Cia Hering : Material Fact - 4Q17 Sales Performance

MATERIAL FACT

4Q17 AND 2017 SALES PERFORMANCE

CIA. HERING (B3: HGTX3), hereby informs its shareholders, investors and the market its 4Q17 sales performance and stores network by year-end.

4Q17 AND 2017 SALES PERFORMANCE PREVIEW (unaudited figures)

Gross revenue reached R$ 537.6 million in 4Q17, 4.4% higher than 4Q16. Sales to franchises remained similar to sell-out sales performance, while own stores sales were favored by addition of point of sales throughout the year. In the e-commerce channel stands out children's brands performance and the initial integration with bricks-and-mortar stores, while the international operation recorded again fast growth. All channels reported growth in the quarter, except for multibrand sales, with a slight decrease in the quarter.

In 2017, gross revenue increased 5.3% over the previous year, totaling R$ 1,841.6 million, driven by the stores performance operated by the Company and double-digit growth in e-commerce.

HERING STORE NETWORK (unaudited figures)

4Q17 sales of the Hering Store network, which includes sales to final consumers of own and franchises stores (sell-out), declined 0.8% compared to 4Q16, mainly due to lower number of check-outs over the year. Performance volatility over the weeks remained high, as observed in other periods of the year. Despite sales improvement during December, there was a sharp fall in sales performance after Christmas. Same-store sales, which considers only stores opened more than 13 months ago, even though presenting sequential improvement in each month during the quarter, declined 1.1% in 4Q17, with high dispersion among stores, highlighting, on the positive side, the performance of the stores located in shopping centers and those operated by the Company.

Store operation in 4Q17, period of greatest traffic of the year, was supported by promotional activations at the point of sales and 'combo' offers, with positive results in their categories and price points. Better sales quality this year, lower shrinkage level and better inventory management led to lower need of inventory adjustments through markups early 2018.

In 2017, Hering Store sales totaled R$ 1,423.4 million, 0.9% lower than the previous year, while same-store sales fell 0.7% in the same period.

STORE NETWORK

The company ended the year with 805 stores, of which 785 in Brazil. 13 stores were opened in the year and another 44 were closed, mainly of the Hering brand. Hering Kids had its network expanded in 3 new stores while PUC, in reorganization process, closed 7 point of sales. DZARM., which is still maturating its single-brand distribution channel, remained with the same stores it had at the end of 2016.

Number of Stores TOTAL

Brazil

Hering Store

Owned

Franchised

Hering Kids

Owned Franchised

PUC

Owned Franchised

DZARM.

Owned Franchised

Foreign - Franchised

Blumenau, January 22nd, 2018.

Rafael Bossolani

CFO and Investor Relations Officer

Phone: [phone]/4805 e-mail:[e-mail]