Company - How to Build Marisa’s Model?
Description of Marisa’s results breakdown
Gross operating revenue: Marisa’s major source of revenue is the sale of women’s, children’s and men’s clothing as well as bed, bath and table linens. The Company also earn revenue from the following services: (i) the sale of insurance products, Marisa Card billing fees, late payment fees related to the Marisa Card and gift card; and (ii) services provided by Due Mille. Marisa’s gross operating revenue excludes the value of goods exchanged by its customers, which are recorded under deductions.
Sales deductions: The following taxes are included under the line item “sales deductions”:
ICMS: A non-cumulative state tax is levied on the value of the item at each step of the production and sales chain, at rates that vary from 7.0% to 19.0%, depending on the state where the product is sold. According to Brazilian ICMS tax law, any ICMS tax paid in the acquisition of raw material or clothing can be used to offset any due ICMS accrued on Marisa’s sales.
PIS/ COFINS: PIS and COFINS taxes are federal non-cumulative taxes assessed on Marisa’s gross operating revenue. Revenue from the sale of the Company’s products and services are subject to the PIS tax, at the rate of 1.65%, and to the COFINS tax, at the rate of 7.6% . Notwithstanding, in relation to the revenue from services provided by Due Mille, TCM, Primos, TEF and Actio, PIS and COFINS taxes are calculated on a cumulative basis at the rates of 0.65% for PIS and 3.00% for COFINS. Cumulative basis means that PIS and COFINS taxes will be charged to Due Mille, TCM, Primos, TEF and Actio revenue, as well.
ISS: ISS is a municipal tax levied on revenue from services, such as the generation of credit card billings, collection of late payments related to the Marisa Card, insurance and logistics. ISS rates vary from 0.5% to 5%.
Exchange of goods: The value of the goods exchanged by Marisa’s customers is recorded under the line item “sales deductions.”
Net operating revenue: Net operating revenue equals gross operating revenue after deductions of taxes levied on gross operating revenue and the exchange of goods.
Cost of goods and services: Marisa’s cost of goods and services consists of the costs of goods purchased, plus inventory losses, the effects of recording adjustments at present value and discounts for advance payments to suppliers. The cost of services are related to Credi-21’s activities, such as lease of Credi-21 establishments, expenses with mail, telephone, messenger services, electricity, paper used in printing Marisa Card bills, outsourcing of collection services, marketing, logistics and inquiries to the Consumer Protection Service, or SPC.
Gross profit: Gross profit equals net operating revenue minus the cost of goods sold and the cost of services.
Operating (expenses) income:
- Selling expenses including expenses related to employees (payroll, any tax charges and benefits), rental payments, condominium fees and property tax (IPTU), marketing (promotion fund, gifts, posters, ornamentation and display window decorating, advertising in newspapers, magazines, radio and TV), utilities (water, telephone, electricity and postal services), miscellaneous services (conservation and maintenance, information technology, cleaning, security, consulting and legal services), freight expenses, materials (packaging, office supplies and others), depreciation and amortization expenses, non-fixed assets, transportation vouchers and transportation of valuable items, vehicle leasing and general expenses (fines, insurance, travel, notary and registry, vehicle and other expenses).
- General and administrative expenses consist of all expenses related to Marisa’s head offices, such as: expenses with personnel (salaries, any tax charges, benefits), rental and related expenses (lease payments, condominium fees and property tax), public utilities (water, telephone, electricity and postal services), miscellaneous services (conservation and maintenance, information technology, cleaning, security, consulting and legal services), materials (packaging, office supplies and others), depreciation and amortization expenses, taxes and fees, non-fixed assets, vehicle leasing and general expenses (fines, insurance, travel, court expenses, inventory adjustment, notary and registry, vehicle and other expenses).
- Other operating income (expenses) consists of expenses such as: tax, labor and civil contingencies, discounts granted to Marisa Card holders, provisions for doubtfulaccounts (net of recovery of credits 180-days past due and related to Marisa Card receivables), and financial charges incurred in the raising of funds in the money market to support its credit operations involving the Marisa Card. Other operating income (expenses) consists of revenue from tax credits (Marisa Lojas is a beneficiary of incentives granted under the Development Program of the State of Pernambuco (Programa de Desenvolvimento do Estado de Pernambuco), granted for an indefinite term, in the form of presumed credits of 3.0% of the total of interstate deliveries by its distribution center located in this state) and revenue from financial services related to the Marisa Card: (a) interest accruing payments in up to eight installments, and (b) interest accrued on the late payment of installments and revolving credit.
Financial income (expenses): Financial income (expenses) equals the difference between financial income and financial expenses. The financial income results from gains and earnings due to exchange variation, and financial investments. The financial expenses consist of interest related to loans taken out by the Company, taxes on financial and exchange transactions, Tax on Financial and Foreign Exchange Transactions (IOF/Exchange Tax), and losses from variable income financial investments.
Income (loss) from operations before depreciation of spun-off property and equipment, equity in real estate companies and revenue from rental of spun-off property : Net profit for the year excludes results from the equity method of accounting equity interest in real estate companies, expenses from depreciation of spun-off property and equipment and revenue from the lease of spun-off properties, in order to create compatibility for future results, since there are no real estate companies or EPEs. It represents the difference between (i) operating profit before financial result, depreciation of spun-off property and equity interest in real estate companies and (ii) financial result, except in the lines that are being discounted.
Non-operating income (expenses), net: Non-operating income (expenses), net, consists primarily of gains (losses) from the variation (increase or decrease) of the Company’s investments (equity) in its subsidiaries.
Income (loss) before income and social contribution taxes, depreciation of spun-off property and equipment, equity in real estate companies and revenue from rental of spun-off property: Represents the difference between (a) operating income before income and social contribution taxes, depreciation of spun-off property and equipment, including results from the method of accounting equity interest in real estate companies, and (b) net non-operating income (expenses).
Income and social contribution taxes – current: the provision for current income tax in accounts related to Marisa Lojas and Credi-21 at a rate of 15.0%, plus an additional 10.0% tax on taxable income exceeding R$240,000 per year. The provision for current social contribution tax was recorded at the rate of 9.0% on its taxable income.
For the companies FIX, Primos, TCM, TEF, Due Mille, Actio, Athol, Lógica, Racional, Ativa, FAX and Transfer, the basis for the calculation of current income and social contribution taxes is established in applicable tax legislation, in accordance with the presumed profit accounting method, at the average rate of 10.8% .
Income and social contribution taxes – deferred: represent the application of income and social contribution tax rates on (a) temporary differences, and (b) tax losses and negative base for social contribution to be offset against future taxable income.