our productive units performing activities such as sewing, embroidery, laundry, among others, which complement our own production.
Sourcing: national and international manufacturers from which we purchase finished items for our collections. We add accessories, footwear, handbags, wallets and other garments to our product mix through our partnerships with these suppliers. all suppliers located in Brazil were considered a location. In the case of factions, the suppliers are located in the same regions where Cia. Hering units to which their products are supplied are located.
Annual Report | 76
GRI 102-9 | 103-2 | 103-3
GRI 102-9 | 102-10 | 103-2 | 103-3
Annual Report | 77
Monitoring of Factions
S
ince 2012, we have developed the
relationship with partners are performed
Sustainable Fashion program, which
by different areas of the company and
aims to stimulate our suppliers to
monitored by the Sustainable Fashion
adopt the best management practices,
Committee, whose multidisciplinary
mitigate risks and enhance the positive
formation features employees from different
social and environmental impacts of
areas. In 2016, the Committee recorded ten
their activities. The actions related to the
formal meetings.
T
he factions with which we
compliance with environmental legislation,
work are important source
we have compliance teams in each region
of employment and income
where we operate in partnership with these
generation for the regions where our units
partners (South, Midwest and Northeast),
are located. in order to mitigate the risk
which monitors and encourages the best
of precarious labor relations and non-
management practices.
The 444 Cia. Hering partner factions create
Sustainable Fashion on four fronts
1.492 jobs in Santa Catarina
Formalization: all our suppliers undertake to respect our Suppliers’ Code of Conduct. The
3.376
jobs in the Northeast (RN, CE and PB)
4.106 jobs in GoiĂĄs
document is available to all interested parties at Cia. Hering’s website. Monitoring: we promote audits in factions per internal teams, assessing the compliance with environmental and labor laws. Moreover, sourcing suppliers are further certified by ABVTEX.
W
henever a new supplier is
the management of our partners, which helps
hired, we perform an on-
to mitigate risks in our chain.
site audit for approval of its
facilities. Once a year each faction undergoes new audits, without prior scheduling, to evaluate the working conditions and regularity of the documentation.
Third-party regularization index (November/15 to October/16)
82%
Once a month, all suppliers also provide Relationship: We offer the Ombudsman
a proof of tax collection and payment
channel (ouvidoria@ciahering.com) for
of wages and labor obligations, such as
receiving claims related to the conduct
FGTS and INSS. The consolidation of these
of suppliers that are inconsistent with the
documents is used to compose the Third-
guidelines provided in our Code of Conduct
Party Regularization Index, which measures
or the legislation. It is also open to questions
the compliance of our factions and influences
related to our conduct before the supply
the performance evaluation of our industrial
chain.
In addition to the Regularization Index, the
managers.
Chain Turnover is another relevant indicator
In order to calculate the Regularization
in our performance model. It reflects the
Development: we promote meetings
Index, we consider the suppliers with at
average number of audits per supplier
with Suppliers and the offering of courses
least three-month billing with Cia. Hering
throughout the year and represents our
and lectures seeking to promote the
between the months of November and
efforts to monitor this chain. The frequency
management skills of partners.
October of the following year. In 2016, the
of audits varies according to the contracts
third-party regularization index reached 82%,
signed and the performance of each partner.
an increase of 10 percent compared to 2015.
In 2016, we carried out 1,527 audits,
This improvement reflects the improvement in
achieving a turnover of 3.39.
Annual Report | 78
GRI 103-2 | 103-3
72%
2015
2016
GRI 203-2 | 103-2 | 103-3
Annual Report | 79
Chain Turnover
When the audits carried out by us identify any pend-
(average audits per supplier)
ing matters or need for improvement, we define action plans together with our suppliers in order to solve the problems found. In these cases, we make new 3,39
visits to the company during the year to verify the compliance with the established commitments. This process is formalized in our Compliance Regulation and is based on a checklist with 16 evaluation dimen-
2,09
sions (see table). It covers 100% of the factions we work with and a few other sourcing suppliers. Read 2015
2016
more about our supplier assessment on page 82.
Sourcing Management Sourcing suppliers are companies located in Brazil and abroad from which we purchase finished products, such as accessories, garments, jewelry and shoes to complement our collections. By the end of 2016, we had 79 Brazilian suppliers and 102 international suppliers - mainly located in Asian countries.
M
ore than 99% of partners located in Brazil are certified by ABVTEX, whose audits evaluate labor
practices, aspects of health and safety, environmental management, among other aspects. Besides requiring the certification, we promote compliance audits in line with those applied to factions in our network. In 2016, we audited 34 national sourcing providers and another 33 second-level audits – in the service providers of these companies. At the international level, we seek to work with partners with at least one of the following
What we assess in our suppliers
certifications, which are recognized for ensuring the adoption of best management practices: BSCI, WRAP, SMETA and SA8000. • Formalization of the company
By 2016, 22.6% of suppliers had at least
• Occurrence of child labor
one of these certifications. Those that fail to
• Occurrence of forced labor or
present a certification are either old or small
slavery-like work
partners, cases in which we have evoked our
• Use of foreign workers in irregular
best efforts to stimulate them to obtain the
conditions
certification in order to allow the maintenance
• Presence of minors in the workplace
of our commercial relations.
• Guaranteed freedom of association • Mechanisms to fight discrimination • Mechanisms to fight abuse and harassment • Health and safety at work • Monitoring and documentation • Overtime Compensation • Control of hours worked • Payment of benefits • Environmental management • Monitoring of the production chain* • Validation of the subcontractors’ list* * For sourcing suppliers.
Continuous improvement
A
mong our sourcing suppliers’
for improvements.
relationship practices, we promote
In the Suppliers’ Meetings, we discuss
the continuous improvement and
together with our partners the main
gains in productivity and quality among our
challenges of the fashion chain and share our
partners. Since 2008, we have carried out
knowledge and good practices. Furthermore,
a monthly evaluation of the delivery quality
we disclose the three best suppliers of the
index (right amount of items in the lot, levels
domestic ranking, thus recognizing their good
of production defects, etc.) with individual
performance.
feedback to each supplier, and suggestions Annual Report | 80
GRI 103-2 | 103-3
GRI 103-2 | 103-3
Annual Report | 81
Supplier Evaluation
I
Management of labor risks
n 2016, 588 suppliers from our
our partners, which meet the requirements
basis were evaluated (combining
assessed more often, and the refinement
factions and sourcing companies).
of our base, since the evolution in the
We identified the need for improvement
compliance process has caused us to
in on-site infrastructure, employees’
terminate agreements with suppliers that
safety, document controls and records
do not meet our requirements and do not
in 412 of our suppliers. In all cases, we
show adherence to our principles.
recommended action plans and monitored
I
n the audits that carried out in our
claim is reported, it is immediately assessed
suppliers, ten evaluated items are
and can be solved in the same day or within
considered mandatory and cause
5 business days (depending on the location
the immediate interruption of the supply
of the suppliers involved in the case and
contract, if noncompliant. These include the
the need to involve different areas of the
In the environmental sphere, suppliers
occurrence of child labor, forced labor or
company).
their compliance through subsequent
with a relevant risk are laundries, mainly
slavery-like work, work of undocumented
audits. We terminated supply agreements
because of the use of chemicals and the
aliens and the presence of minors in the work
with 13% of the companies within
generation of effluents. We monitored the
environment. In 2016, we do not identify any
this scenario for not implementing the
performance of these partners with regards
such occurrences among our suppliers.
necessary corrections and noncompliance
to the compliance with the restrictions and
We also act raising awareness
with the standards required.
the validation of environmental licenses,
of our partners, issuing
The number of failure for mandatory items
and no real impact was identified in the last
recommendations at each
dropped by 30% compared to 2015. This
year.
visit and including the
evolution reflects both the improvement of
I
n the last year, the channel received 37 communications. Among which 34 were claims, but none of them were related to the occurrence of child labor, forced labor or slavery-like work in our suppliers. There was an increase in the number of
topic both in our Code
communications in comparison
of Conduct and the
with previous years (there were
agenda of Supplier’s
7 in 2015 and 4 in 2014), and
Meetings.
we believe this fact relates
I
to the greater trust of our n addition to raising awareness before our partners, we have a team with
stakeholders in the channel, and the understanding that we want to act as partners, stimulating the adoption of good
nine employees and a proprietary system for
practices and having a positive impact on our
conducting audits. In 2016, we started using
supply chain.
an application that enable auditors to have more agility in their analysis and notes.
Another important factor is the increasing
We have an open channel (ouvidoria@
debate about the liability of the fashion
ciahering.com.br) to receive claims related
chain within the civil society, which causes
to irregularities in our suppliers. Our
more people to engage in identifying the
Ombudsman’s Office allows for anonymous
traceability of items acquired in our stores.
claims and, in all cases, the identity of the authors is kept confidential. Whenever a
Annual Report | 82
GRI 103-2 | 103-3 | 308-2 | 414-2
GRI 102-17 | 103-2 | 103-3 | 408-1 | 409-1
Annual Report | 83
Franchises and multi-brand Franchises We are the largest apparel franchise network in the country, with 299 franchisees (totaling 746 stores) selling our products to final consumers.
O
ur network operational model allows the generation of value for these audiences by offering quality
products that deliver our value proposition (Good Value for Money) to our consumers. Every year we conduct a survey with our franchisees aimed at evaluating the level of satisfaction with the services provided,
Network Supply
S
ince 2015, we have structured a project to improve the supply of stores focusing on reducing inventories of past collections. In 2016, the evolutions made in the model included the biweekly recommendation of assortment for each store, considering factors such as location of the establishment and frequency of consumers. Addition to contributing to the operational management of franchisees and improving profitability by reducing re-pricing, this model reduces product disruption, enhancing the consumer purchasing experience. In 2017, we plan to move forward with the
definition of the assortment for the chain and the development of technologies that allow the quick and expeditious replacement of basic parts. We also intend to expand the use of VER (Electronic Visitor Report), a digital tool that improves the monitoring of the store performance and action plans to increase sales. Over the past year, we have conducted a pilot initiative in the Southern Region to test the app and identify gains in aspects such as customer purchasing experience and visual merchandising. The investments in training and development favoring these partners’ business management development.
Our approach goes beyond the mere
On-site training
commercial behavior, and seek to contribute
In addition to the virtual platform, we also
to the improvement of the operational
invested in on-site training to reinforce the
management of the stores and the
customer culture. These capabilities impact
commercial model. One of the main tools
both the franchisees and the employees
we have to improve this relationship are the
working in retail. In 2016, over 4,700 people
network trainings, structured as follows:
were trained in these capacities. Among the
Portal Tecendo Conhecimento Distance
trainings applied in 2016 for this audience,
Education Platform (EAD), which offers
we highlight:
identifying opportunities for improvement and reinforcing the strengths of this relationship. Aspects such as product, purchasing planning, delivery logistics, sales support, operational support, information and management, suppliers, relationship, corporate image and commercial conditions are evaluated. In 2016, 68% of the franchisees were satisfied with the actions developed.
Cia. Hering franchisees generate*
courses and e-learning training for managers and supervisors of proprietary stores and franchisees. In 2016, the portal had over 30.3 thousand accesses and 1,329 thousand
8.600 jobs in Brazil
180
jobs in Latin America (Bolivia, Paraguay and Uruguay)
users.
• Integration Program with 18 new franchisees. • PDF (Franchise Development Program), with 53 participants. • PDG (Management Development Program) with 54 participants. • TG (Management Training), with 40 participants.
Once a year, we assess the satisfaction of franchisees with the content of Tecendo * Numbers are estimated based on the average number of employees per store.
Annual Report | 84
GRI 103-2 | 103-3
Conhecimento through a survey. In the last year, the approval rate stood at 91%, with actions to improve the clarity and objectivity of information presented.
GRI 103-2 | 103-3 | 203-2
Annual Report | 85
Customers
Multi-brand Our network also connects 17,500 multibrand stores, which buy our collections and enable our products to be present in more than 3,000 municipalities, in all Brazilian states. In this scenario, 423 partners take part in the Qualified Retail segment - stores where our products represent at least 80% of revenues.
T
he goal of Qualified Retail is to guide the point of sale as to the proper presentation of our brands, through standardization
of the store, application of branding and visual
Here, we dress up life Here, we dress life since its first steps, recalling the emotion of the first stolen kiss, the joy of the first party with friends, the greatest achievements. We wear the moments that are only yours.
W
e work everyday to dress the life of our customers with emotion, joy and celebration.
Those wearing our clothes is the core o four business and our strategic planning.
merchandising. All participating customers receive
Therefore, we offer products as a smart
differentiated support in their operation.
purchase option, which makes people perceive and experience the Good Value for
The service to multi-brand retailers is done through
Money (read more on page 28).
300 commercial representatives, who received investments in distant and on-site training on routine
Through the social media and promotional
management (agenda planning, time-management
actions, we have established a close bond
and management of prospecting and loyalty actions),
between our brands and their audiences,
as well as support for multi-brand customers on retail
increasing the recognition of our products’
issues - such as store layout, inventory optimization
features. In 2016, the number of followers
and visual merchandising.
of Hering Kids on Facebook and Instagram
All representatives attended trainings, in groups
increased by 260% and 240%, respectively.
segmented according to the region. Therefore, we
On the same platforms, PUC presented
have broadened our positive impact on the chain,
an
sharing Cia. Hering’s knowledge and market expertise.
increased their followers by 128% on
increase of 113% and 350%. DZARM.
Playing Manual, launched by Hering Kids, is an example of the way we act to be present in all moments o four customers’ lives.
W
e seek to listen and to know our customers through the development of researches
that, besides supporting subsidiarem the development of new collections, show us the opportunities to improve the way our brands operate and position themseves in the market.
Instagram and by 26% on Facebook. The
Customer service channels SAC – Customer Service | 0800 47 3114 | sac@ciahering.com.br
Annual Report | 86
GRI 103-2 | 103-3
Annual Report | 87
Hering, a Democratic brand Our customers elected Hering as one of the 20 most democratic brands in Brazil, in 2016. The ranking was prepared by magazine Consumidor Moderno, in partnership with the consulting firm A Ponte EstratĂŠgica.
We want our consumers always close. In 2016, three of them - who use Hering Card in our stores - were invited to visit our headquarters in Blumenau (SC), to get a closer look at the stories and relationships that stitch together our nature. Three employees from proprietary stores and franchises were also present in this visit.
T
he study conducted discussions panels with consumers (focus
group) and a quantitative survey with more than 1,200 people. At the end of this process, the most qualified brands were identified
Here we dress up life.
in attributes such as consumer identification, accessibility, consistency and engagement.
Annual Report | 88
Annual Annual Report Report | 89| 89
Environmental management
Health of our consumers
W
e are committed to offering
to extend to all our lines the restrictions
reliable products that do not
on chemicals applicable to children’s
pose any health risk to our
products. Thus, we not only reduce risks to
consumers. This concern is essential for
our customers, but also optimize internal
meeting the quality requirements associated
monitoring and quality efforts.
with our brands, in line with the values
When our consumers have any type of
we believe in. In this sense, we carry out
complaint related to these aspects, we
several analyzes during the development
receive the complaints through the Customer
and production process, among which we
Service Department or the store teams of the
analyze the composition of yarns, dyes and
different channels in which we operate, then
chemicals and the solidity of dyeing and
we investigate the causes of these problems
at a small hydroelectric
prints. All our products go through these
in depth. Worth mentioning that such
assessments, including audits of the factions
occurrences are extremely rare.
plant, installed in Foz do
working with us.
T
Before launching a new product, we develop usage tests with customers and employees,
the electric energy we consume is generated
Chopim, in the state of ParanĂĄ.
o exemplify the concern we have, we are rigorously assessing the application of compounds that
from which we can identify improvements
act as insect repellents in our items. This
in the items. When we start the production,
is a market trend we will only adopt in our
we monitor through the FISPQ (Chemical
portfolio after careful analysis of its possible
Product Safety Data Sheet) the compliance
effects, ensuring the safety of consumers
of items with our health and safety standards,
and their satisfaction with the quality of our
and any noncompliant item are to be
products.
disregarded. Another practice adopted is
Approximately 80% of
T
he management of the
(Internal Commission for Conservation
environmental impacts in our
and Energy), a group responsible for the
hybrid production model,
control and evaluation of water, energy &
which combines our own production with
fuel consumption, waste management and
outsourcing, is complex and demands
effluents indicators. CICE has a monthly
investments in continuous chain monitoring
meeting to analyze the results obtained
and process improvements to mitigate risks
in the industrial plants and the possible
to the environment and to our reputation.
opportunities to develop improvement
In our industrial plants, we adopt the best
projects.
practices and technologies to increase our
A
efficiency, in addition to complying with all legal requirements. In the supply chain, we encourage our
Annual Report | 90
GRI 103-2 | 103-3 | 416-1
mong the aspects monitored by ICC is the validity of all environmental licenses necessary
partners to make the same commitments and
for the operation of our plants. In our
to have their procedures verified and audited
structure, we have an area aimed to assist
in order to ensure they also act in compliance
both in these licenses renewal processes
with applicable rules and regulations.
and in the fulfillment of the environmental
The monitoring of our performance and
constraints. Based on this management
the proposition of actions that improve
method, we did not incur fines and sanctions
our environmental performance are
for noncompliance with environmental
discussed within the scope of the CICE
regulations in 2016.
GRI 103-2 | 103-3
Annual Report | 91
Water management
T
he constant search for solutions
collect water. The raw material is collected
that reduce the need to use water
from Rio Ribeirão do Gato and undergoes
in our production processes
chemical treatment and filtration before
meets the requirements of environmental
being used in production. After this step, the
agencies, concerned with the preservation
generated effluents are treated and the water
of water bodies, and local communities less
is returned to Ribeirão da Velha water body,
exposed to resource scarcity in the region.
according to the environmental legislation
In the design of a new industrial plant or
specifications.
in the purchase of new equipment, water
The unit is also engaged in reusing water
consumption is one of the aspects evaluated
for washing sidewalks and for toilet water
for the decision making of investments.
supply, and has a modern water treatment
Itororó unit, where we process jerseys
system by reverse osmosis, in which part can
and rotate stamping, has the highest
be reused in the process. At the end of the
consumption of water within our production
year, the unit also received a system capable
process, but we did not record any significant
of collecting rainwater to be used in the
impacts on the water body from which we
process.
T
he water consumption
with the purpose of increasing the quality
measurement covers the units
and durability of the product, also brought
of Santa Catarina, Anápolis,
impacts on the total water consumption.
Goianésia, Paraúna and Parnamirim, and
In view of this scenario, we understand the
the data were obtained using flow meters.
relevance of developing our processes and
The variation between 2015 and 2016
we are investing in new dyeing Technologies
reflects the increase in the production of
and new dyeing and washing options for
items demanding greater consumption of
prints so as to allow a greater eco-efficiency
water in their dyeing or printing processes,
in our operations, following the market trends
such as dark color products or products
and our consumers’ expectations in the
with filled-background prints. The bio-
delivery of the product.
polishing process, implemented in 2016
Waste Management
I
n our production process, the largest
use state-of-the-art software and machinery
amount of waste generated is related
to achieve the greatest possible use of the
to the production waste and the sludge
material and decrease the generation of
produced at the effluent treatment plant.
waste. Currently, we have a reuse rate of
Our management is focused on reducing
around 80% of the raw material.
ur headquarters in Blumenau,
this generation and ensuring the appropriate
Leftovers and flaps generated in the
supplied with water collected
disposal of these materials, in compliance
production process are mostly marketed
from the dam built on-site,
with the environmental legislation.
to a partner who resells this material. Part
adopted the same measures to increase our
The effluent treatment plant of Itororó, where
of this material can also be reused for the
eco-efficiency. In the other units, the supply
the most demanding water consumption
production of new items or promotional
is made through artesian wells or through
production processes are concentrated, has
items, such as those for Mother’s Day at
the local public water system. In these
technologies that reduce sludge generation.
Hering stores (read more on page 35). Or
poles, the use is practically all intended for
In addition, the service provider operating the
even in projects like Trama Afetiva (read
human consumption and, therefore, the
facility is encouraged to always maintain the
more on page 98). In 2016, our operations
reduction actions are focused on campaigns
minimum level of production of that waste.
generated a total of 1.1 million tons of waste.
and awareness programs. In 2016, our water
In the areas for jersey and fabric cutting, we
O
consumption totaled 1.7 million m³
Volume of water captured per source (in thousand m³)
Annual Report | 92
GRI 103-2 | 103-3 | 303-2
Non-hazardous waste per disposal method in 2016 (t)* Landfill Reuse (Sales of chips to third parties) Recycling (paper, cardboard and plastic) Total * In 2016, 1,666,948m3 of sludge from effluent treatment were also discarded. We do not generate hazardous waste in significant volumes in our operations.
1.137.450 2.255 686 1.140.391
GRI 103-2 | 103-3 | 303-1 | 306-2
Annual Report | 93
Other
initiatives
Traceability of paper: Bags and packaging used in Hering Stores are certified by the FSC® (Forest Stewardship Council), what ensures the legal origin of the wood used in the paper-making process and the use of good forest management techniques.
Pioneer Reforestation: In Blumenau, where we are headquartered, we maintain 8.5 million m² of green area, of which 750 thousand m² correspond to legal reserve. The area purchased by the founders of Cia. Hering was deforested and reforested, an initiative that gave Bruno Hering the title of “pioneer of Brazilian reforestation”, in 1906.
Annual Report | 94
Logistics: Our products are distributed throughout Brazil through two Distribution Centers, which receive packaged and labeled products from production plants and outsourcing suppliers. In this sense, we have been able to optimize delivery routes, thus reducing environmental impacts and transportation costs.
Annual Report | 95
Hermann Hering Foundation
We believe in the creative and entrepreneurial potential of people and want to contribute to building a society where talents are well used to build stories of capacity and courage.
T
Entrepreneurship
T
he pillar covers qualification
70 small companies, generating productivity
programs targeted at local
gains and reducing costs and production
communities around our industrial
time. Since 2014, when the project began,
units to provide knowledge and generate
252 factions have been trained. The Art of
skilled work opportunities. In the last year,
Sewing project began in the last year and
the projects carried out were: the Production
was carried out in the region of our unit in
Chain - Sustainable Fashion and the Art of
São Luís de Montes Belos (GO), aimed at
Sewing.
training local residents in the profession
In the Production Chain - Sustainable
of industrial sewer. The action relied on
Fashion, held in partnership with
the partnership of Senai Goiás and local
Sebrae, factions are trained to stimulate
municipalities, which offered an area for the
entrepreneurship, improve people
conduction of technical courses. The first
management, increase product quality
two classes, each with 16 students (men and
and improve financial and production
women), took place in the municipalities of
management. In 2016, the initiative impacted
Iporá and Bom Jardim (GO).
hat is what Hermann Hering Foundation works for; while remaining faithful to the principles
that led to its creation in 1935. The Foundation was born to support employees in aspects such as education, health and housing. The institution has evolved in its performance and governance model and is currently responsible for the management of our private social investment. With investments, it promotes entrepreneurship and the social and economic development of communities in the regions where we operate. The projects developed by the Foundation are based on three pillars: Entrepreneurship, Creative Culture and Retail Connection. In 2016, we invested a total of R$ 1,254 million with our own funds and R $ 30,000 raised in accordance with tax incentive laws.
Annual Report | 96
Annual Report | 97
Creative Culture
I
Cia. Hering Memory
and trends in our market. This vision
from many Brazilian states and propose
T
materializes in the project Trama Afetiva,
innovations concerning the use of waste
Hering Memory Center.
which promoted a collaborative learning
from our production processes. Among the
Open and free for the population, the
experience in upcycling (transformation of
creations resulting from such experience are
Museum guarantees a tour throughout
waste into value-added products), in 2016.
products such as the “wall orchid”, a fabric
our history, with interactive resources
In São Paulo, we invited three renowned
structure for setting vertical gardens indoors.
and shows from different periods within
n this regard, we fostered the
Marcelo Rosenbaum and Patricia Centurion
innovative vision of youths, so that
- to coordinate study panels and creative
they contribute with new perspectives
workshops with 11 young designers
designers - Alexandre Herchcovitch,
he Foundation is further responsible for the maintenance of Hering Museum in Blumenau
(SC) and for the coordination of Ingo
the company’s 136 years. The exhibit includes panels and videos about our journey, letters from the founders, statements from our employees, interactive stations with iconic items and campaigns that made history, among
The contents generated in Trama Afetiva and the discussions between the members and project leaders were made available in social networks to broaden the scope of the knowledge developed. Access on Facebook: /FundacaoHermannHering.
other attractions. The museum also has a design room, where visitors can develop items and prints. In 2016, the museum received 16,840 visitors, including 1,908 Brazilian and local students – amounting over 81.8 thousand visitors since its establishment. The Memory Center is an indoor area that ensures the preservation of documents, machinery, work tools, photos and historical records. Kept for decades by our collaborators, this heritage with thousands of items, of which more than 24 thousand have already been cataloged, contributes for the inspiration and development of new collections and are also available to
Retail Connection
O
researchers and students query.
n this front, we work with the
We also want to establish connections with
purpose of preparing youths for a
our consumers, thus creating synergistic
journey of learning and knowledge,
and enriching relationships. We are in the
enabling them a professional performance in
evaluation phase of the projects to be
fashion retail.
encouraged and developed in this front.
Annual Report | 98
Read More Visit Hermann Hering Foundation website http://fundacaohermannhering.org.br/
Annual Report | 99
“
“
Our Annual Report has developed and start being published, as of 2017, in full alignment with GRI (Global Reporting Initiative) guidelines and indicators.
Here we dress up life.
100 Annual Report ||100
101 Annual Report ||101
GRI Attachment About the Report We are one of the first companies in Brazil to adopt the new version of GRI Standards, internationally launched in October 2016.
T
he adoption of these higher global standards for reporting our strategy
1.
Pre-classification of themes: we
channels, such as the Ombudsman’s Office,
analyze benchmarking and studies
the Customer Service Department (SAC)
in the industry, which are topics
and the investor relations’ channel. These
often discussed by the press and the civil
inputs allowed us to understand the context
society, agendas of organizations linked
in which we are inserted and the main trends,
to the fashion chain, and references to
risks, opportunities and expectations of civil
sustainability reports, as well as inputs
society concerning our value chain.
from Cia. Hering’s permanent engagement
and business performance is
another important step in strengthening our accountability transparency towards all our stakeholders. The information presented in this document, for the period from January 1st to December 31st, 2016, was collected from Cia. Hering’s departments and approved by our Management. As in the previous report, published in the first half of 2016, only economic and financial data
2.
Engagement of publics: we prioritize
retailers, shareholders and non-governmental
our stakeholders, taking into
organizations. Then, we promoted a panel
account criteria as the intensity and
for in-depth analysis of the topics proposed
frequency of relationships and the level of
in the query, gathering 6 franchisees and
dependence and influence of the publics
4 consumers for qualitative discussions.
covers the same units considered in the
in relation to the company. From this point,
To ensure alignment of the matrix to our
preparation of Financial Statements and previous
we promoted an online survey with 752
business, we also conducted interviews with
data were not represented, which broadly allows
respondents from different priority audiences:
7 managers of Cia. Hering, thus enhancing
its integration with other company documents.
suppliers, franchisees, consumers,
the these leaders’ vision on key aspects of
In order to continuously improve our Annual
employees, representatives, multi-brand
our strategy and operations.
were verified by external audit. The publication
Report, we count on your feedback regarding this document. Therefore, share with us your impressions, doubts and suggestions through the e-mail comunicacao@ciahering.com.br.
Materiality Matrix
I
3.
Consolidation: the listening and
issues were identified, we also carefully
analysis were consolidated into a
consider the composition of topics that could
materiality matrix, which correlates
represent the main risks, impacts and social,
n 2016, we conducted a materiality
and alignment with strategic perspectives of
process in line with GRI guidelines. In
our leadership.
themes regarding their impact on the
economic and environmental opportunities
order to define the most relevant topics
Structured on three fronts, this process
company and relevance to the public’s
related to Cia. Hering.
for our business and for the decision-making
comprises the principles of inclusion of
decision making process. When priority
process of our publics, we conducted an
stakeholders, the context of sustainability,
intensive study on the external perspectives
materiality and completeness.
trends, the listening to our prime audiences,
Annual Report | 102
GRI 102-32 | 102-45 | 102-48 | 102-50 | 102-51 | 102-52 | 102-53 | 102-56
GRI 102-40 | 102-42 | 102-43
Annual Report | 103
A
s a result of this entire process, we identified five material issues guiding the content of the Annual Report.
Cia. Hering Material Issues
retailers and representatives, we understand
this purpose is key to establishing an unified
our role as “educators of the chain” by
culture and vision. In order to empower and
sharing knowledge and contributing to
engage employees in and to our network,
the development of our stakeholders. We
we encourage the entrepreneurship and the
believe that our positive influence must go
development through experiences provided
beyond the generation of jobs and income,
by our business model, which goes from
seeking to be a benchmark of ethical posture,
the industry to retail. Posing new challenges
Consumer Relations | We are a network
value generation, which involves generating
best practices and values in each of our
aimed at having the right person in the right
company focused on the consumer.
economic value, we also create value for
relationships.
place at the right time matches the employee
Knowing our consumer and building closer
communities impacted by our network.
People Development and Attraction | Our
goals with the company goals, in addition to
relationships every day is how we keep
Connecting and driving a large network
purpose is to dress up life, which connects
drive the growth both of our personnel and
connected to the constant market changes.
of people is the challenge that moves us
us and motivates us every day. Ensuring
our company.
Besides reinventing and broadening our
forward and keeps us in constant evolution.
that our personnel are also connected to
dialogue channels and points of contact with the use of new technologies, formats and languages, we understand the importance
Management of environmental impacts | We live in the present, committed to
of providing differentiated interaction and
everything we believe in and proud of
engagement experiences with our brands
a history marked by responsibility and
as well as the relevance of delivering
environmental awareness. We know that
items according to our consumers’ value
the impacts generated by the consumption
proposition, design and quality expectations.
of water, solid waste and CO² emission are
We are a centennial company, which clothe
global challenges and we are also aware
1 out of 2 Brazilians. We have followed
of the responsibility of every individual and
several movements over the years and we
organization. As part of the society, we
know our role, through our brands, in positive
understand our role in the constant search
reflections on new consumption methods
for eco-efficiency, aiming, therefore, to
and opportunities in the fashion chain.
reduce water consumption, waste generation
O the top of these material issues,
and CO2 emissions in our processes.
Ethics | We are a network organization with
the aspects related to governance &
values essentially guided by respect to all
Accordingly, investing in new technologies,
transparency, ethics & innovation are the
of those somehow connect to out business.
Entrepreneurship and wealth generation
rethinking the use and reuse are developing
core of Cia. Hering, and were considered in
We believe that honesty, commitment and
| We are a network organization and this
processes that are in line with this vision
the construction of content once they are
reliability are essential aspects for ethical and
activity drives us to develop skills and
are premises for the management of
essential to the constant improvement of
business success.
competencies for the engagement and
environmental impacts.
our management and relationships, driving
Governance and transparency | Through
strengthening of this chain. We know the relevant role we play as influencers of entrepreneurship and good management
positive impacts on our networking. Network development | Dress Up Life also means to stimulate our partners to adopt
indicators and targets, the Corporate
Innovation | Innovating is a constant and
Governance & Transparency is connected
determining process for the maintenance
to the long-term constant presence of the
practices and as the protagonist of the
good management practices and share the
individual career journey. Through our
of an organization. We understand that
business. It represents our commitment in
values and commitments of Cia. Hering. With
business model, we contribute to the
innovation is a core topic for the evolution
planning the evolution of material issues, in
our strong and sound business and based
wealth generation in partners connected
and consolidation of material issues in the
addition to implementing, monitoring and
on structured actions and programs for our
to us. Based on the principle of shared
company’s strategy.
communicating processes and results.
supply chain, franchise network, multi-brand
Annual Report | 104
GRI 102-44 | 102-46 | 102-47 | 102-49 | 103-1
GRI 102-44 | 102-46 | 102-47 | 102-49 | 103-1
Annual Report |105 | 105
Additional Information to Indicators
GRI Standard 102-11 | Precaution principle
O
ur environmental investments
like work is reported among our suppliers,
currently meet the legal
the contracts are terminated in cases where
requirements. We understand the
our audits fail to prove, but indicate that the
applicability of the precautionary principle in
GRI Standards 102-8 and 102-41 | Information on employees and other workers; Agreements and collective agreements
A
the social dimension. If child labor or slavery-
GRI Standard 102-13 | Participation in associations
ll employees are hired in line with
observe an increase in the number of
the requirements of the Brazilian
employees in the Southeast region, due
Labor Laws (CLT) and are covered
to the opening of new stores, and a more
by agreements or collective agreements with
significant reduction in the South region, as
unions. At the end of 2016, we had 7,748
a result of the transfer of some productive
employees, 5.3% less than in the previous
activities to the Midwest region.
year due to changes in structure in the
Only apprentices, hired according to Law No.
period.
10.097 / 200, work part-time.
A
BVTEX (Brazilian Textile Retail
of practices among member companies,
Association): is the most relevant
fostering innovation and anticipating trends
entity of the industry to our
and regulatory demands.
business, since it allows for the exchange of information between retailers, the
Analyzing the table per region below, we
alignment of interests in the debate with civil society and government agencies, and
Employees per employment contract *
2016 Permanent
2015
Temporary
Total
Permanent
2014
Temporary
Total
Permanent
Temporary
complaints are grounded.
Total
Per gender
A
BRASCA: (Brazilian Association of Publicly-Held Companies): the institution represents the interests
the monitoring of our sector’s chain through
of all companies listed in Brazil and is an
the Supplier Certification Program. We take
important space for exchanging good
part in the Management Committee, the
practices of accountability and services
highest level of governance in the entity, as
to the investor market, thus helping to
Female
5.405
227
5.632
5.918
125
6.043
6.035
92
6.127
well as the Suppliers’ Working Group, which
strengthen our transparency and dialogue
Male
2.029
87
2.116
2.101
38
2.139
2.254
60
2.314
coordinates the certification program. Over
with other entities on regulatory changes.
Total
7.434
314
7.748
8.019
163
8.182
8.289
152
8.441
the year, we contributed financially to an
Midwest
2.757
4
2.761
2.822
0
2.822
2.467
2
2.469
South
2.586
81
2.667
3.060
44
3.104
3.682
45
3.727
Northeast
1.196
12
1.208
1.280
4
1.284
1.352
9
1.361
Southeast
895
217
1.112
857
115
972
788
96
884
A
7.434
314
7.748
8.019
163
8.182
8.289
152
8.441
Per region
Total
* Data related to our employees are monitored by a specialized team from the department of Organization & People Management and registered in a computerized system.
Employees per type of employment
2016 Full time
2015
Part time
Total
Full time
2014
Part time
Total
Full time
Part time
Total
ABVTEX initiative aimed at promoting the positive impacts of the fashion chain through the articulation with the Ministry of Labor and
DIAL: We have six industrial units in the state of GoiĂĄs and we are committed to our role as agents
Employment and the generation of positive
of change and development in the cities
guidelines through the press office of the
where we operate, through our own units and
entity.
our faction network. ADIAL is an important
A
partnership to reinforce our commitment to BIT (Brazilian Association of the
the region, in addition to providing a space
Textile and Apparel Industry)
for exchanges between companies from the
and IDV (Institute for Retail
most varied sectors within the region.
Development): forums that are relevant to the
Per gender Female
5.609
23
5.632
6.036
7
6.043
6.036
91
6.127
representativeness of the industry before the
Male
2.102
14
2.116
2.136
3
2.139
2.251
63
2.314
government and to the debate and exchange
Total
7.711
37
7.748
8.172
10
8.182
8.287
154
8.441
* Data related to our employees are monitored by a specialized team from the department of Organization & People Management and registered in a computerized system .
Annual Report | 106
Annual Report | 107
GRI Standard 102-17 | Mechanisms for instructions and claims related to ethical conducts
I
GRI Standard 403-2 | Health and Safety Indicators
claims through suppliers’ on-site audits and
In order to seek guidance on ethical conducts
T
activities is not performed by Cia. Hering.
contractors before the Ministry of Labor. We
through customer service, but we do not
that are suitable to our values, our employees
In the integration of these professionals,
started monitoring the number of accidents
have a formal process for recording such
are always encouraged to talk with their
we recommend that any occurrences are
occurred with this public in our units and this
communications. All of them, however, are
managers.
referred to the unit’s outpatient clinic for
information shall be made available in our
appropriate medical care. When an accident
2017 Annual Report.
n addition to the Ombudsman’s
assessed according to the same procedures
Office (read more on page 83), we
applied to the information received by the
may also receive contacts with
Ombudsman’s Office.
he control over third-parties
occurs, the companies are required to send
accidents’ frequency rate acting
a copy of the relevant CAT (Work Accident
mainly in reception and restaurant
Report), which shall be filed by these
GRI Standard 204-1 | Proportion of expenses with local suppliers
T
he location of suppliers is not
of the factions, the proximity to industrial
a prime factor in our selection
units contributes not only to efficiency gains
Frequency rate of accidents with employees
process, except in the case of
in logistics operations, but also to optimize
Per gender
the audit activities in these partners, further
Female
1,1
2,1
3,3
facilitating the continuous monitoring of the
Male
chain and the agility in the decision making.
Total
2,9 1,6
4,4 2,7
6,5 4,2
Midwest
1,6
1,2
1,3
South
2,1
2,5
5,5
Northeast
1,6
8,7
9,0
Southeast
0,6 1,6
0,1 2,7
0,3 4,2
factions. In general terms, we seek to balance, in competition processes, aspects like quality and agility in supply and price in
2016
2015
2014
Per region
order to meet business demands. In the case
Proportion of expenses with faction suppliers by region (%) Midwest Northeast South
2016 55,0 27,3 17,7
2015 53,3 28,0 18,7
2014 51,9 30,5 17,6
Total
* Indicator calculated according to OHSAS 18001 methodology: number of reportable accidents for every 200 thousand man hours worked.
GRI Standards 307-1 and 419-1 | Environmental, Social and Economic Compliance
W
e operate in strict compliance
minor occurrences of small amounts (up to
with all laws and regulations
R$ 5 thousand), mainly related to quotas
applicable to our business.
for apprentices and disabled people, which
We have business areas especially dedicated
totaled R$ 42 thousand in the year. In
to the monitoring of new legislation and
the environmental sphere, we received a
compliance with our environmental licenses’
notice for the acquisition and use of images
constraints. Additionally, we are in constant
from Pico das Agulhas Negras without a
dialogue with other companies in entities
consent from the Chico Mendes Institute
and forums of the industry with regards to
(ICMBio). After the receipt of such notice, we
the changes and updates in laws, among
suspended the sale of the items containing
other topics related to the business. In 2016,
the image, reviewed our procedures to avoid
we did not undergo significant sanctions
new occurrences and started negotiations
or fines for environmental, social and
with the Institute for the use of the image.
Frequency rate of occupational illnesses among employees *
2016
2015
2014
Per gender Female
0,00
0,00
0,03
Male
0,00
0,09
0,13
Total
0,00
0,02
0,06
Midwest
0,00
0,00
0,00
South
0,00
0,07
0,14
Northeast
0,00
0,00
0,00
Southeast
0,00
0,00
0,00
Total
0,00
0,02
0,06
Per region
* Indicator calculated according to OHSAS 18001 methodology: days lost for every 200 thousand man hours worked.
economic noncompliance. We recorded Annual Report | 108
Annual Report | 109
Rate of lost days due to accidents with employees * Per gender Female Male Total Per region Midwest South Northeast Southeast Total
2016
2015
2014
4,5 21,3 9,1
7,6 18,0 10,4
6,6 32,3 15,9
14,2 7,9 6,1 0,6 9,1
6,5 16,6 11,4 2,8 10,4
3,2 28,3 8,2 1,0 15,9
GRI Table of Contents GRI Standard GRI 101: Fundamentals 2016 General Indicators
* Indicator calculated according to OHSAS 18001 methodology: days lost for every 200 thousand man hours worked.
Employees’ absentee rate* Per gender Female Male Total Per region Midwest South Northeast Southeast Total
2016
2015
2014
2,6% 0,6% 3,3%
3,8% 1,0% 4,8%
4,4% 1,2% 5,5%
1,9% 0,9% 0,3% 0,2% 3,3%
2,3% 1,7% 0,7% 0,3% 4,8%
2,2% 2,2% 0,8% 0,3% 5,5%
* Indicator calculated by the total absence hours, justified or with medical certificate over the total man hours available.
GRI 102 | General Indicators 2016
Annual Report | 110
Indicator
Page
Omissions
102-1 102-2 102-3 102-4 102-5 102-6 102-7 102-8 102-9 102-10 102-11 102-12 102-13 102-14 102-16 102-17 102-18 102-22 102-24 102-32 102-40 102-41 102-42 102-43 102-44 102-45 102-46 102-47 102-48 102-49 102-50 102-51 102-52 102-53 102-54
Cia. Hering 10, 11 and 12 13 13 21 10, 11 and 12 13 66 and 106 76 and 77 12 and 77 107 63 63 and 107 4, 5 and 6 8, 9 and 24 83 and 108 21, 22 and 23 21 21 102 103 106 103 103 104 and 105 102 104 and 105 104 and 105 102 104 and 105 102 102 102 102 This report was prepared according to GRI Standards: Essential Option
-
102-55 102-56
111, 112 and 113 102
-
GRI 102-55
Annual Report | 111
Material topics Consumer Relations
GRI 416 | Customer’s Health and Safety 2016
Entrepreneurship and wealth generation GRI 201 | Economic Performance 2016
GRI 203 | Indirect economic impacts 2016
Material topics
103-1
104 and 105
-
103-2 103-3 416-1
90 90 90
-
103-1
104 and 105
-
103-2 103-3 201-1 103-1
56, 57 and 58 56, 57 and 58 58 104 and 105
-
103-2
-
203-2
76, 77, 78, 84, 85 and 86 76, 77, 78, 84, 85 and 86 79 and 84
103-1 103-2 103-3 303-1 303-2 103-1 103-2 103-3 306-2 103-1
104 and 105 91, 92 and 93 91, 92 and 93 93 92 104 and 105 91 and 93 91 and 93 93 104 and 105
-
103-2 103-3 307-1
24 24 108
-
103-1 103-2 103-3 204-1 103-1
104 and 105 76, 77 and 78 76, 77 and 78 108 104 and 105
-
103-2 103-3 308-2 103-1 103-2 103-3 408-1
79, 80, 81 and 82 79, 80, 81 and 82 82 104 and 105 83 83 83
-
103-3 Management of environmental impacts GRI 303 | Water 2016
GRI 306 | Effluents and residues 2016
GRI 307 | Environmental Compliance 2016
Network development GRI 204 | Purchase Practices 2016
GRI 308 | Environmental evaluation of suppliers 2016
GRI 408 | Child labor 2016
Annual Report | 112
GRI 102-55
Consumer Relations
GRI 409 | Forced Labor or slavery-like work 2016
GRI 414 | Social evaluation of suppliers 2016
Attracting and developing people GRI 403 | Occupational Health and Safety 2016
-
GRI 404 | Training and Education 2016
Innovation Ethics GRI 205 | Fight against corruption 2016
Governance and transparency GRI 419 | Social & Economic Compliance 2016
103-1
104 and 105
-
103-2 103-3 409-1 103-1
83 83 83 104 and 105
-
103-2 103-3 414-2
79, 80, 81 and 82 79, 80, 81 and 82 82
-
103-1
104 and 105
-
103-2 103-3 403-2 103-1 103-2 103-3 404-1 404-3
71, 72 and 73 71, 72 and 73 72, 73 and 109 104 and 105 67, 68, 69, 70 and 85 67, 68, 69, 70 and 85 68 and 69 70
-
103-1 103-2 103-3 205-1
104 and 105 24 24 24
-
103-1
104 and 105
-
103-2 103-3 419-1
24 24 108
-
GRI 102-55
Annual Report | 113
Credits Coordination People Management Dir. Corporate Responsibility team GRI Consulting and editorial coordination Usina82 Graphic design and layout Johnny Cipriani Photography Collection Cia. Hering Collection Hermann Hering Foundation
Annual Report | 114
Annual Report | 115
Annual Report | 116