Annual Report - 2015 by Cia. Hering

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IN DEX OUR PURPOSE.............................. 4 BUSINESS MODEL........................ 5

BRANDS MANAGEMENT...... 10

HERING.............................. 12 HERING KIDS...................... 16. PUC.................................... 19 DZARM............................... 22 HERING FOR YOU.............. 25

CHANNEL MANAGEMENT.... 28

SUPPLY CHAIN..................... 29

GOVERNANCE AND

MANAGEMENT...................... 31

ECONOMIC PERFORMANCE... 38

NETWORK PERFORMANCE......... 44 EMPLOYEES......................... 48 CONSUMERS........................ 64 FRANCHISEES...................... 66 SUPPLIERS........................... 69 COMMUNITY......................... 72 ENVIRONMENT..................... 79 135 YEARS..................................... 85 AWARDS......................................... 95 REPORTS....................................... 96

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The channel management also received strong attention with developments in the supply model of the stores, the consolidation of Hering’s reform model, important investments in webstores and important adjustment of the network inventory level. This way, we guarantee the delivery of the right product at the right time and closer to consumers. We invested in a new production unit in Sao Luis de Montes Belos that began to concentrate various stages of the production process in Goias. Other investments were also carried out at the final phase of the SAP implementation for sales and logistics, with completion in the first quarter of 2016. Fabio Hering Chairman

LETTER

FROM THE CHAIRMAN In 2015 we celebrated our 135th anniversary. A history of tradition and large processing capacity that makes us very proud. We reinforce the purpose of “Dressing the Life” of people who connect to our large network. We build the future by implementing the 2020 strategic plan and by strengthening the management by brands. We approach the consumers through the movements of Varejar, which has led our managers and teams to the shops, through market research and through more frequent visits to the field. Our brands remain strong and consolidating this position. Hering is one of the few global brands recognized by an icon (the two small fish) and is the second most beloved female fashion brand in Brazil for the second consecutive year, according to research from Officina Sophia, a research firm specializing in retail and buying behavior. According to Interbrand, Hering remains among the 20 most valuable Brazilian brands. DZARM. was re-launched with a focus on the female audience, a differentiated product proposal and a comprehensive communication plan. In 2015 we launched two stores with the new brand positioning in SP. The children’s brands PUC and Hering Kids had small positioning adjustments to increase complementarity.

Last year, we strengthened the development process of employees, with emphasis on: a new model of new employees integration that explores our business model in a playful way, the mentoring process for leaders and the implementation of an educational platform for distance learning, namely Weaving Knowledge, with content updated daily. The online platform is also available to our franchisees. The Sustainable Fashion Program has acted consistently in the development and monitoring of the supply chain, stimulating entrepreneurship in small business that operate as partners of the Company in the clothing manufacturing process. The celebrations of the 135th anniversary were intense and showed the size of the engagement and pride that our employees and partners feel for this history built by so many hands. The results were impacted by the economic environment, with declining sales and contracting margins. However, we know the challenges and the plan to be implemented. We have confidence in our business model and in the value creation capability across the network. We have many stories to tell. This report will present the business model of the Company, our results and relationship strategies with our network. We hope to build a company that is increasingly strong, relevant and solid for the next 135 years.

GOOD READING!

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HOW DO YOU DRESS YO U R LIFE? Here, we dress life from the first steps, with the excitement of the first stolen kiss and the joy of the first party with friends. We are together on the great achievements, and we dress the moments that are only yours. We dress life with contact and affection â&#x20AC;&#x201C; life dressed in life! So our closet is full of emotions. We are casual in our essence and always authentic! Our way was not invented at all. It was lived, learned and built more than a century ago. Today, we are who we are because we work in a large network. For us, dressing life is part of this network of people who dream, believe, realize and know that, no matter what, we will live together one more emotion.

HERE, WE DRESS LIFE!

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From industry to retail, we are casual in our essence and always authentic. Our business model has been learned and is built in the relationship with partners who believe in our choices. Our work is structured in three major stages: brand management, with strong brands and product development; supply chain, with manufacturing (own or outsourced) and purchase of finished products; channel management, with multichannel distribution.

05 clothing brands - Hering, Hering for you, Hering Kids, PUC and DZARM. Largest network of clothing franchises in Brazil with 3 different networks: Hering Store, Hering Kids and PUC.

More than

800 stores

18.000 multibrand retailers.

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Company winner of the Best and Biggest 2015 Award by Exame Magazine, in the Textile category, The Most Admired Companies in Brazil by Carta Capital Magazine for the sixth time, in the Clothing and Apparel category, and for the fifth time, it was awarded as the best company in the textile, leather and clothing segment by Valor 1000, an award promoted by Valor Economico newspaper.

Capillary distribution to more than

05 Webstores - Hering, Hering for

3.000 cities in all Brazilian states

you, Hering Kids, PUC and DZARM.

through the multibrand retail channel.

9 plants (03 in SC, 05 in GO, and 01

02 Distribution Centers

in RN) responsible for the production,

(SC and GO).

processing and cutting of the knitting, manufacturing and finishing of garments.

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02 Offices (SC and SP).

International market, with 17 franchises in three countries: Uruguay, Paraguay and Bolivia.

About 8.000 employees.

OUR STORY 1880

In Blumenau-SC, Brazil, the brothers Hermann and Bruno Hering believed in a dream and wrote the first lines of a story full of emotions.

1935

To dress the life of our employees with well-being and development, and to honor the centenary of Hermann, we created the Hermann Hering Foundation.

1966

Here, we face the challenge of the new. 1966 was the year of public listing, taking the casual DNA outside Brazil, with the start of exports.

1979

To dress life from the first steps, we launched the childrenâ&#x20AC;&#x2122;s brand PUC. Annual Report | 8

1993

We are entrepreneurs by nature, and here we embark on a new challenge: to retail with the initial store, the Hering Family Store.

1994

We decided to build a different retailing way of being: with the beginning of the first stores in the franchise model.

1998

Our essence is true, and here we begin to dress life with the brand DZARM.

2000 A 2006

Our way to make it happen was not invented. It was lived and learned. From 2000 to 2003, we went through financial restructuring and from 2003 to 2006 we restructured our operations.

2007

We joined the segment of the BM&FBOVESPA Market.

2010

Look who came to dress the life in a spontaneous and energetic way: the brand Hering Kids.

2013 A 2015

Always â&#x20AC;&#x153;reinvent yourselfâ&#x20AC;?! This is one of our passions. We improved the management of our brands with a new structure of teams and with repositioning in the market.

2015

We celebrated the 135 years of history of the Company in our very own way.

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BRAND MANAGEMENT It is our strategy to manage strong brands; it covers planning, creation and development of collections, in addition to the brand communication at all points of contact with the consumer. Each of our brands have a distinct position in relation to the value proposition and target audience, creating a good combination of product offerings to Brazilian consumers.

CYCLES OF BRAND MANAGEMENT

planning of the collection, considering the structure, shape and â&#x20AC;&#x2DC;make or buyâ&#x20AC;&#x2122; options. It ensures the right product at the right time with the right price.

MERCHANDISING

creation area that draws the collection from the merchandising planning, the consumer habits and the market trends.

STYLE

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ensures the emotional connection of the brand with consumers and presents the collections.

COMMUNICATION AND MARKETING

defines the strategic presentation of the collection in the store. VISUAL MERCHANDISING

Makes the planning of volumes to be purchased DEMAND MANAGEMENT

and/or manufactured and the inventory management.

SALES BY BRANDS OUTROS

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BRAND MANAGEMENT

We know that you donâ&#x20AC;&#x2122;t follow standards. That your day dresses the color you choose. That your clothes express who you are. And that your essence always remains the same, regardless of the situation. For those who are authentic, there is no other better brand. Our clothes have the style of those who know what they want. The versatility of those who move in various environments. The colors that match your day, your night, your time. The comfort of true freedom.

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Elected the second most beloved female fashion brand of Brazil in 2015, in pool by Officina Sophia.

HERING STORE

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The two small fish icon needs no introduction and is widely recognized by Brazilians. The wide acceptance in various social classes and age groups is due to the product offering with good costbenefit ratio. The new communication campaign reinforced the authenticity and the relevance of the brand “É basico. É unico.”

76,2%

of the company’s

stores in South America,

revenues

Paraguay, Uruguay and

1,4

BILLION in revenues

Bolivia

• 653 shops | 57 own and 596 franchises • 22 stores opened in 2015

Where to find: Hering Stores all over Brazil Multibrand stores all over Brazil hering.com.br/store facebook.com/CiaHering instagram.com/hering_oficial/ twitter.com/Hering_Oficial

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FASHION TARGETS BREAST CANCER As the first Brazilian brand to support the Fashion Targets Breast Cancer Campaign, Hering destines R$ 6.50 for each piece sold with the blue target to the Brazilian Institute for Cancer Control (IBCC).

In 2015, 20 years of partnership were celebrated with R$ 610,736.32 reverted to the cause.

1880

1990

1997

2004

2013

2015

Together with the company, the two small fish brand is born

We launched our darling World T Shirt. In the second year of the shirt, 2.5 million copies of the basic one were sold in eight months.

We celebrated the milestone of 5 billion t-shirts produced. We are basic! We are fashion!

We launched the Hering Store card, a facility for our consumer.

We reached 1 million followers in the fanpage of the brand.

The two fish won a new face, as well as the stores with a new architectural design.

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BRAND MANAGEMENT

It values the freedom to play and explore. Our universe celebrates curiosity, experimentation, authoring and integration. The collections combine fun and style and are dedicated to kids who fully live their childhood.

We have our own stores,

franchises and multi-brand, and we are on the Internet via webstore. We believe that childrenâ&#x20AC;&#x2122;s clothes should be at the service of childhood and recreation, allowing the child to be free to find and discover the world from their individual skills and interests. Our collections favor full and healthy childhood with comfort and flexibility to track the movements, suitable to play and to be part of the childâ&#x20AC;&#x2122;s routine. What we want is childhood to be well experienced, wide, rich in discoveries and learnings. We have a spontaneous, natural and free personality, which is constantly changing. We are close, accessible, inviting, and available. We believe in early adulthood, in respect to the other, in freedom and in learning by experience. We are a friendly brand of children. Hering Kids. Boosting childhood discoveries!

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HERING KIDS STORE

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11% of the company’s

200

R$ MILLION

shops

in revenues

revenues

• 13 own and 80 franchises

Where to find:

• 10 stores opened in 2015

Hering Kids stores all over Brazil Multibrand stores all over Brazil heringkids.com.br/store/ facebook.com/heringkidsoficial/ instagram.com/heringkidsoficial/

1992 Fun and funky, Hering Kids comes to the market as the children’s line by Hering

2005 Time to be independent! Hering Kids earn its place as a brand at the Company.

2010 We launched the first fully Hering Kids own stores.

2012 Wholesale is with us, and 2012 was the year to open the first franchise of the children’s brand.

2015 The brand gets a new face, more colorful and connected with the children.

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BRAND MANAGEMENT

PUC is a brand that does not go unnoticed. It mixes styles and references to create clothes that delight and highlight even more the children, for all to see. We have our own stores, franchises and multibrand, and we are on the Internet via webstore. We follow trends, behavioral changes and new developments in the world. Because we are restless. Every child is contagious. This is our essence as a brand. This is why we exist. We are an impactful brand that draws attention and influences positively what is around us. Our collections are made of clothes that help children to delight others and to enhance their own brilliance. We are vibrant, energetic, active, so our clothes are colorful, rich in prints, with lots of novelties and filled with great mixture. So that the children may be children in a cheerful, dynamic, cool and very comfortable way. The look, the joy and spontaneity of children transform all that is around them. When you think about our brand, remember that we exist because we believe that all children are contagious, and we work so that, by wearing our clothes, they will enchant the world around them.

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PUC STORE

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shops

of revenue

130

R$ MILLION in revenues

• 8 own and 64 franchises

Where to find:

• 3 stores opened in 2015

PUC stores all over Brazil Multibrand stores all over Brazil puc.com.br/store instagram.com/puc_oficial facebook.com/pucoficial

1979 PUC is born with cheerful, relaxed and colorful clothes, which fall in the taste of the kids and dress the infant audience throughout Brazil.

1999 The Franchise system arrives for the brand, with the first franchise opened in Sao Paulo.

2005 How it has grown! PUC wins the Alshop/Visa Award in the category Children’s Fashion, as a featured stores network.

2015 There is novelty in the air: new colors and prints innovate and delight the brand’s logo.

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BRAND MANAGEMENT

It believes in the power of sensuality. It believes that women are powerful in nature. It helps women to be in control of their sensuality and to express all their power from a sophisticated way and with a hint of irreverence, without

falling

into

the

ordinary. “Nice to meet you, I’m DZARM.”

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DZARM. STORE

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The year 2015 was the year of

Party occasions.

implementation of the new business plan,

The distinctive and

structured on 4 pillars: brand, product,

contemporary store

communication and channels. The tradition

design reflects the

and quality of the brand with over 20

brand concept and

years in the market was reaffirmed with a

aims to strengthen its

new product proposal, exclusively for the

presence in the main capitals.

female audience on the Day, Work and

4,4%

2.000

of revenue

multibrand stores in Brazil

R$ MILLION in revenues

â&#x20AC;˘ 2 stores opened in 2015

Where to find: DZARM.com.br/store facebook.com/dzarm.oficial instagram.com/dzarmoficial Own and multibrand stores.

1998 All powerful, DZARM. arrives to join the team of our brands.

2000 DZARM. debuts with advertising in cinemas and open TV.

2010 Proving its attitude, in 2010 the brand promotes a pop-up store in SP. A temporary store that combines the pieces of the brand with artistic interventions.

2015 With a new strategy, DZARM. focuses on the female audience and becomes an ally of women to express their power and to mark their presence wherever they go.

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BRAND MANAGEMENT

Hering

For

You

the brand that brings an irresistible invitation: what about turning

time

into

moments?

Moments that bring well-being to

everyday

life,

showing

that happiness is in little things.

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HERING F O R YO U STORE

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Aimed at women, the brand has all the

of modern woman, so

essentials on an outfit: comfort, practicality,

that she can live her

elegance and sophistication with ease.

moments.

Complete products for the day-to-day

3 own stores.

Where to find: Own and multibrand stores heringforyou.com.br/store facebook.com/heringforyou instagram.com/heringforyou

2014

2015

The brand Hering For You is released with an irresistible invitation to turn time into moments.

Time to go retailing with Hering For You: in the second half of 2014, we opened two concept stores of the brand in Sao Paulo, in the Morumbi and Center Norte shopping malls.

In the first year, the brand was the inspiration for the creative team of Cia. Hering in the Shared Intelligence project of Santa Catarina Fashion and Culture (SCMC). The collection, specially developed for the project, was transformed into a capsule collection and launched in Autumn/2015.

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CHANNEL

MANAGEMENT From the industry to retailing, today we are the largest network of clothing franchises in Brazil. The channel management is a strategy that differentiates us in the market, as it is the result of a commercial activity that combines its own stores, franchises, multi-brand and webstore. This combination allows the establishment of more points of contact between brands and consumers, ensuring a comprehensive distribution of the products in Brazil.

OWN STORES

FRANCHISES

MULTIBRAND RETAIL

14,1%

39,7%

44,5%

OF REVENUE 83 STORES

OF REVENUE 74 0 S T O R E S IN BRAZIL 17 STORES IN SOUTH AMERICA

OF REVENUE 18,228 CUSTOMERS IN BRAZIL

• Visibility for the brands. • Close relationship with the consumer. • Differentiated shopping experience. • Allows to “pilot” new projects.

• Visibility for the brands. • Growth and velocity scope for the network.

• Complements the stores network. • Presence in all States of Brazil, in more than 3,000 municipalities. • Strong presence within the country.

E-COMMERCE

1,7% 1.7% OF REVENUE 5 WEBSTORES: HERING STORE, H E R I N G F O R YO U, HERING KIDS, PUC AND DZARM.

• Presentation of the complete collection to the consumer. • Quick access to new collections. • Access to past collections.

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SUPPLY CHAIN Our way was not invented at all. It was lived, learned

We know what

and built in the relationship with partners who believe

to produce and

in our choices and share our values.

deliver because

For each piece of clothing or accessory of our brands

we know our consumers. The operation with this

to be manufactured and to get to the store, we have

production model ensures speed and flexibility in

a large network of partners in a production model that

finding the best opportunities for cost and quality,

combines production itself, outsourcing steps and

present in various available supply chains.

subcontracting (purchase of finished product).

HYBRID MODEL OF PRODUCTION

75%

25%

OWN PRODUCTION + OUTSOURCED

S O U R C I N G

• Knitting,

• Purchase

processing, cutting,

confection, finishing and packaging • 50%

of the processes

of finished products

• 20%

- Domestic

• 80%

- International

conducted internally • 50%

of outsourced processes

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The industrial structure is distributed in nine production units located in the states of Santa Catarina, Goias and Rio Grande do Norte. In 2015, with the reorganization of production steps, we opened the Sao Luis de Montes Belos Unit (GO) and ended the Rodeio unit operation.

Manufacture is directed for two Distribution Centers, located in Santa Catarina and Goias.

SC Bom Retiro: knitting and development of arts Itororo: processing and cutting Encano: clothing manufacturing

GO Goianesia: clothing manufacturing Santa Helena: clothing manufacturing Parauna: cutting Anapolis/DAIA: finishing and packaging Sao Luis de Montes Belos: finishing, supply and printing

RN Parnamirim: cutting, clothing manufacturing and finishing

DISTRIBUTION CENTERS Blumenau/SC and Anapolis/GO

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GOVERNANCE

AND MANAGEMENT Transparency and good reputation in the market are

Aiming at the

attributes that we seek to maintain in our business.

commitment to

Corporate governance practices guarantee the

achieve and maintain

creation of value for society, the accountability and the

high standards of

adoption of corporate responsibility principles.

governance, our Bylaws contain all the minimum clauses required by the New

We entered 2007 in the New Market of

Market Listing Rules, such as: protection mechanism

BM&FBOVESPA, a standard of highly differentiated

to the dispersion of the shareholder base (â&#x20AC;&#x2DC;poison

corporate governance, implying the adoption of

pillâ&#x20AC;&#x2122;); minimum of 25% of independent members on

a set of corporate rules that expand the rights of

the Board of Directors; variable compensation of

shareholders, in addition to the adoption of a more

executives aligned to metrics of short and long-term

transparent and comprehensive information disclosure

value creation, among others.

policy.

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GOVERNANCE STRUCTURE A team of experienced and qualified advisors to assess the company’s results, to monitor and to analyze business decisions, forms the Board of Directors. • Collegiate •7

decision organ.

• Fixed

members, 3 of them independent.

• Election • Ruled

• Finance

Committee (non-statutory):

accompanies the financial results.

in general meeting.

• Remuneration

by Bylaws.

• Mandate

remuneration.

Committee (non-statutory):

validates the executive compensation plans.

of two years.

Corporate governance • Listed

on the BM&FBOVESPA New

Market • True

Corporation (shares ~ 80%), having

Hering Family as main shareholder. • Dispersion

protection mechanism of the

shareholder base (poison pill). • Majority

of independent members on the

Board of Directors. • Variable

compensation of executives

aligned to metrics of short and long term value creation. • For

more information, please access

http://hering.riweb.com.br/

MEMBERS OF THE BOARD DIRECTORS IN 2015 Mr. Ivo Hering

Chairman

Mrs. Andrea Mota Baril

Advisor

Mr. Anderson Lemos Birman

Advisor

Mr. Fabio Hering

Advisor

Mr. Marcio Guedes Pereira Junior

Advisor

Mr. Nei Schilling Zelmanovits

Advisor

Mr. Patrick Charles Morin Junior

Advisor

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The Executive Board defines the future vision and the business strategies, and it routes the management team through management meetings as well. The executives monitor and act on the implementation of our strategic plan, aimed at the growth of the company until 2020 and for developments in design and of product, channels, support and management processes.

•

Chairmanship and 7 boards,

•

2 of them non-statutory. •

•

Performance evaluated annually by

Officers lead and accompany the projects of the strategic plan.

•

Alignment monthly meetings with

a 360° process (leadership, peers,

managers about people, processes

social networking, team).

and business.

Weekly management meetings.

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Fabio Hering

Chairmanship

Alessandra Morrison

People & Organizational Management Director

Edgar de Oliveira Filho

Industrial Director

Edson Amaro

Brands Director

Frederico de A. Oldani

CFO

Marciel Eder Costa

Administrative Officer

Moacyr J. Matheussi

Procurement and Logistics Director

Ronaldo Loos

Commercial Director

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MANAGEMENT MODEL Our Network Management model aims to ensure

director discusses with his team

integration among strategy, processes, people and

the results, indicators and initiatives

relationships, so that everything in the organization

related to people, processes and

serves the final consumer. Our Business Model

business.

is based on the establishment and support of interdependent relationships (franchisees, retailers,

In 2014, the top leadership and a representative

representatives, seamstresses, employees, suppliers,

group of managers was involved in the strategic

shareholders, communities, etc.) that work to deliver

planning process for 2015-2020. The vision is

the proposed business value and the purpose of

built from the perspective of the Board of Directors,

Dressing Life to all stakeholders.

the board and group of managers, considering the business model, the current context, the challenges

To ensure alignment of strategies and business goals,

and the simulation of scenarios.

there are some rituals and commitments established among the top leadership. An operational meeting

Planning is being deployed in enterprise projects,

between the chairman and directors takes place

according to the challenges and strategies designed,

weekly for monitoring and analysis of results, projects

and it is monitored in bimonthly meetings.

and indicators. This information is also discussed with the managers through management meeting by the board. Each

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RELATIONSHIP WITH INVESTORS Communication and relationship with the market, for

•

the submission of our strategies and results.

net income to shareholders.

•

Quarterly disclosure of results.

•

Bylaws provide for the allocation of at least 25% of R$ 132 million in earnings in 2015.

SHAREHOLDING STRUCTURE

Coronation Fund Managers Gávea Investimentos Inpasa S/A Ivo Hering Cambuhy Investimentos Templeton Asset Management Treasury Stock Others

CONFLICT OF INTERESTS The conflict of interest between shareholders and

The dilemmas and conflicts solution related to

management is handled through arbitration. The

corporate matters and investor relations is properly

bylaws of the Board of Directors provides that the

handled in the Market Arbitration Chamber, ensuring

advisor must refrain from discussing or voting if, for

transparency and neutrality in decision making.

whatever reason, he/she has particular or conflicting interests with the company regarding the matter referred to it.

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RISK MANAGEMENT Risk management is handled through a policy, which

Issues related to social

lists the information and the reports to be monitored

conditions in the supply

regularly in order to evaluate the operations and

chain are regularly monitored

to support the decision making. This process is

by the Compliance area

continuous, it is the CFOâ&#x20AC;&#x2122;s responsibility, and a

and business areas, and are

specialized consulting firm carries it out. Based on

described in the chapter about our work with suppliers

the principles and parameters determined by the

in this report.

risk management policy, the exposure possibilities are analyzed and reported monthly to the finance

Environmental aspects such as water consumption

committee in order to define the mitigation actions to

and chemical use are accompanied by the

be taken.

environmental team and will also be reported in this document, in the chapter about our work with the

The areas related to aspects considered critical

environment.

accompany the environmental risk factors.

PRINCIPLES AND CODE OF ETHICS We operate from the organizational values and principles set out in our Code of Ethics directed to associates. Our suppliers must also act in accordance with the specific code of conduct for this audience. Actions that may deviate from our principles should be directed to the channel ouvidoria@ciahering.com.br.

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ECONOMIC

PERFORMANCE Our growth expectations were revised throughout

The results were negatively

the year and were influenced by strong economic

impacted by declining sales

recession, with negative impacts on income,

(-5.5%) and contraction of margins, with Earnings

employment and household consumption.

before Interest, Taxes, Depreciation and Amortization (EBITDA) of R$ 262.9 million (-33 6% vs. 2014)

In this environment, our results were impacted by the

and EBITDA Margin of 16.5%. Aligned with the

downturn in sales and contraction of margins, despite

conservative policy of financial management, we

the various actions taken by the administration, from

ended the year very close to zero debt and R$ 106.8

improvements in product offering implemented in

million in net cash, with the distribution of dividends for

late 2014 to inventory adjustment actions and supply

the year of R$ 132.0 million.

improvement in networks stores throughout the year. Despite all the difficulties, we reported in 2015 a Net

In 2015, the wealth generated by the Company was

Income of R$ 281.2 million, with healthy levels of

779.9 million reais, distributed mainly to employees

profitability and cash generation, which demonstrates

and the government.

the strength of our brands and the resilience of our business model.

ADDED VALUE D E M O N S T R AT I O N - AV D

Employees Govern Intereste and rents Shareholde Reinvestment

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SALES PERFORMANCE The company’s gross sales totaled R$ 1.9 billion in

multi-channel, whose sales shrank

2015, a decrease of 5.5% compared to the same

12.6%, underperforming all brands,

period in 2014, affected by the negative effects of the

especially PUC and DZARM. Sales by

decline of the macroeconomic scenario throughout the

webstores continued their double-digit growth trend

year in the consumer environment and by the more

(+24.5%) compared to the continuous improvements

conservative distribution channels, which sought to

made after the implementation of new platforms,

operate with lower inventory levels.

which have greater capacity for transactions, in

The adverse effect from the deterioration of the

addition to new features.

economic environment was more pronounced in the

EBITDA AND E B I T DA’ S M A R G I N The operating profit before interest, depreciation and

• Increase of 9.4% in operating expenses mainly due

amortization and taxes (EBITDA) decreased by 33.6%

to the recognition of expenses related to inventory

in 2015, while the EBITDA margin reached 16.5%

reduction campaign of franchisees, which totaled

(-7.1 p.p). The main factors associated with these

R$ 7.5 million; higher investments in advertising and

results are:

marketing, especially for investments intended to

• Retraction of 5.5% of sales;

relaunch the brand DZARM. and increased spending

• Fall of the gross margin by 4.2 percentage points,

on stores by the net addition of 5 units in the year;

mainly due to the weak sales performance, insufficient

• Increase in Other Operating Expenses mainly due to

to dilute fixed costs, increased costs and increased

severance payments resulting from the reorganization

promotional activity focused on selling items from

of manufacturing plants.

previous collections in the company ownership;

EBITDA

IN R$ MILLION and

EBITDA MARGIN

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NET INCOME AND NET MARGIN Our net income decreased by 11.8%, reaching R$

intercompany debt, which generated R$ 53.5 million in

281.2 million, down 1.3 percentage points in net

the Income tax and Social Contribution line â&#x20AC;&#x201C; for more

margin, due to the decrease of sales and lower

information, please see Relevant Fact published on

operating margins, partially offset by effective rate of

10.02.2015; to the amount of Interest on Equity 36%

income tax lower than that observed in 2014, mainly

higher than 2014 and to the highest share of local

due to the effects of the dissolution and liquidation

products in the sales mix, which in turn generates

of the subsidiary Hering Overseas Ltd. and to

greater amount of tax incentives.

NET PROFIT

IN R$ MILLION AND

NET MARGIN

Annual Report | 40

INVEST MENTS Investments totaled R$ 96.9 million in 2015, where we

the implementation of the SAP

highlight the amount allocated to the manufacturing

system. In front of the shops, we

facilities, especially the opening of the Sao Luis de

highlight the amount directed to

Montes Belos plant (GO), and investments in the

the opening of 5 stores, including the opening of two

Distribution Center in Goias.

stores of the brand DZARM. following revision of its

Investments in the IT infrastructure are focused on

business plan.

INVESTMENTS 2015 (MILLIONS)

Other Industry Stores IT

INDEB TEDNESS For another year, the Company closed the fiscal year

and net cash of R$ 106.8 million. The decrease in

with net cash, in line with the conservative policy of

cash relates mainly to the settlement of debts and the

financial management. At the end of 2015, there was

repurchase of shares held throughout the year.

R$ 108.1 million in cash and financial investments,

SHAREHOLDER R E M U N E R AT I O N The earnings for the year 2015 totaled R$ 132.0 million, representing a payout ratio of 47.0%, of which R$ 92.0 million was paid in 2015 and the remainder in 2016.

Annual Report | 41

FINANCIAL PERFORMANCE R$ MIL Gross Sales Revenue

2015

Part. (%)

2014

Part. (%)

Var. 2015 / 2014

1.900.101

119,6%

2.011.023

119,8%

-5,5%

Sales Deductions

(311.212)

-19,6%

(332.729)

-19,8%

-6,5%

Deductions Sales Tax

(388.305)

-24,4%

(410.591)

-24,5%

-5,4%

Adjustment to Current Value

(39.358)

-2,5%

(36.130)

-2,2%

8,9%

Deductions Sales Incentives

116.451

7,3%

113.992

6,8%

2,2%

1.588.889

100,0%

1.678.294

100,0%

-5,3%

Total CPV - No Depreciation and Amortization

(935.487)

-58,9%

(923.646)

-55,0%

1,3%

Cost of Products Sold

(974.008)

-61,3%

(959.431)

-57,2%

1,5%

Adjustment to Current Value

20.320

1,3%

16.523

1,0%

23,0%

Grant for Funding

18.201

1,1%

19.262

1,1%

-5,5%

Cash Gross Profit

653.402

41,1%

754.648

45,0%

-13,4%

Depreciation and Amortization

(25.848)

-1,6%

(20.887)

-1,2%

23,8%

Gross Profit

627.554

39,5%

733.761

43,7%

-14,5%

Operational Expenses

(411.855)

-25,9%

(376.495)

-22,4%

9,4%

Sales

(318.494)

-20,0%

(292.126)

-17,4%

9,0%

Company

(225.766)

-14,2%

(208.166)

-12,4%

8,5%

Fixed

(119.891)

-7,5%

(100.597)

-6,0%

19,2%

Variable

(105.875)

-6,7%

(107.569)

-6,4%

-1,6%

Stores

(92.728)

-5,8%

(83.960)

-5,0%

10,4%

General, Administrative and Rem. of Directors

(54.089)

-3,4%

(53.280)

-3,2%

1,5%

Depreciation and Amortization

(21.329)

-1,3%

(17.682)

-1,1%

20,6%

N.D

(668)

0,0%

N.D

Other Operational Income (Expenses)

(17.943)

-1,1%

(12.739)

-0,8%

40,9%

Profit Before Financial

215.699

13,6%

357.266

21,3%

-39,6%

77.961

4,9%

64.765

3,9%

20,4%

(38.485)

-2,4%

(30.418)

-1,8%

26,5%

39.476

2,5%

34.347

2,0%

14,9%

255.175

16,1%

391.613

23,3%

-34,8%

Current Tax - CSLL and IRPJ

1.631

0,1%

(74.042)

-4,4%

N.D

Deferred Tax - CSLL and ISPJ

24.364

1,5%

1.296

0,1%

1779,9%

Net profit

281.170

17,7%

318.867

19,0%

-11,8%

Attributable to controlling shareholders

281.170

17,7%

318.858

19,0%

-11,8%

N.D

0,0%

N.D

1,7361

N.D

1,9374

N.D

-10,4%

262.876

16,5%

395.835

23,6%

-33,6%

Liquid Revenue of Sales

Profit Sharing

Financial income Financial expenses Total financial results Operational Profit

Attributable to non-controlling shareholders Basic earnings per share - R $ Attributable to controlling shareholders EBITDA

Annual Report | 42

Annual Report | 43

Annual Report | 44

NETWORK

PERFORMANCE Dressing life is making part of a network of people

By acting in this

who dream, believe, accomplish and undertake.

business model, we share and engage stakeholders

Being a network organization means sharing wealth,

with our purpose of dressing life, influencing and

stimulating entrepreneurship and creating growth

mobilizing through our values, strategies and ways to

opportunities for stakeholders.

make it happen.

We seek to create synergy in our organizational structure and to establish channels of communication and relationship that can keep the network connected:

Shareholders

DOMESTIC AND INTERNATIONAL

Management Report, Cia. Hering website, Investor Relations (results center, talk to the IR, events, general information), Reference Form, call of results, Investor Relations team.

Employees

Organizational Climate Survey, Performance Integrated Management (PIM), Intranet, Cia Hering Universe, Doce Lar Company, anniversaries, DDSQ (Daily Dialogue of Safety and Quality), Internship Program, Integration Program, Volunteer Program, Weaving Program, Communicators, Internal Communication Channels, My First Job Program, CoOperar Program, internal marketing actions.

ABOUT 8,000 EMPLO YEES

Community

SURROUNDINGS OF PLANTS AND OFFICES

Support for social projects and cultural events, Hermann Hering Foundation, Hering Museum, Junior Achievement Program (SC), specific actions to volunteering, donation of clothes to social institutions, investments in projects through incentive laws.

Annual Report | 45

Consumers

BRAZIL L AT I N AMERICA

Suppliers

ABOUT 1,400 ACTIVE SUPPLIERS OF INPUTS, EQUIPMENT AND SERVICES, SOURCING AND FACTIONS

Customer Service Hotline (chat, 0800, email), social networking brands, trademarks campaigns, market research, shopping, webstores, quality research, Cia. Hering website.

Sustainable Fashion Program: Code of conduct for suppliers, self evaluation research, technical visits, audits, supplier meetings, ombudsman, contract, compliance checklist, business areas, Productive Chaining Program (Sebrae - GO), ABVTEX.

Sales representatives

392 REPRESENTATIVES Franchisees

293 FRANCHISEES IN BRAZIL 3 FRANCHISEES IN SOUTH AMERICA

Government

FEDERAL, STATE, M U N I C I PA L

Press

DOMESTIC MARKET

Commercial team, showroom, regional events and livestream.

Council of franchisees, satisfaction survey, Franchisees Workshop, franchise consultants, integration of new franchisees, training and meetings through livestream, Weaving Knowledge (distance education portal)

Municipal, state and federal agencies.

Cia. Hering website, Investor Relations site, social networking brands, press office.

Annual Report | 46

Multibrand stores

18,000

RETAILERS

Environment

MANUFACTURING UNITS, SHOPS, OFFICES, DISTRIBUTION

Society

DOMESTIC MARKET

Relationship with business representatives, showroom, Qualified Retail Program.

Internal Commission for Energy Conservation (ICEC), agencies and environmental permits, Effluent Treatment Plant (ETP), Solid Waste Management Program.

Representation in associations and groups: ABVTEX (Brazilian Association of Textile Retail), SCMC (Santa Catarina Fashion and Culture), ACIB (Commercial and Industrial Association of Blumenau), ABIT (Brazilian Textile and Apparel Industry Association), CFIA (Trade and Inudstrial Association of Anapolis), AGICON (Goiana Association of Confection Industry), ABRAPI (Brazilian Association of Tax payers), ABRASCA (Brazilian Association of Listed Companies), IBRI (Brazilian Institute of Investor Relations), ABRH (Brazilian Association of Human Resources), ABF (Brazilian Franchising Association), ABA (Brazilian Advertisers Association), ADIAL Brasil â&#x20AC;&#x201C; Brazilian Association of Regional Sustainable Pro-Development. Labor unions Cia. Hering website Social networks IBCC Partnership (Brazilian Institute of Cancer Control)

Annual Report | 47

EMPLO YEES The relationship with employees and all the people management policies are based on some fundamental principles:

Establishing a single culture, a single vision

Ensuring that people are

and a single purpose.

empowered and engaged in network and within the Network.

Having the right person in the right place and at the right time.

These assumptions guide the strategies and actions

environment of opportunity and meritocracy, based on

of attraction, retention, development, recognition

results.

and employee engagement, aimed at building an

Annual Report | 48

A SINGLE CULTURE, A SINGLE VISION AND A SINGLE PURPOSE

49 Annual Report | 49

THE PUR POSE In 2015, we translated in a phrase the company’s

within the

purpose, what drives us in the relationships

company.

established with partners. A unique and authentic way

The purpose

of understanding our essence, why and for what we

of “Dressing Life”

exist.

was felt and lived through many experiences of

This movement allowed to materialize important

our employees and it is recognized as what connects

attributes of the organizational culture and to

more than eight thousand people who work directly in

recognize the significance of the work of each person

the business.

“Dressing life is part of a network of people who dream, believe and make it happen. People who face the challenge of the new and undertake along with us!”

Annual Report | 50

THE BUSINESS VISION Aligning the understanding of the business model and

An important initiative

the role that each one plays on it is a daily challenge

was the implementation

when we see our capillarity of physical structure and

of a new employees

the multitude of activities involved, from the creation

integration model with the application of a game,

and development of fashion items to manufacture,

namely â&#x20AC;&#x153;World of Opportunitiesâ&#x20AC;?.

purchase and distribution of products in multi-channel.

A playful tool that explores details of the story and

Each part of the operation is complex and needs to be

business processes of the companyâ&#x20AC;&#x2122;s, accelerating

in synergy to deliver the best product to consumers at

the understanding of the new employee about their

the right time. In 2015, this process was reinforced in

role and the engagement in business challenges.

new rituals and in greater involvement of managers in

In 2015, about 2,000 employees were integrated

the multiplication of their knowledge.

through this new experience.

Annual Report | 51

THE C U LT U R E The year 2015 was marked by the celebration of

interdependencies among areas, people and partners.

the 135th anniversary of Cia. Hering. It was a time

One of the initiatives was the launch of VareJAr,

to strengthen and enhance the strong features of

whose main goal is to acculturate our employees for

the culture that are present throughout the history of

a targeted retail vision, focusing on the consumer.

the company, recognizing the value of the network,

The VareJAr actions consist of sharing trends and

awakening the pride and the role of a company that

innovations in the market and encouraging the

daily builds the future of this solid company that

participation of employees in the field, to better

reinvents itself.

understand how their processes interfere in stores,

This culture of transformation and collaboration is

and especially how they reflect in the perception and

built on relationships. Trust relationships, cooperation,

experience of our consumers. VareJAr is a skill that we

dialogue and partnership. Therefore, there are

constantly seek to develop in our employees.

many rituals that reinforce the relationships and

We carried out 69 Cafes with Managers,

Acting of employees from the

with the participation of 1,207 people

administrative areas of Sao Paulo and

from the industrial area, approaching the

Blumenau in stores during four days of

relationship between managers and their

December/15, developing the Varejar

teams in conversations about questions of

competence in the organization.

employees.

664 new ideas generated in Cooperar, of which 177 were implemented, bringing flexibility and efficiency for the operation.

Why celebrate 135 INOVAR: Meeting of

years? To reaffirm

product innovation with

the belonging to our large

180 professionals of the

network, with pride of Dressing Life

company, of the teams

with us for 135 years.

involved in the creation

A story in which each one

and development process.

is the protagonist of his/her own story.

Annual Report | 52

PEOPLE EMPOWERED AND ENGAGED IN NETWORK AND WITHIN THE NETWORK

53 Annual Report | 53

DEVELO PMENT Our development model is based mainly on

This is how the development

experiences of the employees in their day to day,

strategies of the employees are

whether through new projects and challenges or

defined and implemented.

function, area or manager changes. Learning can

The Universo Cia. Hering

also be accelerated when it happens through the

corporate university has this

relationship with other professionals who, through an

role: connecting, developing and

individualized relationship, guide the development of

progressing. Connecting to enhance

specific skills. And finally, this process is completed by

the creative capacity. Developing

the formal knowledge through courses, lectures and

to generate knowledge. Progressing to

trainings.

understand the changes and the context.

1. FORMAL DEVELOPMENT ACTIONS

• People Management for new managers in the company or position: 60 managers. • Career Management, applying MBTI for employees: 93 professionals indicated by performance. • Business vision, applying the World of Opportunities game for 152 managers and 1,010 employees. • Contents on the EAD platform, Weaving Knowledge for the commercial team and franchisees.

WEAVING KNOWLEDGE – E A D P O R TA L • 20 E-learning format courses + 93 content in various formats • 848 users trained • 4,827 courses held

2 . LEARNING THROUGH OTHERS

• Counseling for individual career guidance with appointed employees. • Mentoring for individual guidance and acceleration in the development of skills with designated managers.

3 . ‘ON THE JOB’ LEARNING

Acting in the role, in multi-area projects and other challenges that can accelerate the career development of our employees and managers.

We believe that these integrated initiatives strengthen the core competencies and allow each employee to act in synergy with our growth strategies.

• 13,479 hits • 1,205 active members • 1,783 hours of training

Annual Report | 54

THE RIGHT PERSON IN THE RIGHT PLACE AND AT THE RIGHT TIME

55 Annual Report | 55

To ensure the right person in the right place at the

Integrated Performance

right time, it is necessary to evaluate, recognize and

Management) starts with

enliven.

setting goals for each

Any of these actions are guided by the Skills

employee and evaluation

Architecture, which defines the profile and behavior

skills in 360°, which

required for each position and the expected results,

involves self-assessment

considering the business strategies.

and peer assessment, team (for managers),

Thus, it is possible to establish a meritocratic

relationship network and manager. The performance

environment with clarity and transparency regarding

of each employee is measured based on the

the individual performance. This model allows the

assessments and targets discussed and calibrated

employees to establish the challenges and ways

in consistency meetings. Finished this process, the

of their career and the leadership to take assertive

leadership conducts the feedback and talks about

decisions for the team and the organization.

career and discusses the individual development plan.

The performance assessment process (GIP –

GIP PROGRESS – INTEGRATED PERFORMANCE MANAGEMENT

2013

2014

2015

252 PEOPLE ASSESSED

1,162 PEOPLE ASSESSED

2.200 PEOPLE ASSESSED

New competency model 360° assessment for directors, managers and coordinators

Including store managers, analysts and experts in the process Cascading goals for all managers

Inclusion of executor public (assistants) in the Pilot process with operational staff (quality area in SC) Inclusion of sales force of own stores in the process Cascading targets for all evaluated audiences Coaching, mentoring and counselling process

Annual Report | 56

HEALTH AND SAFETY AT W O R K Dressing life, for us, is taking care of our people

• SQD

forever, so here we dress safety every day. Here, the

SIPAT and training: our great

“safe work” outfit never goes out of fashion! And with

allies to dress safety and raise

this outfit, innovation and continuous improvement

awareness about the role of

always go well.

each one in this movement. We

To dress safety, our wardrobe has:

highlight the OSH training, working

• Increasingly

at heights, the forklift operator, the

active CIPA and Brigade teams, with

– Safety and Quality Dialogue,

participation of managers in the monthly meetings of

Machinery and Equipment.

CIPA.

• In

• Improvements

and adjustments of machines,

our own stores, specialized consultants handle

health and safety issues, and the information is

procedures and environments. A highlight for the

passed on to employees by the managers of each

implementation of the Technical Inspection Program,

store. The corporate team of safety and occupational

the Power Lockout Procedure, the Behavior Deviation

health supports retail network with visits, guidance

Audit Programme, risk inspections of industrial

and materials for the training of its employees.

facilities and review of Operating Procedures.

For the best management of working conditions,

Safety Advisory Services) 18001, favoring the definition

we adopted, as Security Index, the guidelines of the

of targets and the monitoring of results.

international standard OSHAS (Occupational Health &

Annual Report | 57

ACCIDENTS AT W O R K accidents with and without leave.

2014

2015

363

228

LOST D AY S Sum of working days lost due to accidents.

2014

2015

1375

888

SAFETY INDEX

Index that considers the frequency of reportable accidents, accidents with leave and severity (estimated days lost). The lower the index, the

2014

2015

5,47

3,43

better.

Annual Report | 58

OUR E M P LOY E E S 1. Number of employees per Unit

EMPLOYEES PER STRUCTURE

EMPLOYEES PER AGE GROUP

Annual Report | 59

EMPLOYEES PER GENDER

2. Admissions

ADMISSIONS PER STRUCTURE

Annual Report | 60

ADMISSIONS PER AGE GROUP

ADMISSIONS PER GENDER

Annual Report | 61

3. Turnover Turnover calculation: number of fired and resigning in

The consolidated for the year is the average of twelve

the month divided by the initial picture of the month.

months.

TURNOVER BY GENDER (%)

Annual Report | 62

TURNOVER BY AGE GROUP (%)

4. Absenteeism

the paid hours and certificates, divided by the man-

Calculation of absenteeism: hours of faults added to

hours available.

Annual Report | 63

CONSU MERS Our relationship with the Brazilian consumer is

For those who have questions,

longstanding and begins in childhood, following the

suggestions or complaints, we

various stages and times of life.

maintain a structure of Customer Service (SAC) by toll free, chat or email. We have

The shopping experience, whether in physical or

operators dedicated to service for each channel, as

virtual store, is an important and comprehensive point

well as social networks.

of contact due to our large capillary distribution. We are aware of the possibilities of evolution and In online shopping, consumers who have difficulty

carry out market and quality research because we

typing, reading or using the mouse can use an

want to be increasingly connected to our consumers,

assistive technology that facilitates navigation and

understanding their needs and desires with regard to

makes the shopping experience more comprehensive.

fashion.

Annual Report | 64

We pioneered the implementation of the Customer Service in 1994.

CONSUMER HEALTH

The relationship with consumers also involves emotional connection with our brands and products.

We observe and test the use of chemicals and materials in our products to prevent any damage to health. All items classified as jewellery (earrings, rings, necklaces, bracelets and bangles) are tested for the use of cadmium and lead, even before Inmetro’s guidelines on this subject.

In 2015, we received special consumers of Hering Card in our headquarters in Blumenau - SC, to learn more about our history, the essence of the brand and our way of dressing life. After all, here we dress life from the first steps, and live stories with each person wearing our brands. In a unique way, we are together in the moments and achievements of our consumers, so our closet is always full of emotions.

Channels: • Customer

Service Hotline

0800 47 3114 • sac@hering.com.br • Social

networks of the brands

Annual Report | 65

FRAN CHISEES

74 0 740 franchises in Brazil

293 franchisees

17 17 stores in South

for Hering, Hering Kids

America, Paraguay,

and PUC

Uruguay and Bolivia

• 6 annual meetings for selling

• Board of franchisees

collections (showroom)

Annual Report | 66

We are proudly the largest network of clothing

the opening of new franchises, we

franchises in Brazil. Through the franchise model, we

prefer the current franchisees and

take our casual DNA to various cities of Brazil and

partners of the multi channel that have

Latin America as well. We are who we are because

prominence in store operations and

we operate in this great network of people who dream

adherence to the desired profile.

and come with us. The partnership grants the right to market the Partners are chosen based on the entrepreneurial

products in an exclusive area of operation, using the

spirit, on previous experience in retail and on the

brand and architectural patterns, know-how, methods

availability to act directly in the business. Each

of operation and developed service technology

franchisee receives complete advice and consultancy,

for each brand. The regional manager, team of

with analysis and negotiation of the selling point, in

consultants and directors guarantee support and

addition to commercial training team support. For

guidance. franchisees

HERING STORE The satisfaction of this group of partners is measured

alignment of the business vision and engagement

in annual surveys, which identify opportunities for

in the outlined strategies. We work with a dedicated

improvement and the strengths of this relationship

team to develop content, methodologies and training

in areas such as: product, purchase planning,

tools to the public. The main tools and actions taken

delivery logistics, sales support, operational support,

are functional and practical integration, Weaving

information and management, suppliers , relationship,

knowledge Distance Learning Portal, store training,

corporate image and commercial terms.

franchisees development program (in management), Franchisees Meetings, Livestream (with strategic

Developing and connecting partners to our values

content for the operation) and model store internship.

and way of making it happen is critical to maintain

Annual Report | 67

MULTIBRAND CHANNEL This important channel ensures the distribution of our

Stores where our brands

brands throughout Brazil, including small towns where

represent the largest part of the

our franchise network is not available.

sale and do not offer other items in the same category take part in the Project. Participating

Trade policy ensures the exclusivity of customers in a

customers receive differentiated guidance and support

given geographical area, avoiding direct competition

in their operation.

across the network. In addition, these partners have reference to operate For the group of multi-brand customers, we have

the franchise model, according to the interest of the

developed the Qualified Retail Project, which aims

retailer and the strategy of the company.

to qualify the point of sale for the fair presentation of the brand, through standardization of the store, application of brands and visual merchandising guidelines.

Annual Report | 68

SUPPLI ERS Here, we dress life in a casual and authentic way

to be manufactured and come

forever. We are across Brazil and we also take our

to the store, we have a large

DNA to Latin America.

network of key partners for the sustainability of our

For each piece of clothing or accessory of our brands

business model.

Annual Report | 69

INPUTS AND SERVICES

CLOTHING PARTNERS

Suppliers of materials and services of Cia. Hering. They are suppliers of various regions of Brazil, with very different segments and sizes. In 2015, the active base (regular purchases) was approximately 700 suppliers.

Small clothing manufacturers that assume the manufacturing process. They are microenterprises operating in the countryside of Goias, Rio Grande do Norte and Santa Catarina. They serve Cia. Hering by demand and type of specialty, according to the need to supplement the domestic production capacity. In 2015, we ended the year with 460 partner clothing companies.

SOURCING

Apparel manufacturers that perform the entire production process of the piece, delivering the item ready to go. They especially meet the demand for items that Cia. Hering does not have the ability to manufacture, such as accessories, shoes, pieces in thread or other materials. In 2015, the domestic sourcing supplier base was 309 partners, as well as international suppliers, mainly from China, India and Bangladesh.

For us, dressing life is also encouraging our suppliers to adopt good management practices. After all, we want each partner to also develop and grow with us. Thinking about it, in 2012 the Sustainable Fashion Program was created in order to monitor, develop and identify the challenges and opportunities in the relationship with our network of suppliers. The practices and policies applied to suppliers are defined by priority according to the magnitude of the supplier (size) and the degree of dependence on our business.

Annual Report | 70

In practice, the actions of Sustainable Fashion are divided into four main areas:

FORMALI ZATION

MONITO RING

With each supplier, we signed a contract,

With audits and monitoring of the internal

as well as the Code of Conduct, which

compliance team, we monitor our suppliers to

contains rules and what we expect from

comply with environmental and labor laws. To do

the relationship with our partner.

this, we follow the guidelines of ABVTEX – Brazilian Association of Textile Retail. Number of audits Informações Number of audits Audited suppliers Chain commerce

2014 1729 664 2,01

RELA TIONSHIP

DEVELOP MENT

The self-assessment survey, conducted

Developing our partners is also

every two years, is a tool in the relationship

our mission. We do this through

with suppliers. With it, we have identified

meetings of suppliers and

demands for action, and it is a way to

qualification in management, with

reaffirm the practices that we expect from

courses and lectures.

2015 1871 718 2,09

our partners. Another tool is the channel ouvidoria@ciahering.com.br for complaints related to suppliers.

The role of Sustainable Fashion reaffirms the good

with legal regulations, in addition to promoting its

practice we expect from our partners in accordance

development in social and environmental issues.

Annual Report | 71

COMMU NITY The relationship with the communities in which we

for actions in the community,

work is guided by our purpose of developing the

either through direct funding

regions where we operate and share wealth.

(73%) or resource tax incentive laws (27% - Rouanet and Fundesporte).

We support the community through social actions, actions of our volunteers, donations of clothes or

There are several causes supported, with special

resources for projects and social institutions.

emphasis on projects related to sports, culture and children.

In 2015, R$ 1,712,778.76 were distributed in funding

Annual Report | 72

RESOURCE DISTRIBUTION

Over 64,000 pieces of clothing were donated, totaling 15 tons.

Annual Report | 73

HERMANN HERING F O U N DAT I O N

The Hermann Hering

With the expansion of

Foundation was

the labor legislation,

established in 1935 to

some actions have

meet the demands of

been incorporated by

employees on issues

Cia. Hering, and the

related to education,

Foundation expanded

health and housing,

its operations to other

among others.

causes and audiences.

In recent years, it

the company.

recognizes the

intensified actions

In 2015, believing that

Entrepreneurial

to preserve the

the Foundation has

Education in the

historical heritage

a key role in social

Fashion Chain

of the company,

transformation and in

as its cause,

with the creation

the strengthening of the

acting to stimulate

of Hering Museum

network of Cia. Hering,

entrepreneurship and

and the professional

a new business plan

opportunities in the

management of the

was built.

field of fashion.

historical collection of

Thus, the Foundation

74 Relatรณrio Anual || 74 Annual Report

CAUSE Entrepreneurial education in the field of fashion.

VISION

Opening doors, waking dreams and enhancing entrepreneurship.

MISSION Expanding entrepreneurship and being an agent of social change through the production and dissemination of knowledge in the field of fashion.

PRINCIPLES Legality, ethics, transparency, efficiency and social transformation.

Annual Report | 75

Throughout 2016, the projects will be analyzed

directed to the education of children, youth

according to the adherence to the cause, and a new

and adults, as well as training of small

governance structure will be implemented.

business suppliers in the state of Goias,

In 2015, the main projects of the Foundation were

totaling an investment of R$ 893,218.52.

Some important projects:

Productive

LINKAGE PROJECT In partnership with SEBRAE: development and qualification in small sewing workshops management, partners of Cia Hering.

252

427

small businesses

consultations held

benefited

courses

sewing workshops attended Empretec

Annual Report | 76

Project

EDUCAÇÃO In partnership with Labor Educacional: ten months training to coordinators of public schools in Sao Luis de Montes Belos and Goianesia, Goias.

12.423

schools, represented by

students affected

101 coordinators

R E S U LT S in the perceived role of the coordinators in teacher’s team training, improving school performance, increased parental involvement in school activities and improving student attendance.

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HERING MUSEUM Opened in 2010, Hering Museum aims to preserve the industrial heritage, the history of the textile industry in Vale do Itajai and Blumenau, as well as the legacy of the company’s founders. Through its collection, facilities and educational projects encourage reflection on fashion, habits, customs and entrepreneurship. In addition to spontaneous visitors, the museum has special projects that integrate the community to the place and extend the possibilities of use of the structure and content available. Since its opening, more than 60,000 people visited the place. Do you want to know the Museum? Take the virtual tour in museuhering.com.br or make an appointment by phone +55 47 3321-3340.

INGO HERING MEMORY CENTER The Ingo Hering Memory Center is the guardian and research space of the historical collection of the family and the company. The first phase of deployment took place in 2014 with the restoration of the “old sewing building”, a building built in the 20s, which housed, beyond the seam, other areas of the company. The Memory Center houses the historical collection of Cia. Hering and the Hering family, with more than 15,000 items cataloged in the collection. The materials are available for internal and external research.

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ENVIRON MENT We understand that the environment is part of our

mitigate environmental

large network, and dressing life, for us, is also acting

impacts at each stage of the chain.

responsibly in this regard, seeking to observe and

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INDUSTRY

In industrial units, we operate with solid waste management program and with the Effluent Treatment Plant, which enables the reuse of a portion of the water used in the production flow through the Reverse Osmosis system. To reduce the emission of gases harmful to the environment, we have adopted a system of analysis and control of oxygen in the boiler processes. With the automation of dosage and the circulation of chemicals within the dyeing area, automatically supplying the machines with their inputs, we ensure greater control of the process, with less chemical and water waste. Through the use of software for knitted cutting, we reduce the leftovers in the process.

Efluent treatment Plant

Approximately 80% of the energy we consume is renewable, as it is generated by a SHPP (Small Hydroelectric Power Plant). We use a heat exchanger system in dyeing, generating heat through the outlet of the effluents of the machines, ensuring savings of time and energy of 12% in the dyeing process. Energy consumption, water and fuel are monitored monthly by the ICEC (Internal Commission for Energy Conservation).

Administrative areas adopt waste reduction measures and energy efficiency, as well as awareness campaigns on the use of these resources. With the upgrade of the HVAC system of the Cia. Hering headquarters in Blumenau, we reduced up to 35% of energy consumption in the same conditions.

ADMINISTRATIVE AREAS

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For the transport of goods, we adopted the distribution of regional hubs, later with smaller vehicles for target regions, optimizing the routes and vehicles. We seek partnerships with carriers to ensure the use of an efficient fleet and the use of fuels with lower environmental impact.

LOGISTICS

In retail, we use bags, cartridges and boxes with FSC (Forest Stewardship Council), which guarantees the origin of the paper used. The new store designs use LED lighting with lower energy consumption, and it will be gradually adopted throughout the network.

RETAIL

GREEN AREA 8.5 million m² of preserved green areas, with 750,000 m² of legal reserve. In 1906, Bruno Hering received the title of “Reforestation Pioneer in Brazil”. The company’s founders bought an extensive deforested area and reforested it.

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MATERIAL VOLUME USED

Type

2014

2015

Fabric (meters)

11.146.067

10.267.458

Knit (KG)

10.527.921

10.252.398

5.603

5.108

10.187

10.027

Chemicals (tons) Yarn (tons)

MATERIAL FOR RECYCLING

Peso em toneladas Unidade

Tipo de resÃduo

2014

2015

Parnamirim