In In order to continue with its expansion plan, the Company plans to open around 40 stores per year over the next four years, reflecting Riachuelo‘s aim of entering new markets and consolidating its regional positions through store inaugurations and remodelings. As a business strategy, the Company is also becoming more flexible in regard to store format in order to adapt to different markets.

In 2012, Riachuelo opened six compact stores with a sales area of less than 1,500 m² , one of which was the first Riachuelo Mulher, geared exclusively to women, whose walk-in closet format appeals to women’s sense of comfort.
In addition to generating higher potential returns on investments (IRR) and healthier contribution margins per m² of sales area, the smaller stores are excellent options for major urban centers where space is restricted.

Store selection is determined by the value generation ranking, analyzed independently by the Group’s financial area. Possible projects are submitted for approval to the investment committee, which examines elements related to competition, market strategy and the overall economic prospects.

Riachuelo’s market positioning is based on the concept of popularizing fashion, offering all its attributes to various income groups at competitive prices in order to attract consumers from the informal to the formal market, as well as ensuring specific payment conditions tailored to the income level of its customers.

In line with the latest international fashion trends, the Group has entered into associations with top Brazilian fashion designers. Riachuelo offers a truly democratic proposition, providing customers across Brazil with designer clothing at accessible prices, maintaining the essence of a partnership between Fast Fashion and leading stylists.

Riachuelo’s 2012 Autumn/Winter collection arrived at the stores replete with references to Swinging London in the sixties, seasoned with a slight touch of the twenties and designed by Juliana Jabour, who had a huge sales success with the Riachuelo’s earlier Fashion Five project.

Another Fashion Five success, Huis Clos launched a new line for Riachuelo. Geared towards Mothers’ Day, Clô Orozco’s collection brought key examples of the brand, including jump suits, shirts and dresses.

For Valentine’s Day, the Zapälla brand launched a collection inspired by music, cinema and art for the modern man who is in tune with all the latest trends, but doesn’t lose sight of the basics. For women, Martha Medeiros created a collection of stylish romantic pieces that emphasized the curves of the female body.

For Fathers‘ Day, Lorenzo Merlino, a designer renowned by his impeccable tailoring, created an exclusive collection for Riachuelo, with 20 models for contemporary urban men who are concerned with the fit, quality and finishing of their clothing. The stylist’s refined, simple and precise design was an outstanding feature of the collection.

Riachuelo’s 2012/13 Spring/Summer collection presented as main references the vintage atmosphere of California in the fifties, pop art from the sixties, a sporting look with big-city attitude, and the colors and spirit of the deserts.

In October, André Lima designed a new line for Riachuelo with pieces in natural and synthetic fabrics and prints that reflect the elements and force of nature around the central motif of the sun.

For the year-end campaign, Daslu drew on the best of its DNA to create a collection for Riachuelo featuring striking animal prints, glamorous party outfits and chic resort wear with the spirit of the Brazilian summer, in addition to men’s and children’s items.

It is worth emphasizing that the performance of these partnerships goes well beyond their sales success. The improvement of fashion’s image among young people who are increasingly concerned with and aware of ecological and social aspects is the greatest achievement of these strategies.

The partnerships have therefore further strengthened the Group’s commitment to making an active contribution to the sustainable development of its business, both in the environmental and social spheres. Through an integrated model that generates around 37,000 formal jobs, the Company pursues efficiency gains and increased competitiveness by prioritizing the use of environment-friendly processes and inputs when developing and producing its products.

In line with its continuing integration process, in 2012 100% of Guararapes output went to Riachuelo, ensuring complete synergy between the Group’s operations. The resulting operational flexibility is reflected in three product lines: Vale a Pena, basic garments with the possibility of seasonal storage; Coleções, following each season’s leading trends; and Fast Fashion, meeting fashion’s instant needs.

On the financing front, in 2010, Midway Financeira began to offer branded cards to its customers in association with Visa and MasterCard, a project which recorded consistent progress throughout the year. At the end of December 2012, the Company had a total of 1.8 million branded cards including the conversion of private label cards. The business plan envisages the issue of one million cards every 12 months.

The Riachuelo card base is one of the Company’s core assets as it establishes long-term relationships with a growing customer base, which currently numbers close to 22 million (March 2013). Another of the Company’s main operations is financial services, which offer customers interest-bearing installment sales, personal loans, insurance and other financial products.

In September 2012, the Company inaugurated its new Contact Center in Natal, Rio Grande do Norte. With an area of 6,500 m², it can hold up to 1,000 workstations, is equipped with the most up-to-date software and systems, and is capable of doubling the Group’s collection capacity.

Outlook for 2013

The Company is maintaining its optimistic outlook for 2013, based on a scenario of increased economic growth and the maintenance of household income levels, accompanied by low unemployment and high consumer confidence indices. These expectations, together with the enormous potential for consolidation, given that the sector’s five leading players have a joint market share of only 10%, have made the Group even more confident in relation to increasing its investments.

Over the next four years, the Company expects to open around 40 stores per year, raising the total from 169 at the close of 2012 to around 330 by the end of 2016. In order to achieve this growth and improve its penetration capacity, Riachuelo began developing different store formats, so that the current mix consists of full and compact stores, as well as the Riachuelo Mulher outlets.

The Group’s strategic plan also includes initiatives to support this growth, especially in regard to the back office structure, logistics centers and technology platforms.
In addition to the pursuit of profitability, in 2013 we will be relieving the short-term pressures that always accompany a strong expansion plan by exerting rigorous control over operating expenses and pursuing more efficient working capital levels, as we did in 2012.

In recent years, more than 40 million consumers have moved up from the lower income groups to join Brazil’s emerging middle class, directly benefiting the Group’s business, and a survey by Instituto Data Popular and Editora Abril indicates that another 40 million will do so within the next four years. Consequently, every year the Company invests heavily in product R&D in order to offer more fashion to its customers together with a better purchasing experience, thereby justifying its slogan: "Riachuelo, fashion‘s official sponsor".

Mission, Vision and Values

• Mission: to provide people with an opportunity to express themselves through Fashion.

• Vision: to be the leader in Brazil’s apparel market, in a predominately formal industry.

• Values: Ethics and Respect; Financial Solidity; Administrative Austerity; Meritocracy; Continuous Improvement; Social Responsibility; Customer Service; Corporate Governance; Selling Attitude.