Lojas Quero Quero S A : Dados Econômico-Financeiros

RESULTS 2Q21

August 4th, 2021

RESULTS WEBCAST

August 5th, 2021 (Thursday)

Time: 9 a.m. (Brasília) | 8 a.m. (New York) | 1 p.m. (London)

Webcast in English(simultaneous translation) |Webcast in Portuguese

Lojas Quero-Quero S.A.

B3: LJQQ3

2Q21 RESULTS RELEASE

Cachoeirinha, August 04, 2021. Lojas Quero-Quero S.A. announces its results for the second quarter of 2021 (2Q21) and first semester of 2021 (1H21).

HIGHLIGHTS

			% 2Q21		% 2Q21				% 1H21		% 1H21
Consolidated Information (R$ million)	2Q21	2Q20	vs 2Q20	2Q19	vs 2Q19		1H21	1H20	vs 1H20	1H19	vs 1H19
Gross Revenue, Net of Returns and Rebates	615.0	434.8	41.5%	377.7	62.8%		1,154.8	822.8	40.4%	731.8	57.8%
Net Operating Revenue¹	496.2	349.1	42.1%	289.3	71.5%		931.6	663.8	40.3%	604.5	54.1%
Gross profit	196.3	138.4	41.8%	118.0	66.3%		371.1	264.8	40.2%	235.6	57.6%
Gross Margin (%)	39.6%	39.6%	(0.1)p.p.	40.8%	(1.2)p.p.		39.8%	39.9%	(0.0)p.p.	39.0%	0.9p.p.
Operating expenses	(155.5)	(114.1)	(36.3%)	(99.9)	(55.7%)		(294.2)	(226.6)	(29.9%)	(194.1)	(51.6%)
EBITDA	60.9	38.9	56.4%	30.2	101.8%		115.0	67.1	71.6%	65.0	76.9%
Margem EBITDA (%)	12.3%	11.1%	1.1p.p.	10.4%	1.8p.p.		12.3%	10.1%	2.2p.p.	10.8%	1.6p.p.
Adjusted EBITDA²	46.1	25.8	78.8%	18.7	146.8%		86.3	41.1	109.8%	42.7	102.0%
Adjusted EBITDA Margin (%)	9.3%	7.4%	1.9p.p.	6.5%	2.8p.p.		9.3%	6.2%	3.1p.p.	7.1%	2.2p.p.
Net Income	16.0	4.4	259.5%	1.4	1,080.6%		27.6	2.9	848.7%	0.9	3,131.6%
Net Margin (%)	3.2%	1.3%	1.9p.p.	0.5%	2.8p.p.		3.0%	0.4%	2.5p.p.	0.1%	2.8p.p.
Same Store Sales Growth (SSS)	35.2%	7.2%	-	4.4%	-		37.7%	0.6%	-	6.1%	-
Adjusted ROIC³	28.1%	24.5%	3.6p.p.	19.5%	8.6p.p.		28.1%	24.5%	3.6p.p.	19.5%	8.6p.p.

• 1. Net operating revenue is negatively impacted by the change in the ICMS-ST/RS legislation (Decree No. 54,308/2018), as of March 2019, which led to an increase in the amount recognized in the Taxes Incurred on Sales account, and a decrease in the Cost of Goods Sold account.
  2. Adjusted EBITDA represents a non-accounting measurement prepared by the Company that corresponds to EBITDA plus non-recurring or non-operating items, and less the impact of IFRS16/CPC06 (R2) adopted in 2019.
  3. Adjusted ROIC (Return On Invested Capital) represents a non-accounting measurement prepared by the Company. Adjusted ROIC is a division of Adjusted Net Operating Profit After Taxes ("Adjusted NOPAT") by the average Invested Capital of the last four quarters (Invested Capital - average of the last four quarters).
  4. Considering that the year 2020 was impacted by the effects of the pandemic, the growths compared to this period may not be properly comparable. To allow for a fairer comparison, we have added the 2019 information and the growth calculation for the 2-year period in the tables in this release.
• Gross revenue, net of returns and rebates grew 41.5% in the quarter (62.8% vs 2Q19) and 40.4% in the semester (57.8% vs 1H19), totaling R$615.0 million in 2Q21 and R$1,154.8 million in 1H21, driven by a 45.3% growth in Retail activity in the quarter (69.6% vs 2Q19) and 48.0% in the semester (62.9% vs 1H19). We continued to gain market share, in another quarter of strong growth, with Same Stores Sales growing 35.2% in the quarter (44.6% vs 2Q19, considering only existing stores in the respective months of 2019) and 37.7% in the semester (38.0% vs 1H19).
• Gross Profit advanced 41.8% in the quarter (66.3% vs. 2Q19) and 40.2% in the semester (57.6% vs. 1H19), with Gross Margin of 39.6%, in line with 2Q20 (-1.2p.p. vs. 1Q19). Gross Margin in line with the previous year, reflecting revenue growth with profitability maintained.
• Operating expenses totaled R$155.5 million, up 36.3% in the quarter (55.7% vs 2Q19). Continued investments in expansion and projects aimed at the Company's growth, but keeping expenses growth lower than gross profit growth, resulting in operating leverage.
• Adjusted EBITDA grew 78.8% in the quarter (146.8% vs 2Q19) and 109.8% in the semester (102.0% vs 1H19), totaling R$46.1 million in 2Q21 and R$86.3 million in 1H21. EBITDA advanced 56.4% in the quarter (101.8% vs 2Q19) and 71.6% in the semester (76.9% vs 1H19), totaling R$60.9 million in 2Q21 and 115.0 million in 1H21. Revenue growth with profitability gain due to operational leverage, reaching an Adjusted EBITDA Margin of 9.3%, up 1.9p.p. vs 2Q20 (+2.8p.p. vs 2Q19). And an EBITDA Margin of 12.3%, up 1.1p.p. vs 2Q20 (+1.8p.p. vs 2Q19).
• Net Profit totaling R$16.0 million in 2Q21 and R$27.6 million in 1H21, with significant increases of 259.5% in the quarter (1,080.6% vs 2Q19) and 848.7% in the semester (3,131.6% vs 1H19). Net Margin expansion of 1.9p.p. in the quarter (+2.8p.p. vs 2Q19) and 2.5p.p. in the semester (+2.8p.p. vs 1H19), reaching 3.2% in 2Q21 and 3.0% in 1H21.

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MESSAGE FROM THE MANAGEMENT

The second quarter of 2021 was another very special quarter for the Company, not only because of the sales performance that exceeded our best expectations, but also because of several important milestones that were achieved in the construction of our company during the quarter, such as the certification of Lojas Quero-Quero by Great Place to Work (GPTW), the opening of 17 new stores, the inaugurations of the new structure in ours distribution center at Rio Grande do Sul state and the new distribution center in the state of Paraná, and the acceleration of store's transformations to a new model that we have been testing for the last two years - Mais Construção Phase III. Each of these milestones reinforces our goal of continuing to build relationships with the communities where we operate, seeking to offer a complete home and construction solution for our customers, always cultivating the soul of the countryside, which guides us in our growth, and which brings opportunity and development to our small and medium-sized towns. With each passing quarter, we find ourselves even more prepared to face and overcome challenges that may arise, and more confident in our ability to capture the growth opportunities we visualize.

After a first quarter in which we saw the pandemic situation worsen in regions where we operate, leading to an increase in restrictions on retail operations, the second quarter brought a better scenario, with a reduction in case numbers and progress in vaccination, and, therefore, fewer restrictions for our operation. Throughout the pandemic period, our main focus was, and continues to be, on preserving our employees' and customers' health, combined with the company's operational viability in a period of many uncertainties we have been through. Our operations in sectors considered essential, such as retail building materials and correspondent banking, mitigated the negative impacts during the periods of greatest restrictions, while the use of digital tools and telephone sales contributed to reduce the impact on sales of appliances and furniture.

Operational status of the stores: highest restrictions between the end of February and the end of March.

Sales performance in the quarter exceeded our expectations. Even after a very strong first quarter, the second quarter showed month-over-month acceleration in sales growth when comparing to respective months of 2019 (in order to eliminate the distortions that would occur when comparing to 2020's pandemic-impacted months). We reached 45.3% growth in Retail revenue in 2Q21 compared to the same period last year (69.6% vs 2Q19), with 35.2% same store growth (44.6% vs 2Q19, considering only existing stores in the respective months of 2019). We continue to observe a heated retail market for building materials, and when we compare it with market data from the IBGE's Monthly Trade Survey or with other sales indexes, we see that our growth continues to be higher, which reinforces our conviction that we are gaining market share. The still challenging product supply scenario, which we have been facing in recent quarters, continued in 2Q21, although better than the one experienced throughout 2020, and we do not foresee an improvement in the short term.

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In order to support this strong sales growth and, consequently, the credit portfolio growth, we conducted a new issue of FIDC Verdecard's senior quotas in the second quarter of 2021 totaling R$300 million, divided in two series, both with brAAA (sf) rating by Standard & Poors Global Rating.

With the opening of 17 new stores in 2Q21, we reached 421 stores in 336 cities, in line with the internal expansion plan outlined for this year: 241 stores have more than 5 years of operation; 76 stores between 2 and 5 years; and 104 stores with up to 2 years of operation. This quarter we also carried out transformations in 12 existing stores, which were converted to the Mais Construção I, II and III models. We highlight Mais Construção Phase III project: just as we did with phases I and II in the past, we started the project conservatively, testing in few stores (3 in 2019 and another 3 in 2020), analyzing the results and making the necessary adjustments until we reached a replicable design, which would then allow us to accelerate stores' transformations to this model, transforming 3 stores in 1Q21 and 6 stores in 2Q21. In this way, we continue on the path of not only broadening our markets through geographic expansion, but also offering a greater products' diversity and a more complete service to consumers in the cities where we already operate, developing an even more lasting relationship with these communities, and capturing an increasingly larger share of these markets.

Map of stores at the end of 2Q21: red dots, stores opened in 2Q21; green dots, other stores.

In order to support this expansion project and improve the level of operations and service to the current stores, we continued to invest in our logistics structure: in the first quarter of 2020, we had carried out the operational change of the distribution center in Santo Cristo - RS, the Company's oldest and located in Lojas Quero-Quero's hometown, to a new location in the same city, with a much larger storage area of 29,000 m², better road access and a more modern physical structure. In the second quarter of 2021, we did the same with the distribution center in Sapiranga - RS, which started operating in a new location, in the same city, enjoying a much more modern structure and an even larger storage area, with 29,000 m². During part of the quarter, we had this distribution center's logistical operations working in parallel at two different locations, until finishing the total operational transfer of the new DC. At the end of the second quarter, we also opened a new distribution center, located in Corbélia - PR, with a storage area of 26,000 m², which will make our operation more efficient in the state of Paraná and in part of the state of Santa Catarina, where, until then, the stores operated with higher logistics costs due to the fact that the goods were sent from the distribution centers located in the state of Rio Grande do Sul. The receipt of goods at

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this new distribution center began at the end of the quarter, with the supply of the stores starting in the third quarter. With the change of operations of the two distribution centers in Rio Grande do Sul and the inauguration of the distribution center in Paraná, which took place in a little more than a year, we expanded our storage capacity by approximately three times.

New Distribution Center in Sapiranga - RS and, beside it, the third Distribution Center in Corbélia - PR, both opened in 2Q21.

In the 1Q21 earnings release, we communicated our strategy for "1PLar" project, which aims to provide our customers in small and medium-sized cities access to products that they would only find in a home center in large cities. In order to achieve this, we want to add a relevant number of products to our mix, making them available in one of our distribution centers, and allowing our more than 400 stores to sell these products through a digital platform, and counting with all the benefits of our structures and physical operation. In the first quarter of 2021, we had started the development of 1PLar, reinforcing our teams and developing partnerships with new and current suppliers. In the second quarter, we adapted part of the old distribution center's area in Sapiranga-RS to receive 1PLar's showroom, continued negotiations with suppliers for the project's new SKUs, and started the registration stage of the new SKUs already negotiated. With 1PLar, we are significantly expanding the product mix in categories in which we already operate, such as Lighting, for example, in which we are bringing products like chandeliers, lampshades, and pendants, or in Bathroom Accessories, in which we are bringing products such as trash cans and towel racks. We are also including new categories, such as Decoration (pictures, organizers, carpets), Security (electronic janitors, monitoring cameras, alarms), among others.

With 115 managers having been trained in the first half of 2021, 53 managers in training, and 421 employees in the Despontes ("Dawns") program at the end of the quarter, we continue investing in the qualification of our teams, who live our values day by day, and preparing ourselves even more to expand with quality.

Through the commitment and dedication of our employees, even in the context of a very adverse scenario, we have maintained the trajectory of improvement and continuous growth of recent years. We continue investing to pursue sustainable growth, to build an increasingly better company and to positively impact society.

We thank all of our shareholders, employees and their families, the communities in which we operate, customers, and suppliers for the trust they have placed in us over these 53 years of history.

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