This website contains forward-looking statements. Our estimates and future statements are based, largely, in current expectations and estimates about future events and trendsthat affect or can affect our business and results. Although we believe that these estimates and future statements are based in reasonable assumptions, these estimates and statements are subject to sevral risks, uncertainties and assumptions created based in information currently available.
Our forward-looking statements may be influenced by the following factors, among others:
The words “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, "can", "could", "may", "would do", "continues" and similar expressions are forward-looking statements. These estimates refers only to the date that they were expressed, so we can't ensure that we will update or review any of these estimates because of the occurence of a new information, future events or any other factors. These estimates involve risks and uncertainties, and doesn't consist in garantee of a future performance, being that the real results or development could be substantially diferents of the expectations described in the eswtimates and future statements. In view of the risks and uncertainties involved, the estimates and statementsabout the future in this website could not occur and, still, our future results and our performance could deffer substantially of these provided in our estimates because, including, of the factors mentioned above. Because of these uncertainties, the investorshould not be based on these estimates and future statements to take an investment decision.
Before making a decision about the acquisition of shares, the potential investors should carefully consider all the information contained in this website and, in special, the risks mentioned below. Our businesses, our financial situation and the results of nouw operations can be adverse and materially affected for any of these risks. The market price of the shares can go down due to any of these risks, existing the possibility of loss of all yours invested capital.
For the purposes of this section, the indication that a risk can have or will have an "adverse effect for the Company", it means that the risk can have or will have an adverse effect in our businesses, financial conditions, liquidity, operational results and shares' value.
Our limited operating history makes it difficult for us to accurately forecast revenue and appropriately plan our expenses.
Due to our limited operating history, our evolving business model, and the unpredictability of our industry, we mal' not be able to accurately forecast future revenue. We base our current and future expense levels and our investment plans on estimates of future revenue. Revenue and operating results are difficult to forecast because they generally depend on the volume and timing of the orders we receive, which are uncertain. In addition, our overhead expenses and investments are largely fixed. As a result, we mal' not be able to adjust our spending if our revenue falls short of our expectations, which could cause our net income in a given period to be lower than expected.
We may experience significant fluctuations in our operating results and rate of growth.
Our revenue and operating profit growth depends on the continued growth of demand for the products that we offer, and our business is affected by general economic and business conditions in Brazil and throughout the world. A softening of demand, whether caused by changes in consumer preferences or purchase power or a weakening of global economies, may result in decreased revenue or growth. Such events could create delays in, and increase the cost of, product shipments, which may decrease demand. Revenue growth may not be sustainable and our company-wide percentage growth rate mal' decrease in the future.
Our revenue and operating profit growth also will fluctuate for many other reasons, including:
If we are unable to address these risks, uncertainties and problems, the price of our common shares may decline, and we may be unable to compete effectively.
We may be unable to compete successfully with our current or future competitors.
The market segments in which we compete are rapidly evolving and are competitive, and we have many competitors in different industries, including both the traditional retail and e-commerce services industries. We currently or potentially compete with a number of companies, including:
Increased competition may result in price pressure, reduced gross margins, a deterioration of our working capital position as a result of providing better payment terms to our customers and loss of market share, any of which could substantially harm our business and results of operations. We believe that the principal competitive factors in our market are brand awareness, selection, personalized services, convenience, price, accessibility, customer service, quality of search tools, quality of editorial and other site content, and reliability and speed of fulfillment. Many of our current and potential competitors may have advantages over us, including longer operating histories, larger customer bases, greater brand recognition and greater financial, marketing and other resources. Competitors in both the retail and e-commerce services industries also may be able to devote more resources to technology development and marketing than we are able to devote. In addition, online retailers may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies, as use of the Internet and other online services increases.
Competition in the e-commerce channel may intensify. Other companies in the retail and e-commerce industries may enter into business combinations of alliances that strengthen their competitive positions. As various Internet market segments obtain large, loyal customer bases, participants in those segments may expand into the market segments in which we operate. In addition, new and expanded web technologies may further intensify the competitive nature of online retail. We believe the nature of the Internet as an electronic marketplace facilitates competitive entry and comparison shopping. This increased competition may reduce our sales, operating profits, or both.
As a result of seasonal fluctuations in our revenue, our quarterly results may vary and could be below expectations.
We have experienced, and expect to continue to experience, seasonal fluctuations in our revenue. In particular, we have realized a disproportionate amount of our revenue during the fourth quarter as a result of the holiday season, and we expect this seasonality to continue in the future.
In anticipation of increased sales activity during the last quarter of the year, we may incur significant additional expenses, including higher inventory of products and additional staffing in our fulfillment and customer support operations. If we were to experience lower than expected revenue during any future fourth quarter, it would have a disproportionately large impact on our operating results and financial condition for that year. In the future, our seasonal sales patterns may become more pronounced, may strain our personnel and fulfillment activities and may cause a shortfall in revenue as compared to expenses in a given period, which would substantially harm our business and results of operations.
Our business depends upon establishing an adequate order fulfillment system and maintaining and developing relationships with suppliers.
We seek to carry minimum inventory levels and thus rely, to a considerable extent, on rapid product procurement from our suppliers and our ability to fill customer orders on a timely basis. We generally do not have long-term contracts or arrangements with our suppliers that guarantee the availability of merchandise, the continuation of particular payment terms or the extension of credit. We cannot assure you that our suppliers will continue to sell products to us on current terms or that we will be able to establish new, or extend existing, supplier relationships to ensure access to products in a timely manner or on acceptable commercial terms. If we fail to develop and maintain relationships with suppliers, we would be adversely affected.
In addition, we depend on service contracts with e-Sedex, the Brazilian post office's express mail service that exclusively services e-commerce companies, and various other delivery companies, to deliver ordered merchandise to our customers. Any disruption of these services could adversely impact our ability to deliver items to our customers. A material disruption of our third-party delivery services that is not timely resolved could cause our image to suffer, as well as substantially harm our business and results of operations.
System interruption or failure, the limitations of a single site and the lack of integration and redundancy in our systems may affect our sales.
A key element of our strategy is to generate a high volume of traffic on, and use of, our website. Accordingly, the satisfactory performance, reliability and availability of our website (including our third party web host), transaction-processing systems and network infrastructure are critical to our reputation and our ability to attract and to retain customers and to maintain adequate customer service levels. Our revenue depends on the number of visitors who shop on our website and the volume of orders we fulfill. We experience occasional system interruptions that make our website unavailable or prevent us from efficiently fulfilling orders, which may reduce our revenue and the attractiveness of our products and services. If we are unable to continually add additional software and hardware and upgrade in an effective manner our systems and network infrastructure or if the service provided by our third party web host is interrupted, it could cause system interruption and adversely affect our operating results. We plan to upgrade our existing enterprise resource planning (ERP) system in 2007. Failure to appropriately plan and implement the transition to a new ERP system could cause system interruption and adversely affect our operating results.
Our success, in particular our ability to successfully receive and fulfill orders and to provide high-quality customer service, largely depends on the efficient and uninterrupted operation of our computer and communications hardware systems. All of our computer and communications hardware is located at a single leased facility in São Paulo. Our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, computer viruses, physical or electronic break-ins, similar events or disruptions. Any of these events could cause system interruptions, delays, and loss of critical data. and could prevent us from accepting and fulfilling customer orders.
Despite the implementation of network security measures by us, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays, loss of data or the inability to accept and fulfill customer orders. While we do have backup systems for certain aspects of our operations. our systems are not fully redundant and our disaster recovery planning may not be sufficient for all eventualities. In addition, we may have inadequate insurance coverage or insurance limits to compensate us for Josses from a major interruption. If any of this were to occur, it could damage our reputation and be expensive to remedy.
Our failure to license technology patents from third parties could harm our business.
We depend upon technology licensed from third parties for homepage, search and related web services. Any dispute with a li censor of the technology may result in our inability to continue to use that technology. There also may be patents or other intellectual property rights that are held by third parties and that cover parts of the technology, products, business methods or services used in our business. If a third party alleges infringement, we may be compelled to enter into a license, which we may not be able to obtain on commercially reasonable terms. We also may incur substantial expenses in defending our company against third-party infringement claims regardless of the merit of these claims. Successful infringement claims against us could result in substantial monetary liability and could lead to a court preventing us from conducting all or a part of our business that falls within the scope of the asserted patent, leading to substantial expenditures to redesign or license technology.
We may be unable to manage our growth effectively.
We have rapidly and significantly expanded our operations, and anticipate that further expansion will be required to address potential growth in our customer base and market opportunities. This expansion has placed, and is expected to continue to place, a significant strain on our management, operational and financial resources. To manage the expected growth of our operations, we will be required to improve existing or implement new transaction-processing, operational and financial systems, procedures and controls, and to expand, train and manage our already growing employee base. We also will be required to expand our finance, administrative and operations staff. In addition, our management will be required to maintain and expand its relationships with various distributors, shipping companies, travel suppliers and other third parties necessary to our business.
There can be no assurance that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations, that management will be able to hire, train, retain, motivate and manage required personnel or that our management will be able to successfully identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business, prospects, financial condition and results of operations will be materially adversely affected.
The loss of key senior management personnel could negatively affect our business.
We depend on the continued services and performance of our senior management and other key personnel. None of our management personnel is bound by an employment or non-competition agreement. The loss of any of our executive officers or other key employees could harm our business.
We may assume certain contingencies resulting from our acquisitions of Ingresso. com and Travelweb.
As of the date of this offering circular, neither we nor any of our subsidiaries were party to any judicial or administrative proceedings relating to our acquisitions of Ingresso.com and Travelweb. However, no assurances can be given that we or our subsidiaries will not be subject to any such judicial or administrative lawsuits or proceedings in the future. If unfavorable decisions are rendered against us in one or more lawsuits, we could be required 10 pay substantial fines, which could materially adversely affect our financial condition and results of operations.
We may be subject to significant risks by providing financing to our customers through our Submarino branded credit card.
We recently entered into a partnership with Cetelem to form Submarino Finance, a jointly-owned company that will offer certain financial products and services to our customers to encourage them to purchase our products by offering alternative financing options, including a Submarino-branded credit card. Subject to certain conditions, B2W will assume 50% of the credit risk associated with the business of the jointly-owned company and will be entitled to 50% of its profits. Although our partner will be exclusively responsible for all credit decisions, we will share in all credit losses related to purchases made with the Submarino-branded credit card. As a result, the failure of our partner to make adequate credit decisions could substantially harm our business and results of operations.
We depend on credit card companies for sales and consumer financing.
Over 80% of our sales are paid for by customers using their credit cards. We are highly dependent on the policies of credit card issuers for the costs associated with accepting credit cards. Any change in the policies of the credit card issuers directed at merchants, including us, and/or at our customers, could harm our results of operations and the price of our common shares.
A substantial portion of our sales is made to customers who purchase products from us through an installment payment plan payable in up to twelve installments. While installment payments are guaranteed by credit card issuers, we depend on credit card issuers to continue to offer these payment plans to their cardholders. Sales on credit to consumers are highly sensitive to changes in interest rates. A change in the policies of credit card companies with respect to installment plans, or a rise in interest rates, could adversely impact our revenue and our financial condition.
The retail industry is affected by the reduction of consumers' purchasing power and unfavorable economic periods.
Historically, the Brazilian retail industry has been affected by periods of low expansion or contraction of the Brazilian economy, as measured by rates of growth in GDP, which reduces the purchasing power of Brazil's population. The success of our operations depends upon many factors, including factors impacting consumer consumption, such as interest rates, inflation, availability of consumer credit, taxation, consumer confidence and employment levels and wages.
An economic setback in Brazil could significantly reduce consumers' expenditures and their available income, which could negatively affect our sales, results of operations and general financial performance. Any negative effect on our financial performance could reduce the market price of our common shares.
Our failure to protect confidential information of our customers and our network against security breaches could damage our reputation and brand und substantially harm our business and results of operations.
A significant barrier to online commerce and communications is the secure transmission of confidential information over public networks. Our failure to prevent these security breaches could damage our reputation and brand and substantially harm our business and results of operations. Currently, a majority of our sales are billed direct to our customers' credit card accounts. We rely on encryption and authentication technology licensed from third parties to effect secure transmission of confidential information, including credit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography, or other developments, may result in a compromise or breach of the technology used by us to protect customer transaction data. Any such compromise of our security could damage our reputation and brand and expose us to a risk of loss or litigation and possible liability, which would substantially harm our business and results of operations. In addition, anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches.
Our failure to address risks associated with credit card fraud and credit risk could damage our reputation and brand name and may cause our business and results of operations to suffer.
Under current credit card practices, we are liable for fraudulent credit card transactions because we do not obtain a cardholder's signature. We do not currently carry insurance against this risk. To date, we have experienced minimal losses from credit card fraud, but we face the risk of significant losses from this type of fraud as our sales increase. Our failure to adequately control fraudulent credit card transactions could damage our reputation and brand and substantially harm our business and results of operations.
Our business could suffer if we are unsuccessful in making, integrating, and maintaining commercial agreements, strategic alliances, acquisitions and other business relationships.
We may enter into commercial agreements, strategic alliances through joint ventures, or other business combinations with other businesses as well as make investments in or acquisitions of other companies. We have entered into agreements to provide e-commerce services to other businesses, and we plan to enter into similar agreements in the future. We have made acquisitions and have entered into a joint venture agreement and may enter into similar transactions in the future.
Our present and future third-party services agreements, other commercial agreements, and strategic alliances including acquisitions create additional risks such as:
Finally, as a result of future acquisitions and other business associations, we might need to issue additional equity securities, spend our cash, or incur debt, contingent liabilities, or amortization expenses related to intangible assets, any of which could reduce our profitability and harm our business.
We may not be able to adapt quickly enough to changing customer requirements and industry standards.
Technology in the e-commerce industry changes rapidly. We may not be able to adapt quickly enough to changing customer requirements and preferences and industry standards. Competitors often introduce new products and services with new technologies. These changes and the emergence of new industry standards and practices could render our existing website and proprietary technology obsolete.
Piracy of music and movies could affect our results of operations.
We offer and sell DVDs and CDs. The illegal exploitation of works protected by copyright by the illegal downloading of DVDs and CDs from the Internet and the piracy of music and movies and other forms of copyright infringement could lead to shortfalls in our revenue and affect our results of operations, and result in a decline in the price of our common stock.
Our business depends upon telecommunication services.
Inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements could have an adverse impact on Internet businesses. Changes in or insufficient availability of telecommunications services to support the Internet or other online services also could result in slower response times and adversely affect usage of the Internet and other online services generally, and our company in particular.
Government regulation of the Internet and e-commerce is evolving and unfavorable changes could harm our business.
We ore subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet and e-commerce. Under Brazilian law, there is currently no distinction between the laws governing e-commerce and the laws governing traditional retail in Brazil. Such existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access, and the characteristics and quality of products and services. It is not always clear how existing laws governing issues such as property ownership, sales and other taxes, libel, and personal privacy apply to the Internet and e-commerce. Unfavorable resolution of these issues may harm our business. This could, in turn, diminish the demand for our products and services and increase our cost of doing business.
Rise of spam and online fraud may adversely affect our business.
Anti-spam regulation may limit our ability to engage in direct marketing. The introduction of new legislation, such as anti-spam laws, could lessen our ability to effectively market our products and services. Complying with new regulations could result in additional cost to us, which could reduce our profit margins of leave us at risk of potentially costly legal action. These developments could affect us adversely in a number of ways.
New regulations could make the Internet less attractive to users, resulting in slower growth in its use and acceptance than is currently expected. Increased awareness of online fraud may negatively affect Internet users' willingness to buy goods online. Any well-publicized compromise of security could deter more people from using the Web or from using it to conduct commercial transactions that involve transmitting confidential information, such as purchasing goods or services. Because our business depends on people using the Web to purchase goods of services, our business could be adversely affected if Internet commerce declines due to security concerns of online fraud.
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian political and economic conditions could adversely affect the financial performance of our company and the market price of our common shares.
The Brazilian economy has been characterized by frequent, and occasionally extensive, intervention by the Brazilian government, and unstable economic cycles. The Brazilian government has often changed monetary, taxation, credit, tariff and other policies, and thus influenced the course of Brazil's economy. The Brazilian government's actions to control inflation and implement other policies have at times involved wage and price controls, currency devaluation, blocking access to bank accounts, imposing capital controls and limiting imports into Brazil.
Our business, results of operations, financial condition, and the price of our common shares, may be adversely affected by factors such as:
The Brazilian government's actions to combat inflation may contribute significantly to economic uncertainty in Brazil.
Historically, Brazil has experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, have had significant negative effects on the Brazilian economy, contributing to economic uncertainty and increasing the volatility of the BOVESPA. Recently, inflation rates were 5.9% in 2010, 4.3% in 2009, 5.9% in 2008, 4.5% in 2007 and 3.1% in 2006 as measured by the Consumer Price Index (Indice de Preços ao Consumidor Ampliado), or IPCA. The Brazilian government's measures to control iní1ation have often included maintaining a tight monetary policy with high interest rates and exchange rate controls, thereby restricting the availability of credit and reducing economic growth.
Increasing prices for petroleum, the depreciation of the real, and future governmental measures seeking to maintain the value of the real in relation to the U.S. dollar, may trigger increased inflation in Brazil. In the event that the rate of inflation increases in Brazil, the Brazilian government may adopt anti-inflationary policies, which could reduce the purchasing power of the Brazilian consumer, as well as economic growth in Brazil, adversely affecting our business, financial condition and results of operations and/or decrease the market price of our common shares. In addition, high inflation generally leads to higher domestic interest rates and, as a result, the cost of servicing our real-denominated debt may increase, causing our net income to be reduced. Inflation and its effect on domestic interest rates can, in addition, lead to reduced liquidity in the domestic capital and lending markets, which could adversely affect our ability to refinance our indebtedness in those markets. A reduction in our net income could lead to a decline in the market price of our common shares.
Developments in other emerging markets may decrease the market price of our common shares.
Brazilian securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries, especially those in Latin America. Although economic conditions ore different in each country, investors' reactions to developments in one country can affect the securities markets and the securities of issuers in other countries. Political, economic and social events emerging economies, including the America Latina's ones, has affected adversely the credit availability for brazilian society in the foreing country, resulting in an expressive leave of resources of the country and in a decrease of the quantity of foreing currency invested in the country.
Assumig that the occurrence of political, economic and social events in other emerging economies that afect relatively Brazil, such events could, for the reasons above indicated, result in an adverse effect for the Company.
The relative volatility and illiquidity of the brazilian stock market could limit substantially the capacity of the investors sell the shares issued by the Company for the price and in the desired occasion
The shares issued by the Company were included in the Ibovespa, price index that corresponds for more than 80% of the trades of the spot marketin BM&FBovespa and IBrX-100, price index that measures the return of theoretical portfolio composed by the 100 shares selected between the most traded in BM&FBovespa, in terms of the number of trades and the financial volume. The shares are subject to political and economic risks, that involve the changes in the regulatory, fiscal, economic and political eviroment able to affect the investors' capacity of receive payments related to their investments, and restrictions to foreing investment and to the capital repatriation.
The investment in securities, like shares, represents a investment risk, since it is an investment in equities, this way, the investors that intend to invest in shares are subject to volatility of the stock market. Moreover, the eventual illiquidity of the market securities could limit substantialy the investors capacity in selling the Company's shares at the price and occasions desired.
Our bylaws contain provisions against hostile takeovers and could prevent or delay transactions that you may favor.
Our bylaws contain provisions that have the effect of avoiding a high concentration of our common shares in a small group of investors, in order to promote a large shareholder base. This provision requires any shareholder (as specified in our bylaws) that becomes the holder of 20% or more of our capital stock (excluding treasury stock), to conduct a public tender offer for a fair price in accordance with our bylaws and CVM regulations and within 60 days of the date that such shareholder purchases or otherwise acquires 20% or more of our capital stock. These provisions may have anti-takeover effects and may discourage, delay or prevent a merger or acquisition that our controlling shareholders consider unfavorable, including transactions in which investors might otherwise receive a premium for their common share.
Holders of our common shares may not receive any dividends.
According to our bylaws, we must generally pay our shareholders at least 25% of our adjusted net profit in the form of dividends. See "Description of Capital Stock-Payment of Dividends and Interest Attributable to Shareholders' Equity." This adjusted net profit may be capitalized, used to absorb losses or otherwise appropriated as allowed under Brazilian Corporation Law and may not be available to be paid as dividends. In addition, we may elect not to pay dividends to our shareholders in any particular fiscal year if our board of directors determines that we do not have adjusted net profits (or accumulated retained earnings) to distribute dividends, or that the distribution of dividends would be incompatible with our financial condition at the time.
We could need additional resouces in the future that could be obtained through the increase of our capital. The obtaining of additional resources through this way could dilute your participation in our capital.
We could need to obtain additonal resouces and, assuming public or private funding realized through debt would not available or in the case that the shareholders decided, the addtional resouces could be obtained through the increase of our capital. Any additional resource obtained through the increase of our capital could dilute the investor participation.