Sonae SR: International Expansion

Sonae SR: International Expansion JMSB Consulting George Emery Jonathan Suprovici Eliane Roy Cinzia Ruberto

Mandate How can Sonae SR expand internationally and become fully profitable by 2017? Where to expand Capital light vs. wholesale Brand development IT system

Creating the Sonae SR road map Corporate infrastructure Franchise model expansion Address Worten model IT system to control global logistics Restructure management for Int. expansion Franchise model is the future for Sport Zone, Zippy & MO 60 new stores per year, implement success template Close non-profitable Worten s in Spain (38 stores) Implement a retrenchment strategy to focus on franchise model Sonae SR can use the franchise model to grow global footprint

Analysis

Make minor adjustments to grow Core strengths Management, logistics, staff Strong ability to adapt and grow Improvements Fine-tune the franchise model Develop brands IT infrastructure Improvements can be fixed with minor adjustments

Focus each division for future expansion Worten Sport Zone Zippy MO Franchise difficulty 50%/50% own brands Higher end products Lower end products Struggling internationally Profitable in Spain Saudi Arabia business model Africa and Asia Each division should be structured to move forward

Franchise BM will be a successful path Sport Zone Growth opp. in India Strong ability to adapt Zippy MO 17 franchise countries Potential for emerging countries Hard-working, experienced staff Logistics and management Focus on franchise model for three divisions will be key

Worten model faces intense competition Low competitive advantage Intense competition - Media Markt - Radio Shack - Darty - Best Buy - Apple Look to close 38 stores Possible expansion in the future through JV Worten s model should be a local only play

Financials

Business Unit Assessment WARTENS 185 Portugal Store 44 Spain Stores 229 Income: 200 K Eur per store SPAIN STORE NOT PROFITABLE Expansion Outlook International Expansion Not Profitable CLOSE SPAIN STORE / OPEN PROFITABLE JOINT VENTURE

Business Unit Assessment SPORT ZONE 81 Portugal Store 35 Spain Stores 1 Indian Store 117 Income: 85 K Eur per store Profitable in Spain and Intl Expansion Outlook Expansion via Franchising FRANCHISE EXPANSION

Business Unit Assessment MO 113 Portugal Store 6 Spain Stores 3 Saudi Arabia Stores 2 Other intl Stores 124 FRANCHISE EXPANSION Income: 16 K Eur per store Expansion Outlook Expansion via Franchising

Business Unit Assessment ZIPPY 38 Portugal Store 35 Spain Stores 15 Saudi Arabia Store 32 Intl Stores 120 FRANCHISE EXPANSION Income: 17 K Eur per store Expansion Outlook Expansion via Franchising

Alternatives

Strategic Assessment for Expansion Strategy Dual strategy : Franchising and organic Diversified offer for different market segments Core Competency Local management & operations Lean infrastructure for international growth Need to improve tecnology branding, logistics International presence Local knowledge Competition Market

Strategic Assessment for Expansion Strategy Dual strategy : Franchising and organic Diversified offer for different market segments Core Competency Local management & operations Lean infrastructure for international growth Need to improve technology branding, logistics International presence Local knowledge Competition Market Finding the right partners & improving structure should be a priority

Alternatives for international expansion Criteria Combine stores in mall model Focus on organic growth Focus on franchising model Improve international structure and operations Initial investment Leverage core competencies Synergies Risk

Risks of franchising model RISKS ACTIONS CONTINGENCIES Control on success & brand Control standardization Aggressive growth Hire Franchise Director Create success template Focus on current locations Hire local team to manage franchisees Provide further training to partners Retrenchment to successful locations

Implementation

Implementation at a Glance 2015 2016 2017 2018 2019 Corporate Infrastructure New Corporate Structure IT Platform Development IT Platform Roll-out Franchise Growth Model Franchise Template 60 Franchise stores 60 Franchise stores 60Franchise stores 60 Franchise stores Addressing Worten model Close nonprofitable stores in Spain Find JV Partner for Expansion

Sonae SR Corporate Structure Paulo de Azevedo Chaiman & Co- CEO Angelo Pauperio Co-CEO Sonae SR Sonae MC Sonae Sierra Sonaecom Sonae RP Sonae IM Francisco Pimentel Exec. Director International Dev. Teresa Castro Director Operations 173 Stores outside Portugal 4 Brands Franchising operations in 22 countries Sonae SR Structure needs to be adjusted for growth

Sonae Corporate Structure Paulo de Azevedo Chaiman & Co- CEO Angelo Pauperio Co-CEO Sonae SR International Division Domestic Divisions Technology Each Brand to have a dedicated Franchising Director Worten Zippy Sport Zone MO 1 Technology Director 2 Technical Specialists New Sonae SR Structure set-up for International Expansion

IT Platform Features Store Level Data Best selling products Seasonality Brand Division in HQ Adjust sales forecast Adjust inventory Estimate delivery times

IT Platform Roll Out Set-Up Hire Technology director Identify Technology provider Pilot Test with 10 Worton stores in Portugal Integrate Roll-out plan across 18 months By brand Training & Support Connecting data from all 4 brands to ensure seamlessness in expansion

Franchising Model Template Each division to Identify potential franchise partners Ensure split of products between Sonae Brands & other brands Utilize synergies from existing franchised stores Dominate existing segments with all 3 brands

New Franchise Stores 60 stores per year Zippy countries as baseline Adjust marketing as per local needs with Franchisors Control inventory & delivery with IT Platform Expand in MENA with Alkoair 22 countries with all 3 brands: Zippy, Sport Zone & Mo

Addressing Worton Model Close unprofitable stores in Spain Keep Canary islands Identify JV partner for future Worton growth Expand Worton once JV partners identified Reassess Worton Strategy

Financials

Cost Corporate Infrastructure IT CORPORATE RESTRUCTURE 200 M eur over 30 months (6.7 M eur per month) 1.5 M eur over 18 months (10 executives) 201.5 M eur over 30 months

Cost Franchise Growth FRANCHISEING WARTENS CLOSURE 15 M eur (60 Stores per year for 4 years @ 250 K per store) (20 stores per Sports Zone, Zippy and MO) 9.5 M eur (Closing 38 stores in mainlain Spain 1 Yr) (250 K per closure) 24.5 M eur FIRST YEAR / 15 M eur PER 3 NEXT YEAR

Projections 2014 2015 2016 2017 2018 2019 WARTENS Portugal stores 185 185 185 185 185 185 International stores 44 6 6 6 6 6 Sales 877 955 955 955 955 955 Closure - 9.5 - - - - Income 40 29 48 48 48 48 SPORT ZONE Portugal stores 81 81 81 81 81 81 International stores 36 36 56 76 96 116 Sales 232 234 254 254 254 254 Store Open - - 5 5 5 5 Income 10 10 8 9 10 12 ZIPPY Portugal stores 38 38 38 38 38 38 International stores 82 82 102 122 142 162 Sales 90 90 105 120 135 150 Store Open - - 5 5 5 5 Income 2 2 (2) 1 3 5 MO 38 38 38 38 38 38 Portugal stores 82 82 102 122 142 162 International stores 16 90 105 120 135 150 Sales - - 5 5 5 5 Store Open 0 2 (2) 1 3 5 Income 2 2 (2) 1 3 5 PROFITABLE BY 2019

Questions?