GRUPO SANBORNS 2013 ANNUAL REPORT

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2013 Annual Report

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CORPORATE PROFILE

GRUPO SANBORNS IS A LEADING COMPANY IN THE MEXICAN RETAIL MARKET. THE COMPANY HAS A UNIQUE PORTFOLIO OF MULTIPLE FORMATS THAT INCLUDES SPECIALIZED DEPARTMENT STORES, ELECTRONICS AND ENTERTAINMENT STORES, CONVENIENCE STORES, LUXURY STORES AND RESTAURANTS, WITH HIGHLY-RECOGNIZED BRANDS SUCH AS SEARS, SANBORNS, ISHOP-MIXUP, EDUMAC, DAX, SANBORNS CAFÉ AND SAKS FIFTH AVENUE. GRUPO SANBORNS HAS A PRESENCE IN 53 CITIES IN MEXICO, 423 STORES AND A SALES AREA OF 1 MILLION SQUARE METERS, OFFERING A WIDE VALUE PROPOSITION TO OUR CLIENTS, WHICH INCLUDE MORE THAN 3 MILLION CARDHOLDERS.

Grupo Sanborns, S.A.B. de C.V.

MISSION:

To offer our clients the highest-quality products and services, at fair prices, in an appropriate environment, ensuring the highest satisfaction through attentive personalized service. The client is the reason for our work.

VISION:

Consolidate and maintain leadership of our Group in the market, integrating the objectives of clients, personnel, suppliers and shareholders.

VALUES

• Work: It is only through work that we can meet our needs, grow as persons and serve others, which is why we should seek our work to be a means of personal and professional development as well as emotional satisfaction.

• Growth: To grow is to increase and improve our personal knowledge and abilities, so that together with the Group we can increase our capacity to offer more and better products through excellent service to our clients.

• Social Responsibility: This responsibility represents doing our work well, reaffirming our values, fulfilling commitments with our clients and suppliers, respecting existing legislation and protecting natural resources and the environment.

• Efficiency: Efficiency means being austere, caring for and efficiently utilizing the resources we have. Spend what is necessary and avoid what is useless and excessive.

KEY FINANCIAL INFORMATION

Grupo Sanborns (Thousand pesos at December 31 of each year*)

GSANBORNS

2013

2012

Var%

Retail Sales

37,819,358

36,938,758

2.4%

Credit Income

2,695,076

2,472,529

9.0%

Total Sales

40,514,434

39,411,287

2.8%

Gross Profit

16,088,304

15,592,520

3.2%

Operating Income

5,006,226

4,565,522

9.7%

Operating Margin

12.4%

11.6%

0.8

EBITDA

5,500,202

5,225,703

5.3%

EBITDA Margin

13.6%

13.3%

0.3

Controlling Participation in Net Income

3,232,549

2,966,795

9.0%

Net Margin

8.0%

7.5%

0.5

Total Assets

38,763,024

31,201,517

24.2%

Total Liabilities

10,751,609

15,972,727

-32.7%

Consolidated Stockholders Equity

26,393,569

13,777,433

91.6%

Capital Expenditures (CapEx)

1,675,214

748,891

123.7%

Net Debt

5,273,039

Total Debt

-7,714,993

2,945,184

Total Area (sq meters)

1,005,410

973,876

3.2%

Credit Portfolio

9,660,893

8,858,821

9.1%

% Non-Performing Loans

2.9%

2.2%

0.7

Net Debt/EBITDA

0.0

0.6

-100.0%

CapEx/Sales

4.1%

1.9%

223.5%

Outstanding Shares (thousand)

2,355,000

Earnings per share**

1.4

Closing year stock price***

22.7

*Except Outstanding Shares, Earnings Per Share and number of credit cards.

**Controlling Participation in Net Income divided by number of outstanding shares.

***Started quoting in the MSE on February 8th, 2013.

EBITDA: Does not include Other Income from the appraisal of investment properties.

Notes

TOTAL REVENUES

(Million Pesos)

OPERATING INCOME

(Million Pesos)

Operating Margin %

GROSS PROFIT

(Million Pesos)

Gross Margin %

EBITDA

(Million Pesos)

EBITDA Margin %

*Extraordinary income of $210 million pesos due to the valuation of investment properties was deducted for the EBITDA calculation.

REVENUE BREAKDOWN

BY SUBSIDIARY

(Million Pesos)

EBITDA BREAKDOWN

BY SUBSIDIARY*

(Million Pesos)

FORMATS AND BRANDS

WE HAVE BUILT A PLATFORM OF DIVERSIFIED RETAIL STORES, WITH RECOGNIZED BRANDS THAT OFFER A WIDE VALUE PROPOSITION TO OUR CLIENTS AND CONSUMERS.

Saks Fifth Avenue

iShop

Sanborns

Sears

BRAND

NUMBER OF

STORES

PRODUCTS

Fashionware, large and small appliances, furniture, home improvement and electronics.

169

Books, magazines, health and beauty, pharmacy, electronics, toys, music, videos, jewelry, photography, cellular phones, candy and gifts. Restaurant and bar service.

ISHOP / MIXUP:

Edumac

111

40,417

11%

Apple products and accessories, music, videos, movies and video games. Apple-related products and courses.

OTHER:

Dax

Sanborns Café

Saks Fifth Avenue

and 2 Shopping Malls

72,670

Cosmetics and perfume.

Accessible traditional Mexican food.

High-quality clothing

and accessories.

Shopping malls.

TOTAL

423

1,005,410

100%

SALES

AREA (Sq meters)

% OF

REVENUE 2013

SEARS

635,895

52%

SANBORNS

256,428

31%

PRESENCE IN MEXICO

GRUPO SANBORNS has wide geographic coverage with a focus mainly on Mexico. Through our network of stores we have a presence in 53 cities throughout the country.

It is considered one of the largest non-bank players in Mexico. Sears stores are highly recognized in Mexico and offer a wide variety of products from branded clothing to latest-generation electronics and houseware that has the Sears quality guarantee, as well as additional plans for service policies.

Sears contributes with 52% of total revenue and 55% of consolidated EBITDA of Grupo Sanborns. During 2013, 4 stores were inaugurated: Santa Fe, Colima, Durango and Nuevo Veracruz, adding 28,211 sq meters of retail space.

In terms of remodeling, major work was started in 6 stores, which will be completed in mid-2014.

More information

SAME STORE

SALES %

TOTAL SALES

(Million pesos)

SALES BY SQ METERS

(Thousand pesos)

SEE MORE SALES FIGURES

REVENUE BREAKDOWN

BY CATEGORY

Hardlines: 45%

Softlines: 41%

Credit: 12%

Services: 2%

Sears

At Sanborns we offer products and services such as: books, photography equipment, cellular phones and accessories, fragrances and cosmetics. It is also the second-largest chain of bars and restaurants. It contributes with 31% of the total revenue and 19% of the consolidated EBITDA of Grupo Sanborns.

In 2013, 4 stores were inaugurated: Samara Santa Fe, Playa del Carmen, Garden Santa Fe and Nuevo Veracruz, which added 5,397 square meters of sales area.

In terms of remodeling for the year we began major work in 4 stores, which will be finished in mid-2014.

More information

SAME STORE

SALES %

TOTAL SALES

(Million pesos)

COMPOUNDED SALES

BY STORE SQ METERS

(Thousand pesos)

SEE MORE SALES FIGURES

REVENUE BREAKDOWN

BY CATEGORY

Retail: 74%

Food and Beverage: 23%

Other: 3%

Sanborns

SAME STORE

SALES %

TOTAL SALES

(Million pesos)

SALES BY SQ METERS

(Thousand pesos)

SEE MORE SALES FIGURES

REVENUE BREAKDOWN

BY FORMAT

MixUp: 36%

iShop: 64%

Number of Stores: 111

Retail Space: 40,417sqm

We are the only authorized service center for Apple, and offer training through EduMac. The chain contributes with 11% of total revenue and 5% of consolidated EBITDA of Grupo Sanborns.

In 2013, 5 iShop stores were inaugurated: Parque Delta, Mérida, Pachuca, Arcos Bosques and La Isla in Cancun.

Due to the closing of 2 stores, sales area was reduced by 1,146 square meters.

More information

ishop

TOTAL SALES

(Million pesos)

SEE MORE SALES FIGURES

We have other formats such as:

• Sanborns Café, which has a presence in 27 states in Mexico and Mexico City,

• Dax, regional retail chain for cosmetics and perfumes,

• Saks Fifth Avenue, luxury department stores that carry international designer fashionware,

• Two shopping malls, Plaza Loreto and Plaza Inbursa and,

• 1 Sears store and 3 Sanborns stores in Central America and 3 boutiques.

In 2013 we opened two Dax stores, one in La Paz and another in Tijuana, Baja California and closed two boutiques. As a result the sales area for Other Formats was reduced by 1.3% to 72,670 square meters.

More information

Sax Fifth Avenue

Grupo Sanborns has social, environmental, labor, health and security performance in line with the programs of Fundación Carlos Slim and its corporate values.

Social Performance

Grupo Sanborns companies have developed channels and mechanisms to communicate with different interest groups, carrying out investments in education, health, infrastructure and community development through the following initiatives:
• Real Estate Restoration Program
In 2013 Grupo Sanborns participated in the conservation of a former aluminum factory in Veracruz, which included a historic building designed in 1962 by Félix Candela. The architectural project involved reconverting this urban liability into a mixed-use real estate development with a shopping mall, hospital, hotel, schools, a university and low-income housing. The new space created 15,000 direct jobs and an additional, innovative, alternative space for people in the Port of Veracruz.
• Medical prevention and disease control campaigns
• In-kind donations
• Hiring of persons with disabilities
• Activities in collaboration with Fundación Telmex and Fundación Carlos Slim

Environmental Performance

Grupo Sanborns continues energy (electricity and gas) and water savings programs and the reduction and recycling of paper, and reporting environmental performance in the Carso Environmental Report for 2013, which includes:
• The update of the Environmental Policy
• The achievement of the projects proposed in 2012,
• The presentation of environmental indicators by industry and/or company.

Labor, Health and Security Performance

As of December 31, 2013 Grupo Sanborns employed more than 47,000 full and part-time persons. The operating subsidiaries of the company carry out training programs for management and other employees such as the following:
• Educational programs and scholarships for collaborators and direct family members,
• Digital scholarships,
• Annual sports event programs,
• Personnel development program through ASUME (Asociación de la Superación por México), This year Grupo Sanborns held more than 15,000 training events that incorporated more than 144,000 participants. The company also continues health prevention campaigns in collaboration with the Mexican Social Security Institute (IMSS) and the Health Ministry.

For more information and detail, please consult: Sustainability activities section of the Grupo Sanborns SAB de CV http://www.gsanborns.com.mx/
Fundación Carlos Slim Report http://www.carlosslim.com/pdf/reporte_fcs_agosto2012.pdf

More information