1

How we evolved in 2016 2

Execution of key activities in one of the biggest recessions in country's history

Cia. Hering Day 2015

PRODUCT & STORE strategic

fronts (P&S)

Cia. Hering Day 2016

Product

Collection improvements,

mainly from High Summer on

Product Lifecycle Management

(PLM) evolution

Store

Step-up in Shopping

Experience

Hering Store Refurbishment

plan

Supply and VM improvements

DZARM. franchise

launch

Operation

SAP System Implementation

Changes in Engineering

and R&D

Inventories returning to

normal levels

Channel

Technological upgrade and

sales stimulus at webstore

multibrand diagnosis closure

Company

Evolution in Governance and

creation of Strategy

Committee

Strategic Fronts 2016-2017 3

Product and Store remain as priority

Initiatives related to

tore

Initiatives related to

roduct P & S

BRANDS

Value proposition construction 5

Delivering consistency and updates in collections is key factor for consumers and clients (trade)

Branding

Value proposition

Pro

pri

etar

y s

tyle

Pro

mo

tio

nal

ca

len

dar

Sho

pp

ing

exp

eri

ence

Co

mm

un

icat

ion

Mix

an

d p

rici

ng

stra

tegy

Inn

ova

tio

n

Consistency

Product Management 6

Product evolution through new development model - Product Lifecycle Management (PLM)

Design Follow market trends,

understand the consumer and sell-out

data, assessing what works in the store

Innovation and inputs alternatives Develop and bring innovation to the process, introducing new fibers, knit, generating differentiation and competitiveness

Cost Efficiency Look for alternatives in product construction that make feasible what style requests (quality, finish, modeling, etc.), ensuring price and margin strategies

Value for money

Product Management

Organization continues to evolve to better support brand management structures

7

DZARM. Rodrigo

Hering Andrea

Children Romael

Shared team - creates basis and generates synergy between brands

Demand planning

Áureo

Engineering and purchase

DZARM. Hering Children

R&D

20

16

evo

luti

on

s

Brand Management

Edson

Merchandising Collection Planning

Style

Visual Merchandising

Communication and Marketing

Brand Management Pillars

$$$

8

Ongoing Programs

Product evolution through programs focusing on perceived quality improvement

• Aims to enhance the perceived quality of products, an attribute

already recognized in all Company’s brands

• From the choice of inputs, suppliers training, production process evaluation, through the delivery the product to final consumer

Study on the consumer profile evolution in partnership with SENAI (Industrial Learning Center) Goals: • How to make products wear even better • Consistency and standardization of measures

Increased conversion Repurchase in webstore and in the traditional channel

Kids market – Where are we? 10

Brands’ combined strategy yields good results

• Combined strategy in kids market by working with two brands of different and complementary profiles and styles

• Approach allows brands to coexist, favoring market share gain in all channels

• In multiband, particulary, the strategy generates competitive advantage by offering a broad portfolio for different occasions of use

Value proposition

To offer differentiated and colorful style for children of classes A and B

To offer casualwear for children of all social classes

Kids market - PUC

End of adjustments in value proposition and distribution network with signs of stabilization

Adjustments promoted in the network distribution, and store closing getting closer to the end. Renewals at key POS.

Product evolutions, aligned with brand’s lifestyle and positioning.

Signs of results stabilization with better results since this year-end.

11

Launch of Shop.

Morumbi

+ 350% (jan-nov/16)

Kids market - PUC

We will promote relevant actions to reinforce distinguished brand positioning Co-branding partnerships, such as Liberty For the autumn 2017, one of the most traditional English brands and pioneer in stamping, reinforcing the distinguished brand positioning.

New partnerships in 2017 including renowned stylist signing collection.

Social media

12

Liberty and PUC

campaign

330k followers

+ 113% (jan-nov/16)

96k followers

~170 million impacts in 2016

Communication

Kids market - Hering Kids

Sustained growth through value proposition and expansion of the store network

13

Company’s best performance and positive SSS in recent quarters

Good value proposition reflected in product offering, store experience and communication

Next steps

Grow through combined strategy with PUC

Potential to open stores in the next years

Shop. Morumbi SP State

Shop. Cidade

São Paulo SP State High

Summer Collection

2016

400k followers

118k followers

Activation Children’s

Day

Kids market - Hering Kids

Focus on increasing awareness and connecting with consumers in 2016

14

Communication and engagement

Marketing mix: Investments in printed media, online and Pay-TV ~ 185 millions impacts

Activation

‘Mês do Brincar’

Promotional calendar

Cartoon Network

Run SP and RJ

+ 240% (jan-nov/16)

+ 260%

(jan-nov/16)

Social media

Synergy among pillars ensures coherence, consistency and integration in long-term Long-term strategy with short-term impact:

Male line discontinued Greater selectivity in the multibrand channel

Brand can come up with new processes, new business model formats for Cia. Hering

Business plan of own stores focused on brand, product and channel construction

BR

AN

D

PEOPLE

PROCESSES

DZARM. | Business plan

PR

OD

UTO

CH

AN

NEL

PR

OD

UC

T

16

17

DZARM. | Brand

DZARM. is for urban women who want to express all their power and self-confidence in a Natural way.

We offer a complete portfolio for all occasions, which reflects the latest trends in cosmopolitan style, with a

great value for money.

Curatorship of current and versatile fashion to keep up with the intense life of modern women.

Target: young women, Class A/B from 25 to 35 years old.

17

DZARM. | Marketing and Communication 18

4 MEDIA PILLARS

Digital Magazines Influencers TRADE (POS)

STRONG GROWTH IN SOCIAL NETWORKS

+ 26% vs 2015.

(642k followers)

+ 128% vs 2015. (140k followers)

Focus on Awareness + Differentiation + Conversion

Integrated Communication Plan

E-commerce as an important platform for the business

DZARM. | Product 19

Complete portfolio for all occasions of usage with great value for money

Product mix more adjusted to the value proposition

Total Look – more than 300 products per collection

Portfolio Structure70:20:10

- Greater focus on key categories: T-shirts; Jeans and 3rd piece

Increase accessibility

Portfolio adjustment by increasing intermediate price ranges

Reinforcement of entry price

Products connected to commercial calendar

Average price of R$ 148.0 (sell-out)

Reduce time to market

- New development process for fast cycle items

- Capsule collection with prompt delivery

DZARM. | Channel – Multibrand Significant drop in revenue due to multibrand closures and greater channel selectivity

20

High capillarity: presence in more than 3,000 points of sale (-20% customers vs. 2015) Channel with complementary role: bring revenue without depreciating brand

Strategy

Channel Segmentation Focus on Qualified Multibrands

Expand at Boutiques

Strengthen presence in POS and improve brand experience

More commercial and accessible portfolio Dedicated commercial manager pilot to DZARM. in SP

DZARM. | Channel – Franchise Light 1st pilot store recently inaugurated in Alfenas - MG

21

Concept Stores ~45 sq. meters, expansion focus in cities with less than

500,000 inhabitants Lower set-up cost Promising expansion potential

We are HERING We offer a contemporary casual style, with strong recognition in basic,

translated into our proprietary style, generating a unique value proposition to our consumer.

23

Are we BASIC? Are we FASHION?

Collection Efficiency

Promotional Calendar

Intensification

Creation Times reorganization by

specialty

Proprietary Style

2016 PRODUCT FOCUS

Collection development process fundamentals

Expected effects starting from 2017

24

FOCO EM PRODUTO

• Value for Money consistent in all categories and price ranges

• Collections connected to commercial strategy in stores

• Product variety yielding innovation

Collection Efficiency

PRODUCT FOCUS 25

PRODUCT FOCUS

• Product activation at the point of sale, boosting conversion

• Storytelling creation for each moment of each collection

Promotional Calendar

26

PRODUCT FOCUS

• Dedicated teams to men's and women's collections, mirrored structure at development areas

• Specialization generating consistency and efficiency across several lines

Teams and processes reorganization based on PLM model

27

Proprietary Style

• In-depth consumer study • "Hering filter“ set-up

according to our proprietary style, essentially casual

PRODUCT FOCUS

Nível de Moda regulado para o estilo Hering,

essencialmente casual

28

FIRST DELIVERIES 2017

Value for

Money enhancement

Hering Proprietary

Style Consolidation

Jeans Essential

Complement to Hering

Style

BASICS’ territory appropriation,

translating into full range of products

29

MULTIBRAND

Market Context 31

Economic difficulties in the last two years have exerted pressure on the multibrand channel

Net loss of customers

Difficulty in opening new POS

Source: Monthly Trade Survey released by IBGE, sep/16 ¹ Data referring to 'Fabrics, Clothing and Shoes’ group

Sales variation of apparel¹ in Brazil (Brazilian Statistic Bureau – ‘IBGE’)

Source: http://onegociodovarejo.com.br/o-estrago-da-crise-segundo-cnc-varejo-fechou-1669-mil-lojas-entre-2015-e-2016/

National Trade Confederation data

700k retail stores in the country, with at least

one employee

166.9k closed throughout 2015 and in the first half of 2016

-5.2% -6.1%

-8.7%

-11.3% Nominal Sales Volume

Multibrand – Current scenario

Channel’s complexity demands company’s greater sophistication, creating segmentation opportunities

Annual sell-in sales

R$800+ million

Points of sale

~18,000

Sales Representatives

~400

Showrooms per collection

~150 Orders/year

300,000+

Cities

3,000+

States

27

Main challenges

Sales decline in the channel

Restricted knowledge of customers

Differentiated service-level

Set where to invest in POS execution

Map where to grow

Better serve Qualified Multibrand, avoiding conflicts

Increase showroom effectiveness and adherence to collections

Evolve management of sales team

of company’s sales

~45%

32

Data referring to the fiscal year of 2015.

2016 Segmentation Study

Different clients, distinct groups, specific policies

Focus in Basic Focus in Discount Regional Networks Qualified Multibrand Traditional Fashion Sophisticated Fashion

33

+ Concept + Price

2016 Segmentation Study 34 To meet the challenge, it was necessary to elaborate a

segmentation project using several parameters City Size

Region

Typologies Customer

Information

Cia. Hering Performance

Consumer profile

GAP Analysis

Segmentation typologies

Vis

ibili

ty a

nd

C

om

pre

hen

sio

n

2016 Segmentation Study 35

Different customers, distinct groups, specific policies

- Strategic relevance to Cia Hering +

- C

on

sum

pti

on

co

nce

ntr

atio

n

+ C

ity

Size

Segment 7

Segment 5

Segment 6 Segment 2

Segment 3 Segment 1

Segm

ent

8

Qu

alif

ied

Mu

ltib

ran

d

Clu

ster

an

d

clas

sify

Focus in Basic Focus in Discount Regional Networks Qualified Multibrand Traditional Fashion Sophisticated Fashion

+ Concept + Price

Segment 4

Vis

ibili

ty a

nd

C

om

pre

hen

sio

n

2016 Segmentation Study – Action plan 36

We shall implement over the next two years a new business model to the channel, aiming to leverage sales

1. Who demands minimum inventory

2. Who we will invest in VM and activations (banners, stickers, etc.)

3. Who will have differentiated service-level

4. Where will we explore more cross-selling opportunities across all brands

Segment X Y Z W ... Qualified

Multibrand

Exclusive commercial policy ...

Service-level model ...

POS material ...

Serving priority ...

Immediate stock availability ...

Allocation priority ...

Illu

stra

tive

exa

mp

le:

1.

2.

3.

4.

Act

ion

p

lan

1. Who should have priority in supply

2. When will we have prompt delivery

3. How the participation in showroom will be

4. How to allocate better company resources

5.

6.

7.

8.

Vis

ibili

ty a

nd

C

om

pre

hen

sio

n

Clu

ster

an

d

clas

sify

E-COMMERCE

E-commerce – Our brands in the online channel 38

Hering.com.br DZARM.com.br PUC.com.br HeringKids.com.br OutletEspacoCiaHering.com.br

How did we get here? 39

Building a solid technology foundation

1998

E-commerce launch

2008

Relaunch

2009

Launch

2010

Launch

2016

Launch

2012

New platform

2015

Unified platform

Latest 5 years

~ 260% growth in visits

~ 300% growth in

unique visits

~ 200% growth in revenue

~ 140% growth in volume

Business maturity

Robust and flexible

platform

Brands’ digital

presence

Investments in Digital MKT

Unique communication

across the channels

Channel with strong growth in recent years

How are we? 40

With the consolidated platform, in 2016 we started a new stage in digital retail

Source: Google Analytics

* Until 28th, Nov

Launch of Outlet Espaço Hering. More investments in digital media, resulting in traffic increase and revenue growth.

1st Half 2016

2nd Half 2016

Visits New Visitors

Recurring Visitors

+17% +12% +21%

Implemented features:

• Products recommendation in virtual stores and via email

• Personalized campaigns of cart abandonment

• Total look purchase (lookbook)

• Responsive layout to desktop and mobile

• Inclusion of videos in product’s description

• Photos with dressed models

Indicators Jan-Nov/16*

E-commerce in 2017 41

Investments already approved must sustain/accelerate the good sales moment of the channel

To increase

FLOW • Investments in SEO (Search Engine Optimization) > Improve rank

• Higher investment in digital marketing

• APP Hering/mobile

• Create MKT campaigns by Geolocation

• Understand and integrate the cross-channel consumer behavior

• Investment to improve User experience and User Interface (CRO)

> increase conversion rate and consumer engagement

To increase

CONVERSION

To improve

CONSUMER EXPERIENCE

E-commerce: channel consolidation 42

9M15 9M16

1.7% 2.4%

E-commerce sales’ participation

To assure our position as one of the leading brands in Brazil's e-commerce

+ 70 bp

Online traffic increase

Conversion rate improvement

Expansion of logistics

OmniChannel

as strategy to boost both channel’s and B&M results

layout redesign for mobile

to meet new projects and channel growth

advance in integration process with other channels

Opportunity

5% of sales in the coming years

STORE EXPERIENCE

44

The store refurbishment cycle is part of the plan to improve shopping experience

2016 Refurbishment Plan

Designed for a quick conversion of the main POS and revitalization of the oldest ones

2015: 87 stores in the Evolution Project, 13% of total network

2016: Refurbishment Plan launch, estimated in ~100 stores

30-40% reduction in investment

¼ of subsidy of the amount invested

by franchisees

Financing ¾ of total invested

Reduction in the ‘closed for renovation’ days

45

Negotiation with suppliers

Savings on items that do not impact customer

Project adjustments to faster execution

To be granted upon store reopening, totaling up to R$

10 mn. Booked in 'Sales Expenses'

Funded by the company, recorded in balance sheet as 'Other Accounts Receivable'

2016 Refurbishment Plan

Shopping center store: example 46

2016 Refurbishment Plan

Shopping center store: example 47

2016 Refurbishment Plan

Street store: example 48

2016 Refurbishment Plan

Renovated stores: more examples 49

Pq. Dom Pedro Sh. Campinas

SP

Itapeti-ninga

SP

Shop. Boulevard BH - MG

Shop. Iguatemi

Florianóp. SC

Barra Shop.

RJ

Catuaí Shop.

PR

4 states

17

2016 Refurbishment Plan - Results

We executed 100 Hering Store renovations in 2016

Remodeled stores remained closed for

renovations, on average, days

Subsidy granted by the company (R$ mn)

* Estimated

50

3 states

4 states

64 stores

4 states

3 states

Renovation dispersion by state Re-openings per month

100 stores

18 states

8 stores

7 stores

3 stores

18 stores

1.2 1.6

6.0

8.8

1Q16 2Q16 3Q16 4Q16E* Feb Apr Aug Sep Oct Dec May

2016 Refurbishment Plan – Hering Store

We prioritized the conversion of the main POS

In 2016 we executed the most ambitious refurbishment plan in company's history, which included the renovation of the main points of sale.

We ended 2016 with ~30% of the base in the new project.

From now on, we enter in a normal cycle of renovations with no incentive program.

51

Store Experience – Improvements in VM

The new project presents important evolutions in the setting and VM

52

Presents trends and advises the consumer on the look composition, collaborating to raise cross-

selling and average ticket

Greater use of tables, better location for activation and exhibition of high turnover fashion merchandise.

Opportunity to increase volume and average ticket

Focal point

Fashion

Enhancement table

High turnover

Store Experience – Improvements in VM

The new project presents important evolutions in the setting and store VM

53

Highlight in sales area, with high display capacity favoring self-service. Frontal display addition

Dedicated area to enhance category, with curatorship, allowing better visualization and interaction

with several variants Focal Point jeans

Focal point Basics

STORE OPERATION

Supply 55

Essential in creating better shopping experience

Promotes store organization and mix

standardization

Increase the value perception

Improves brand image

Reduces shrinkage

Supply

Developments made in 2015 and 2016 supply model prevent inventories accumulation in the network

56

2015: Inventory adjustment and markdown strategy revision of past

season items

2016: change in the supply model

Assortment recommendation store by store Emphasis on greater depth

Purchasing strategy per closet/fixture Transitory collections = inventories adjustment

* Purchase valued at MSRP

Purchases and sales of Hering Store network excl. outlets

Fall/16

Winter/16

Spring/16

Fall/16

Winter/16

Spring/16 + fall leftovers + winter leftovers

-0.9%

Biweekly recommendation of basic’s replenishment

Purchase* Sell-out R

$ m

illio

n

Supply

We will evolve in 2017 by evaluating product location in the store since its conception and by improving basics supply management

57

Increase in the frequency of high-turnover basics replenishment

Resupply controlled by the company

Automated basics replenishment

Adoption expansion by the network

It will cover from product planning to in-store application

Purchase evolution/ selection of network assortment

Store management - evolutions 58

Supply initiatives combined to others that support franchisees to manage their operation

Sto

re m

anag

emen

t

and

su

pp

ort

Standardizes team and store processes

Records the visit

Scoring system

Management of improvement points

Generates action plans and monitors it

Generates understanding of best practices

Fast improvement of store experience and VM in the pilot carried out in the South region

Extended to all Brazil from

Feb 1st on

Example: Store – South region

Training in operation management:

• Live training about Store and Financial Management to franchisees and staff

• Development via Portal to store staff, with around 20 thousand impacted in 2016

New Business Intelligence - ‘BI’, to franchisees and staff

Consultant's Electronic Inspection Report ‘ ‘REV’

Outlets

A good alternative for managing past season items 59

7 stores operated by Cia. Hering

~4% of network’s sell-out

Two-digit of SSS growth in 9M16

It will sell more than 1 million items in 2016

Catarina Outlet

SP

Outlet Plus BH

Outlets 60

The space is shared among the Company’s brands, in a structure with low operational cost

Outlets - strategy

The channel can gain even more relevance in the sale of past season items

Best channel to sell past collections

Greater control in the point of sale experience

Good consumer acceptance. Improved experience (vs. traditional clearance channels)

Better margins for the Company

Channel growth, since current stores meet only 10-15% of the Company’s need

Improve Company’s profitability, with average sales margin increase of markdown items

61

Application

Benefits

Opportunities

Store network| Satisfaction Survey

High level of satisfaction of Cia. Hering franchisees network

Source: Instituto da Qualidade – Nov/2016 Research conducted with franchisees of Hering Store, Hering Kids and PUC networks.

62

Willingness to open another store (same brand) if it were to invest in retail

Willingness to recommend to whom might invest

Overall Satisfaction

Very satisfied

Satisfied

Insatisfied

Neither satisfied, nor

insatisfied

Very insatisfied

Definitely yes

Definitely no

Probably no

Maybe yes, maybe no

Definitely no

Definitely yes Probably no

Maybe yes, maybe no

Probably yes Probably yes

Management and Operation of store Network

Key Messages 63

Improved store experience as a priority

Store network renovation in progress

Supply initiatives progresses

Support for the franchisee> continuous investments in systems and training

Outlet presents a good opportunity

Healthy and confident franchisees’ network

FINANCIAL MANAGEMENT

Financial Management | Cash Flow 65

Strong cash flow generation this year due to improved working capital and reduced CapEx

in R$ million

Reduction of R$ 76.8 million in working capital and lower investments favored cash flow generation

Cash flow from operations

Financial Management | Shareholder’s Return 66

Historically payout has grown in line with cash generation

in R$ million

Strong cash generation in 2016 tends to translate into higher payout in the year

Share Buybacks

Financial Management | Priorities

We will prioritize operating results normalization and cash generation

Short-term scenario

4Q16 still presents difficulties in sales due to a difficult consumption environment

Higher invoiced volume of High Summer collection in 3Q16* generates sales impacts to the channel in 4Q16

2017 Priorities

Sales growth resumption. Focus on Product & Store

• Markdowns reduction, positively affecting gross margin

• Cash generation and conservative capital structure

67

* As detailed in the 3Q16 release reported on 10/27/2016

68

Cia. Hering www.ciahering.com.br

+55 (11) 3371-4848

Investor Relations www.ciahering.com.br/ir

ri@hering.com.br +55 (11) 3371-4867 / 4805