Lojas Americanas S.A. · (a) CPC 06 (R2) / IFRS 16 - Leasing Operations The Group is required to...

Lojas Americanas S.A. Notes to the financial statements December 31, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise stated

1. Operational context Lojas Americanas S.A. (“LASA” or “Company”) is a publicly traded company with shares traded on B3 – Brasil, Bolsa, Balcão under the codes LAME3 - ON and LAME4 - PN and is engaged in the retail trade of consumer products through stores in the traditional, Americanas Express and convenience (“Local”) models, located in the main capitals and cities of the country, as well as distribution centers.

The Company, through its subsidiaries (the “Group”), also operates e-commerce and marketplace through its subsidiary B2W COMPANHIA DIGITAL (“B2W”), that operates the following brands: Americanas.com, Submarino, Shoptime and Sou Barato, besides offering a complete platform of services in the verticals of technology, storage, distribution, customer service, consumer financing and payment account through Ame.

2. Description of significant accounting policies

The main accounting policies applied in the preparation of these financial statements are defined below. These policies were consistently applied in the years presented, unless otherwise stated.

2.1 Basis of accounting

The preparation of the financial statements requires the use of certain critical accounting estimates and also the exercise of judgment by the Company's Management in the process of applying the Group's accounting policies. Those areas that require a higher level of judgment and are more complex, as well as the areas in which assumptions and estimates are significant for the consolidated financial statements, are disclosed in note 3.

The financial statements have been prepared based on historical cost, except for financial assets at fair value through profit or loss and derivative financial instruments, which are measured at fair value and financial liabilities, which are measured at amortized cost.

The issuance of these financial statements information was authorized by the Board on March 18, 2019.

(a) Declaration of conformity

The financial statements have been prepared in accordance with the accounting practices adopted in Brazil, Law 6,404/76, including pronouncements issued by the Accounting Pronouncements Committee (CPC) for individual and consolidated financial statements and the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB) for the consolidated financial statements and only show the relevant information specific to the financial statements which are consistent with those used by Management in its management.

(b) Statement of Value Added (DVA) The presentation of the Individual and Consolidated Statement of Value Added (DVA) is required by Brazilian corporate law and by the accounting practices adopted in Brazil applicable to publicly-held companies. IFRS does not require the presentation of this statement. As a consequence, by IFRS, this statement is presented as supplementary information, without prejudice to all financial statements.

2.2 Changes in significant accounting policies The Group adopted CPC 47 / IFRS 15 Revenues from Customer Contracts (see a) and CPC 48 / IFRS 9 Financial Instruments (see (b)), from January 1st, 2018, restating the Statement of Income and


Statement of Value Added for the period ended on December 31, 2017, for both parent company and consolidated as indicated by CPC 47 / IFRS 15 for the retrospective method.

(a) CPC 47 / IFRS 15 – Revenue from Contracts with Customers

The CPC 47 / IFRS 15 establishes a comprehensive framework for determining whether, when, and by how much revenue is recognized. Replaces CPC 30 / IAS 18 Revenue. According to the CPC 47/15 IFRS, revenue is recognized when a client gets control of the goods or services. Determine the time of transfer of control - in a specific moment in time or over time - it requires judgment.

Among the new requirements established in the accounting standard, the stages of accounting for revenue that arises from contracts with clients are highlighted. Therefore, revenue must be recognized only for the amount that the Company expects to be entitled in the transaction and at the moment when the goods and services are transferred to the customers.

In the case of extended guarantees, the Group is an agent in the sale of insurance policies, recognizing the commission in the Service Sales Revenue. There is no impact related to this transition.

We present below the effects of the new standard compared to the practices maintained until December 31, 2017:

INCOME STATEMENT Period ended in December 31, 2017

Parent

Company Consolidated

Originally presented

Adjustment Restated


Adjustment Restated

Net revenue 11,000,183 (807,729) 10,192,454 17,044,716 (699,127) 16,345,589 Cost of goods and services rendered

(7,110,019) 964,678 (6,145,341) (11,603,751) 619,221 (10,984,530)

Operating expenses (2,223,942) (156,949) (2,380,891) (3,528,360) (156,949) (3,685,309)

Financial expenses (1,034,733) - (1,034,733) (1,876,522) 236,855 (1,639,667)

Total 631,489 - 631,489 36,083 - 36,083

STATEMENT OF VALUE ADDED Period ended in December 31, 2017

Parent Company

Consolidated


Adjustment Restated


Adjustment Restated Sales of goods and services 12,582,471 (955,990) 11,626,481 20,002,305 (752,817) 19,249,488 Cost of goods sold (Include ICMS, PIS e COFINS)

(8,328,697) 964,678 (7,364,019)

(13,851,512) 619,221 (13,232,291)

Other 192,004 (156,949) 35,055 192,650 (156,948) 35,702

Federal (126,293) 95,099 (31,194) 72,206 53,589 125,895

State (431,763) 53,162 (378,601) (721,692) - (721,692)

Interest (1,515,602) - (1,515,602) (2,859,204) 236,855 (2,622,349)

Total 2,372,120 - 2,372,120 2,834,753 - 2,834,753

The Company identified the impacts that occurred in the sale of services, commercial agreements with suppliers and intercompany operations. The main impacts in 2018 are described below:

Operations Previous treatment IFRS 15 / CPC 47 Effect

Parent Company Consolidated


Services Revenue from sales and cost of sales

Commision over the sale 137,713 137,713

Intercompany operations (merchandise sales)

Revenue from sales and cost of sales

Net value of the consideration

62,161 -

Conditional discounts

Financial expense Dedution of gross revenue - (*)

(*) Discounts were granted unconditionally, that is, via invoice.

(b) CPC 48 / IFRS 9 Financial Instruments

The CPC 48/IFRS 9 establishes requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard supersedes the CPC 38/IAS 39 Financial Instruments: Recognition and Measurement. (i) - Classification and measurement of financial assets and liabilities

Tha addoption of CPC 48 / IFRS 9 did not have a significant effect in the accounting policies of the Group related to financial liabilities and financial derivative instruments (for derivatives that are used as hedge instruments (Note 4.1 (a)). The following table presentes the original measurement categories in CPC 38 / IAS 39 and the new measurement categories of CPC 48 / IFRS 9 for each Companie’s financial assets class in December 31, 2018.

Category of financial instruments

Original classification according to

CPC 38 / IAS 39

New classification according to

CPC 48/IFRS 9

Original accounting value according to CPC

38/IAS 39

New accounting

value according to

CPC 48/IFRS 9

Securities and other financial assets Fair value through result

Fair value through result

9,805,046 9,805,046

Derivative financial instruments - swap Fair value through result


56,221 56,221

Accounts receivable from clients and other accounts receivable

Amortized cost Amortized cost 3,002,248 3,002,248

Borrowings – Local currency Amortized cost Amortized cost 9,307,018 9,307,018

Borrowings - Forreign currency Fair value through result


1,783,334 1,783,334

Suppliers and other liabilities, excluding legal liabilities

Amortized cost Amortized cost 5,487,719 5,487,719

Debentures Amortized cost Amortized cost 4,749,473 4,749,473

(ii) - Reduction in the recoverable amount (Impairment)

The CPC 48 / IFRS 9 replaces the 'losses incurred' model in CPC 38 / IAS 39 with an 'expected credit loss' model. The new model for impairment applies to financial assets measured at amortized cost, assets of contracts and debt instruments measured to Fair Value Through Other Comprehensive Results (VJORA), but not to investments in equity instruments. Under CPC 48 / IFRS 9, credit losses are recognized earlier than in CPC 38 / IAS 39.

Based on the evaluations carried out, the Group did not have a material impact on its accounting statements due to the change considering the purpose of analyzing the impairment of its financial assets.


(iii) - Hedge accounting

The adoption of the CPC 48 / IFRS 9 did not have a significant effect on the Group's accounting policies related to financial liabilities and derivative financial instruments (for derivatives that are used as hedging instruments).

The Group has determined that all existing hedge relationships currently designated as effective hedge relationships will continue to be qualified for hedge accounting purposes in accordance with CPC 48 / IFRS 9.

Since CPC 48 / IFRS 9 does not change the general principles of how an entity accounts for effective hedges, the application of the hedge requirements of CPC 48 / IFRS 9 will not have a material impact on the Group's accounting statements.

Since, in relation to hedge accounting, the adoption of IFRS 9 / CPC 48 requirements are optional, the Group opted for the maintenance of IAS 39 / CPC 38.

2.3 New standards, changes and interpretations of standards that are not yet in force

A number of new standards will be effective for years beginning after January 1, 2019. The Group did not adopt these changes in the preparation of these financial statements. The Group does not plan to adopt these standards in advance.

Among the standards that are not yet in force, it is expected that CPC 06 (R2) / IFRS 16 will have a material impact on the Group's Financial Statements in the initial adoption period.

(a) CPC 06 (R2) / IFRS 16 - Leasing Operations

The Group is required to adopt CPC 06 (R2) / IFRS 16 - Leases as of January 1, 2019.

The CPC 06 (R2) / IFRS 16 introduces a single model for the accounting of leases in the balance sheet for lessees. A lessee recognizes a right of use asset that represents his right to use the leased asset and a lease liability that represents his obligation to make lease payments. Exemptions are available for short term leases and low value items. As a basis for conclusion, the IASB suggests as low value leases, those whose underlying assets, when new, are up to U$5 thousand.

The lessor's accounting remains similar to the current standard, that is, lessors continue to classify leases as financial or operating.

The Group has assessed the potential impact that the initial application of CPC 06 (R2) / IFRS 16 will have on the consolidated financial statements as of January 1, 2019. The actual impacts of adopting the standard may change because the new accounting policies are subject to until the Group presents its first financial statements that include the date of the initial application.

The CPC 06 (R2) / IFRS 16 will enter into force for fiscal years beginning on or after January 1, 2019, and will replace the following standards: - IAS 17 - Lease (CPC 06); - IFRIC 4 - Determine whether an agreement contains a lease (ICPC 03); - SIC 15 - Operating leases - incentives (ICPC 03); - SIC 27 - Evaluation of the essence of transactions involving the legal form of a lease (ICPC 03).


CPC 06 (R2) / IFRS 16 did not provides monetary value of what should be considered “low value”, it just stablish that shoul be done the evaluation based on the new asset value (if the leased asset is used). Below we included the resume table with tha main accountability differences between CPC 06 (R2) / IFRS 16 and the current rule (CPC 06 (R1) / IAS 17):

Accounting for the tenant

CPC 06 (R2) / IFRS 16 CPC 06 (R1) / IAS 17

Balance Sheet Right to use of corresponding assets and liabilities.

Operational leasing: no asset or liability is recognized.

Financial leasing: fixed assets and liabilities leased.

Income Statement

Unique approach: - Right to use the asset: depreciation; and - Leasing liability: method of effective interest rate. Note: variable rental payments are not included in the leasing liability.

Operational leasing: rental payments in linear bases.

Financial leasing: depreciation and leasing liabilities by the method of effective interest rate.

Cash Flow Statement

Cash flow arising from financing activities: part of the lease payment that represents the major portion

Financial leasing: similar to CPC 06 (R2) / IFRS 16.

Operational cash flow or resultant from financial activities (depending on the entity policy): payments for short term leasings, to low value assets leasings and to leasing variable payments not included in the leasing liability. In addition to the expenditure and interest payments.

Operational leasing: operational cash flow

Transition

The Group intends to use the modified retrospective approach. Therefore, the cumulative effect of the adoption of CPC 06 (R2) / IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings / losses as of January 1, 2019, without updating the comparative information.

The Group will apply CPC 06 (R2) / IFRS 16 to all contracts entered into before January 1, 2019 that were identified as leases in accordance with CPC 06 (R1) / IAS 17 and ICPC 03 / IFRIC 4.

Impacts estimates The Group made the classification of its contracts using the extracted flowchart from Standard (CPC 06 (R2) / IFRS 16), to evaluate each contract are in the scope. The main analyzed points were:

Existence of an identifiable asset;

The right to obtain economic benefits from the use of the asset; and

The right to direct the use of the asset. In this way, the Company considered approximately 1,500 leasing contracts, of which only those with fixed mandatory portion (not variables) were considered. Based on preliminary assessment, the parent company, estimated that the net effect on right to use assets, on 31 December 2018, would be R$ 1,595,800.


(b) Other Standards The following Amended Standards and interpretations should not have a material impact on the Group's Financial Statements: - IFRIC 23 / ICPC 22 Uncertainty about Taxes on Profits.

- Prepayment Characteristics with Negative Remuneration (Changes in CPC 48 / IFRS 9).

- Investment in Affiliate, Subsidiary and Joint Venture (Amendments in CPC 18 (R2) / IAS 28).

- Changes in the Plan, Reductions or Liquidation of the Plan (Amendments in CPC 33 / IAS 19). - IFRS 17 Insurance Contracts.

2.4 Consolidation The following accounting policies are applied in the preparation of the Consolidated Financial Statements:

(a) Subsidiaries The subsidiaries are all entities (including structured entities) in which the Group has control. Subsidiaries are fully consolidated as of the date the control is transferred to the Group. The consolidation is interrupted from the date on which the Group ceases to have control. The identifiable assets acquired and the contingent liabilities assumed for the acquisition of subsidiaries in a business combination are initially measured at fair values at the acquisition date. The Group recognizes the non-controlling interest in the acquired, both at its fair value and at the proportional portion of the uncontrolled interest in the fair value of the acquired’s net assets. The measurement of non-controlling interest is determined on each acquisition. Costs related to acquisition are recorded in the income for the year as incurred. Transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. The accounting policies of subsidiaries are changed, when necessary, to ensure consistency with the policies adopted by the Group In the financial statements of the Parent Company, the financial information of subsidiaries is recognized using the equity method (Note 14).

(b) Loss of control in subsidiaries When the Group ceases to have control, any holding retained in the entity is measured at its fair value, and the change in book value is recognized in profit or loss. The amounts previously recognized in other comprehensive income are reclassified to income.


(c) Joint agreements The joint agreements are all entities over which the Group has shared control with one or more parties. Investments in joint ventures are classified as joint ventures or joint ventures depending on the rights and contractual obligations of each investor. The joint operations are accounted for in the financial statements to represent the Group's contractual rights and obligations. Accordingly, the assets, liabilities, revenues and expenses related to their interests in joint operations are accounted for individually in the financial statements. The Company, together with its subsidiary B2W, closed in June 2018 the interest in the Fênix Investment Fund for Credit Law (FIDC), a special purpose company incorporated in 2011 with the exclusive purpose of conducting the securitization of receivables of the Company and its subsidiary B2W.

2.5 Presentation of information by segments

The operating segments are disclosed in a manner consistent with the internal report provided to the Group's Management that allocates resources and evaluates performance by reviewing results and other information related to the operating segments. The Group's Management defined its operating segments as follows: • Physical trade - retail trade, through Lojas Americanas stores in the traditional formats, express and convenience stores "Local"; • E-commerce - trade in products and provision of services through various non-presence means, in particular the internet through the subsidiary B2W; • Other - FIDC in 2017, and other activities that did not meet the minimum quantitative and qualitative parameters for presentation separately. These segments are identified based on the legal formalization of the Group's businesses and are disclosed in (note 32).

2.6 Foreign Currency Conversion

(a) Functional currency and presentation currency

The Financial Statements, individual and consolidated, are presented in Reais, which is the functional currency of the Group. All balances were rounded to the nearest thousand, unless otherwise noted

(b) Transactions and balances

The transactions in foreign currency, that is, all those that are not carried out in the functional currency are converted by the exchange rate of the dates of each transaction. Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the exchange rate on the closing date. The gains and losses on changes in exchange rates on monetary assets and liabilities are recognized in the income statement. The non-monetary assets and liabilities acquired or contracted in foreign currency when applicable are translated based on the exchange rates of the transaction dates or the valuation dates at fair value when used. The foreign currency translation differences arising from the translation of the financial statements of subsidiaries, whose functional currency is not the Brazilian real ("R$"), are recognized in other comprehensive income and accumulated in valuation in shareholders' equity.


2.7 Cash and cash equivalents The cash and cash equivalents include cash, bank deposits and other highly liquid short-term securities with the intent and possibility of being redeemed in the short term (up to 90 days) and with insignificant risk of change in value.

2.8 Financial assets and liabilities 2.8.1 Classification

The Group classifies, at initial recognition, its financial assets and liabilities, securities, loans and receivables, as measured: (i) amortized cost; (ii) fair value through other comprehensive income (VJORA); (iii) fair value through profit or loss (VJR). The classification of financial assets under CPC 48 / IFRS 9 is generally based on the business model in which a financial asset is managed and its characteristics of contractual cash flows.

2.8.2 Recognition and measurement

The Group performs an evaluation of the business model objective in which a financial asset is held in portfolio because this better reflects the way in which the business is managed and the information is provided to the Management. The financial assets are initially recognized at fair value, plus transaction costs for all financial assets not classified as at fair value through profit or loss. The financial assets of the VJR are initially recognized at fair value and transaction costs are charged to the income statement. The financial assets are written off when the rights to receive cash flows have expired or have been transferred, in the latter case, provided that the Group has significantly transferred all risks and rewards of property. Available-for-sale financial assets are measured at fair value fair value and changes in fair value, except for impairment losses, interest and foreign exchange differences on debt instruments, were recognized in VJORA and accumulated in the fair value reserve. The financial assets measured at VJR are subsequently accounted for at fair value. Loans and receivables are recorded at amortized cost using the effective interest rate method.

The gains or losses arising from changes in the fair value of financial assets measured at VJR are presented in the income statement under "Financial income" in the year in which they occur.

The foreign exchange variations on monetary instruments are recognized in income. Changes in the fair value of monetary and non-monetary securities classified as VJORA are recognized in shareholders' equity. When securities classified as VJORA are sold or suffer impairment, the accumulated fair value adjustments recognized in equity are included in the statement of income as "Financial income or expenses." The interest on VJORA securities, calculated by the effective interest rate method, is recognized in the statement of income as part of other revenues. The fair values of publicly traded investments are based on current purchase prices. If the market for a financial asset (and securities not listed on the Stock Exchange) is not active, the Group establishes fair value through valuation techniques. These techniques include the use of recent transactions contracted with third parties, reference to other substantially similar instruments, analysis of discounted cash flows and option pricing models that make the greatest possible use of market-generated information and rely as little as possible on information generated by the entity's own management.


For the purposes of assessing whether the contractual cash flows are only payments of principal and interest, the 'main' is defined as the fair value of the financial asset on initial recognition. The ‘interest’ is defined as the considaration by the value of the Money during the time and by the credit risk associated to the main value opened during a certain time and by the other risks and basic costs of loans (as the liquidity risk and the administrative costs), as well as a profit margin. The Group considers the contractual terms of the instrument to assess whether the contractual cash flows are only payments of principal and interest. This includes the assessment of whether the financial asset contains a contractual term that could change the time or the value of the contractual cash flows so that it doesn't would meet this condition.

2.8.3 Compensation of financial instruments The financial assets and liabilities are cleared and the net amount is presented in the balance sheet when there is a legal right to offset the amounts recognized and there is the intention to liquidate them on a net basis or to realize the asset and settle the liability simultaneously. The legal right should not be contingent on future events, should be applicable in the normal course of business and, in the event of default, insolvency or bankruptcy of the company or the counterparty.

2.8.4 Impairment of the financial assets

The company has chosen to measure provisions for losses on accounts receivable and other receivables and assets for a contractual value of expected credit loss for the whole life. To determine if the credit risk of a financial asset has increased significantly since the initial recognition and to estimate the expected credit losses, the company considers reasonable and supportable information that are relevant and available at no cost or overexertion. This includes information and quantitative and qualitative analysis, based on the historical experience of the company, credit evaluation and considering forward looking information. The company considers a financial asset as a defaulter when: (i) unlikely that the lender pay your credit obligations in full, without recourse to actions such as the realization of the guarantee (if any); or (ii) the financial asset is expired for more than 180 days; or (iii) probability that the borrower will enter into bankruptcy or will undergo another type of financial reorganization. Expected credit losses are weighted by the probability estimates of credit losses. Credit losses are measured at present value based on the difference between the cash flows due to the group in accordance with the contract and the cash flows that the Group expects to receive. At each balance sheet date, the Group assesses if financial assets are in trouble. A financial asset has "recovery problems" when one or more events with harmful impact on the estimated future cash flows of the financial asset.

2.8.5 Derecognition

The Group disrecognizes a financial asset when the contractual rights to the cash flows of the asset expire, or when the Group transfers the contractual rights of receipt to the contractual cash flows on a financial asset in a transaction in which substantially all the risks and benefits of the ownership of the financial asset are transferred or in which the Group neither transfers nor maintains substantially all the risks and benefits of the ownership of the financial asset and also does not retain control over the financial assets.


The group disrecognizes a financial liability when its contractual obligation is withdrawn, cancelled or expired. The group also disrecognizes a financial liability when the terms are modified and the cash flows of the modified liabilities are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

2.9 Derivative financial instruments – hedging activities

The Group holds derivative financial instruments to protect their exhibits to the risks of changes in foreign currency and interest rate. The derivatives are recognized at fair value at the date of conclusion of the contract and are subsequently measured at fair value. For more details, see note 4.3.

2.10 Accounts receivable

The accounts receivable from the credit card companies are presented net of the adjustment to present value, calculated on the portion of sales and the provision for estimated credit loss. Also recorded under this heading are sales made through corporate operations, loyalty projects and commercial agreements, highlighted as "Other accounts receivable" (note 9). Trade accounts receivable, unless it is a trade receivables without a significant financing component, are initially recognized at fair value. An accounts receivable from customers without a significant financing component is initially measured at the price of the transaction less the provision for estimated impairment ("Impairment").

2.11 Inventories The inventories are stated at average acquisition cost or net realizable value, whichever is less. The average acquisition cost is presented net of the adjustment to present value of suppliers (forward purchases) and bonuses agreed with suppliers, when applicable. The net realizable value is the estimated selling price in the normal course of business and the estimated costs necessary to make the sale. The inventories are reduced by the provision for losses, which is periodically analyzed and evaluated for suitability.

2.12 Intangible Assets

(a) Goodwill The goodwill results from the acquisition of subsidiaries and represents the excess:

(i) of the consideration transferred; (ii) the value of the non-controlling interest in the acquiree and; (iii) the fair value at the date of acquisition of any previous equity interest in the acquiree in

relation to the fair value of the identifiable net assets acquired. If the total of the consideration transferred, the non-controlling interest recognized and the holding previously measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of an advantageous purchase, the difference is recognized directly in the statement of the result. In the consolidated financial statements, goodwill on the acquisition of subsidiaries is recorded as an "intangible asset".

(b) Trademarks and licenses


The trademarks and licenses acquired separately are initially stated at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the date of acquisition. Subsequently, the brands and licenses, evaluated with a defined useful life, are accounted for at their cost less accumulated amortization. The amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses during their estimated useful life of 15 to 20 years.

(c) Softwares/Website The expenditures related to the development of web sites (B2W's main sales channel), such as development of operational applications and technological infrastructure (purchase and in-house development of software and application installation on sites), software usage rights, and as a graphic development, are recorded in intangible assets, as provided for in Technical Pronouncement CPC 04 (IAS 38), and are amortized on a straight-line basis considering the stipulated period of use and benefits to be realized (note 16). The software licenses are capitalized based on the costs incurred to acquire the software and websites and to make them ready for use. The costs associated with maintaining software are recognized as an expense, as incurred. Development costs that are directly attributable to the design and testing of new identifiable and unique software and websites controlled by the Group are recognized as intangible assets when the following criteria are met: • It is technically feasible to complete the software/website so that it is available for use. • The Management intends to complete the software/website and use or sell it. • The software/website may be sold or used. • It can be demonstrated that the software/website is likely to generate future economic benefits. • Adequate technical, financial, and other resources are available to complete development and to use or sell the software/website. • The expense attributable to the software/website during its development can be measured reliably. The directly attributable costs, which are capitalized as part of the software/website product, include employees' software/website development costs and an appropriate portion of applicable indirect costs. Costs also include borrowing costs incurred during the software/website development exercise. The amount of charges on capitalized loans is obtained by applying the weighted average rate of the loans that were in force during the year on investments made in obtaining the asset and does not exceed the amount of borrowing costs incurred during the year. The other development expenses that do not meet these criteria are recognized as an expense, as incurred. The development costs previously recognized as an expense are not recognized as a subsequent asset.

2.13 Property, plant and equipment

The property, plant and equipment are measured at historical cost less accumulated depreciation. Historical cost includes expenses directly attributable to the acquisition of items and financing costs related to the acquisition of qualifying assets.


The subsequent costs are included in the carrying amount of the asset or recognized as a separate asset, as appropriate, only when future economic benefits associated with these costs are likely to flow and can be reliably measured. All other repairs and maintenance are recorded as a contra entry to the result, when incurred. The land is not depreciated. Depreciation of other property, plant and equipment is calculated using the straight-line method, considering its costs and its residual values over the estimated useful life, as shown in note 15. The residual values and the useful lives of the assets are reviewed at the end of each year and, if appropriate, adjusted. The impacts of accounting for borrowing costs for the purpose of acquiring and/or constructing qualifying fixed assets are not relevant due to the short time spent in assembling the stores (their main qualifying asset) and therefore were not accounted for. The gains and losses on disposals are determined by comparing the results with their carrying amounts and are recognized in "Other operating expenses and net" in the statement of income.

2.14 Lease

Until December 31, 2018, leases for commercial, logistics and administrative units are recognized, in compliance with current legislation, as operating leases. Effective January 1, 2019, IFRS 16 / CPC 06 (R2) introduces a single model of lease accounting for tenants. As a result, the lessee will recognize an asset, which represents its right of use and a liability net of financial charges, which will be appropriated in accordance with the accrual basis. Exemptions are provided for short-term or small-value leases.

2.15 Impairment of non-financial assets The assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually to identify any impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds its recoverable amount, which represents the greater of an asset's fair value less costs to sell and its value in use. For the purpose of impairment assessment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash Generating Units - UGC). Non-financial assets, other than goodwill, that have been adjusted for impairment are subsequently reviewed for the analysis of a possible reversal of impairment at the balance sheet date. The goodwill calculated by the Company and its subsidiaries in the acquisition of investments up to December 31, 2008 was amortized at a rate of 10% pa. and, as of fiscal year 2009, subject only to impairment assessment. The adjusted goodwill, the result of the year, for impairment, is no longer reversed.

2.16 Accounts payable

The accounts payable to suppliers are obligations contracted for goods or services acquired in the ordinary course of business. These obligations may be deducted from receivables when there are commercial agreements entered into with suppliers for the promotion or promotion of certain products. They are classified as current liabilities if payment is due in up to one year. Otherwise, these accounts payable are presented as non-current liabilities. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method (note 17).

2.17 Adjustment to present value


The terms purchase operations, basically suppliers of goods and services, were brought to their present value considering the terms of said transactions. The mean rate of 6.48% pa. on December 31, 2018 (12.02% pa. on December 31, 2017), the basis of funding for the respective years. The adjustment to the present value of purchases is recorded under the heading "Suppliers" (note 17) and "Inventories" (note 10) and their reversal is recorded under "Financial expenses" (note 27) in the case of suppliers, and the realization of inventories in relation to the amounts recorded in the item "Cost of goods sold and services rendered". The term sales operations, with the same amount of spot sales, prefixed, represented mainly by time sales with credit cards, were brought to their present value considering the terms of said transactions. The mean rate of 7.24% pa. on December 31, 2018 (11.38% pa. on December 31, 2017), based on discounts of receivables on the respective base dates. Regarding the adjustments identified, the tax rates were applied on the respective base dates. The adjustment to present value of forward sales is recorded in the item "Trade accounts receivable" (note 9) and is recorded under "Financial income" (note 28) due to the term.

2.18 Loans and financing

The loans and financing are recognized at amortized cost, net of costs incurred in the transaction. Any difference between the amounts received (net of transaction costs) and the total amount payable is recognized in the income statement during the period in which the loans are outstanding, using the effective interest rate method. Hedged loans, with swap contracts as instruments for the protection of exchange rate fluctuations are recorded at fair value, as shown in Note 4.1 (a). The loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of liabilities for at least 12 months after the balance sheet date.

2.19 Provisions The provisions for lawsuits are recognized when:

(i) the Group has a present or non-formalized obligation as a result of events that have already occurred;

(ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) The value can be estimated safely.

When there are a number of similar obligations, the probability of liquidating them is determined by taking into account the class of bonds as a whole. A provision is recognized even if the probability of settlement related to any individual item included in the same class of obligations is small. The provisions are measured at the present value of the expenses that must be required to settle the obligation, using a pre-tax rate, which reflects the current market valuations of the time value of money and the specific risks of the obligation. The increase in the obligation as a result of the passage of time is recognized as a financial expense.

The Group evaluates, at least once a year, the sufficiency of its provisions for probable events occurring during the next fiscal year.

2.20 Current and deferred income tax and social contribution The income and social contribution taxes for the year comprise current and deferred taxes and are


recognized in the statement of income. The current and deferred income tax liability is calculated based on the tax laws enacted, or substantially enacted, at the balance sheet date. The Management periodically evaluates the positions taken by the Group in assessing income taxes in relation to situations in which the applicable tax regulations give rise to interpretations; and establishes provisions, where appropriate, based on the estimated amounts of payment to the tax authorities. The current income and social contribution taxes are presented net, by taxpaying entity, in liabilities when there are amounts payable or, in assets, when the amounts paid in advance exceed the total due at the date of the financial statements. However, deferred tax assets and liabilities are presented separately (Note 12 (a)). The deferred income tax and social contribution assets are recognized only in proportion to the probability that future taxable income is available and against which temporary differences can be used. The deferred income tax assets and liabilities are presented net in the balance sheet when there is a legal right and the intention to compensate them when calculating current taxes, generally related to the same legal entity and same tax authority.

2.21 Employee benefits

(a) Shared-based compensation The Group operates a compensation stock-based compensation plan whereby entities receive employee services as consideration for the Group's equity instruments (BTOW3 shares in B2W and LAME4 shares in the Company). The fair value of employee services, received in exchange for the granting of options, is recognized with expense. The total amount to be recognized as an expense over the life and vesting period is determined by the fair value of the instruments granted, calculated on the date of the granting of the at the average quotation of the closing of the shares on the stock exchange where they are traded, and this total is appropriate to the result, with corresponding adjustment in equity, by the linear method during the vesting period, considering the expected withdrawal. At the balance sheet date, the Group reviews the vesting period estimates based on historical data and recognizes the impact of the revision of the estimates, if any, in the income statement with an adjustment corresponding amount in shareholders equity. At the date of granting of the plan, the amounts received from employees, net of any directly attributable transaction costs, are credited to the share capital (nominal value). The shares issued at the end of the vesting period are also credited to the share capital, but based on the capitalization of the reserves that were constituted during the vesting period.

(b) Profit sharing When applicable, the Group recognizes a liability and a profit sharing expense based on a methodology that takes into account the net income attributable to the Company's shareholders.

(c) Other benefits The Company and its subsidiaries do not grant other post-employment benefits, termination benefits or


other long-term benefits to the Management and its employees, in addition to those provided for in labor legislation.

2.22 Share capital The common and preferred shares are classified in shareholders' equity (Note 23). The incremental costs, directly attributable to the issuance of new shares or options, are shown in shareholders' equity as a deduction from the amount collected, net of taxes. When the Company purchases shares of its own capital (treasury shares), the amount paid, including any directly attributable additional costs (net of income tax), is deducted from stockholders' equity until the shares are canceled or traded. When such shares are subsequently traded, any amount received, net of any directly attributable transaction costs and the related income tax and social contribution effects, it is included in shareholders' equity attributable to the Company's shareholders.

2.23 Revenue recognition

The Group adopted CPC 47 / IFRS 15 as of January 1, 2018. The effect of the initial application of CPC 47 / IFRS 15 is described in Note 2.2. The revenue comprises the fair value of the consideration received or receivable from the sale of products and services in the ordinary course of business of the Group. The revenue is presented net of taxes, discards, rebates and rebates, as well as sales eliminations between Group companies. The Group recognizes revenue when its value can be reliably measured when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the activities. The Group bases its estimates taking into account the type of customer, the type of transaction and the specifications of each sale.

(a) Sales of goods and services The revenues from sales of goods and services that include freight collected from customers are recognized when transferring ownership and risks to third parties only for the amount that the company expects to be entitled to in the transaction (its gross values and deducted from unconditional discounts, refunds, adjustment to present value calculated on sales in terms and sales taxes) and at the moment in which the transfer of control of goods and services to customers happens. In the subsidiary B2W, the sales orders approved by credit card companies whose products have not yet been invoiced or delivered to customers and sales of gift certificates held by customers that will be used in the future are recorded as "other obligations" classified in current liabilities.

(b) Financial income The financial income is recognized on the accrual basis, using the effective interest rate method. Some of the Company's suppliers, at their sole and exclusive discretion, have prepayments of their receivables from financial institutions, without changing the deadline and price. As a result of these operations, the Company receives a commission from the financial institution, recorded in the Financial Result.

2.24 Distribution of dividends and interest on capital


When applicable, the distribution of dividends and interest on capital to the Group's shareholders is recognized as a liability in the Group's financial statements at the end of the year based on the by-laws of each company. Any amount above the mandatory minimum is recorded in equity until the date of approval. The tax benefit of interest on capital is recognized in the statement of income for tax purposes and in stockholders' equity for corporate purposes.

3. Critical accounting estimates and judgements

The accounting estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events considered reasonable for the circumstances.

3.1 Critical accounting estimates and assumptions By definition, the resulting accounting estimates will rarely be the same as the actual results. The estimates and assumptions that present a significant risk and are likely to cause a material adjustment to the carrying amounts of assets and liabilities for the next fiscal year are as follows:

(a) Impairment of the goodwill The Group annually tests any impairment losses on goodwill in accordance with the accounting policy presented in Note 2.15. For the subsidiary B2W (Publicly-held company), the goodwill calculated on the acquisition of the investment was evaluated based on market price quotation information and did not identify a need to record a provision for losses, according to the calculation shown in Note 15 (a). For the other direct and indirect subsidiaries, the goodwill impairment was evaluated based on future profitability projections and expectations for a period of 10 years, using a nominal IPCA rate plus 2% pa. and 1% growth rate for perpetuity. The discount rate on future cash flows was estimated at 10.3% pa.. No impairment losses were recognized in the financial statements for the years ended December 31, 2018 and 2017.

(b) Recovery of deferred income tax and social contribution Significant Management judgment is required to determine the amount of deferred tax assets that can be recognized based on the probable term and level of future taxable income, together with future tax planning strategies and profit-generating market assumptions. The criteria for determining the need for provision for realization of deferred income tax and social contribution assets are described in Note 12.

(c) Fair value of derivative and other financial instruments The fair value of the financial instruments presented in Note 4.1 is based on market prices quoted at the balance sheet date or, if they do not exist, in other instruments that allow them to be measured.

3.2 Critical judgments in the application of the Group’s accounting policies


(a) Reduction in recoverable value of accounts receivable from customers

CPC 48/IFRS 9 determines that the Management evaluates, based on twelve months or for the entire life of the financial asset, accounts receivable from customers, and records the effects if there are indicative of losses on credit expected in that financial asset. The Group applied the simplified approach and recorded the expected losses throughout the lifetime of the financial assets for accounts receivable from customers (note 9).

(b) Estimates inventory losses

The losses recorded in the inventories, are based on historical information of the Company over time. Inventory adjustment occurs when inventories are carried out. These adjustments that will reflect the real losses will serve as a basis for future estimates (note 10).

(c) Property, plant and equipment and intangible assets useful lives The depreciation or amortization of property, plant and equipment and intangible assets, based on an appraisal report issued by independent experts, considers the best estimate of the use of these assets throughout their operations. The Management periodically assesses whether changes in the economic scenario and/or the consumer market may require revision of these estimates of useful life (notes 15 and 16).

(d) Impairment of non-financial assets The impairment tests are carried out considering the projections of future results, calculated based on internal and market assumptions, discounted to present value. These projections are calculated considering the best management estimates that are reviewed when there is a change in the economic scenario or in the consumer market.

(e) Contingent assets and liabilities The Group recorded provisions, which involve a considerable judgment by the Management, for tax, labor and civil risks that, as a result of a past event, it is probable that an outflow of resources involving economic benefits will be required to settle the obligation and a reasonable estimate can be made of the amount of that obligation. The Company is subject to legal, civil and labor claims covering matters arising from the normal course of its business activities (note 21). The assessment of likelihood of loss includes assessing the available evidence, the hierarchy of laws, available case law, the most recent court decisions and their relevance to the legal system, as well as the evaluation of outside lawyers. The provisions are reviewed and adjusted to take into account changes in circumstances such as applicable limitation period, findings of tax inspections or additional exposures identified on the basis of new matters or court decisions. Actual results may differ from estimates. The contingent assets are events that give rise to the possibility of entry of economic benefits to the Company. When practically certain, based on legal opinions that support its realization, are recognized in the income for the year (note 11).

4. Financial Risk Management


4.1 Financial risk factors

In the normal course of its business, the Company and its subsidiaries are exposed to market risks related to fluctuations in interest rates and exchange rate variations, as well as credit risk in its term sales and liquidity risk. The Company and its subsidiaries use hedging instruments to minimize their exposure to these risks, based on their monitoring under the Management of their directors and supervised by the Board of Directors. This Management determines the strategies to be adopted and the Administration contracts protection instruments appropriate to each circumstance and inherent risks. The Company and its subsidiaries do not have options, swaptions, repurchase swaps, flexible options, derivatives embedded in other products, structured transactions with derivatives and “exotic derivatives”. The Company and its subsidiaries do not operate with derivative financial instruments for the purpose of speculation, thus reaffirming their commitment to the conservative cash management policy, both in relation to their financial liabilities and to their cash position.

(a) Market risk

(i) Foreign exchange risk

The Group use traditional swaps for the purpose of eliminating exchange losses arising from sharp devaluations of the Brazilian Real currency (BRL) against these funds in foreign currencies. Traditional swaps (recorded in the loans and financing account) The counterpart of these traditional swaps is the financial institution that provides loans in foreign currency (US dollars). These CDI-denominated swap operations aim to offset exchange rate risk by transforming the cost of debt (note 18) to local currency and local interest rates, varying from 115.7% to 137.2% of the CDI. These agreements have a reference value of R$ 496,109 in the parent company and R$ 1,632,433 in the consolidated on December 31, 2018 (R$ 540,489 and R$ 1,542,813 on December 31, 2017, respectively). These transactions are matched in terms of value, terms and interest rates. The Company and its subsidiaries intend to settle such contracts simultaneously with the respective loans. In this type of operation there are no contractual terms of margin call.


December

31, 2018

December

31, 2017

December

31, 2018

December

31, 2017

Hedged 615,050 667,194 1,783,334 1,632,204

Swap liability position (% CDI) (562,807) (657,638) (1,727,114) (1,686,020)

Adjustable swap book balance (Notes 7 and 17 (a)) 52,243 9,556 56,220 (53,816)


December

31, 2018

December

31, 2017

December

31, 2018

December

31, 2017

Amortized Cost 615,050 667,194 1,783,334 1,632,204

Hedge item (debt) Fair Market Value 614,309 683,331 1,751,720 1,667,251

(741) 16,137 (31.614) 35,047

Swaps

Asset position (Dollar + Pre)

Amortized Cost (615,050) (667,194) (1,783,334) (1,632,204) Fair Market Value (627,392) (662,224) (1,793,334) (1,630,079)


12,342 (4,970) 10,000 (2,125)

Liability position (% CDI)

Amortized Cost (562,807) (657,638) (1,727,114) (1,686,020)

Fair Market Value (575,890) (636,531) (1,768,728) (1,648,848)

(13,083) 21,107 (41,614) 37,172

(741) 16,137 (31,614) 35,047

Considering that the Company’s exposure to the risk of exchange rate fluctuations is mitigated by the traditional swap operations contracted for exchange protection, and therefore simultaneously with the respective foreign currency loans, the variation of the US Dollar against the Brazilian Real, is due to the current market condition, and has no material effects on the Company’s financial statements.

(ii) Interest rate risk The Company and its subsidiaries use resources generated by operating activities to manage their operations, as well as to guarantee their investments and growth. In order to complement its cash requirements for growth, the Company and its subsidiaries obtain loans and financing from the country’s main financial institutions, substantially indexed to the CDI variation (Around 85%). The inherent risk arises from the possibility of significant fluctuations in the CDI (sensitivity analysis in item (d) below). The CDI indexed financial investments policy partially mitigates this effect.

(b) Credit risk

The credit risk is managed on a Company-wide basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks and other financial institutions, as well as from credit exposures to customers. For banks and other financial institutions, individual risk limits are determined based on internal or external classifications in accordance with the limits determined by the Board of Directors. The use of credit limits is monitored regularly. Sales to retail customers are settled in cash or through the major credit cards on the market.

The credit risk is minimized as the receivables of the Company and its subsidiaries are essentially with the main credit card companies that have excellent levels of credit rating. Approximately 53% (36% in Consolidated) of the Company's sales are made in cash and the remainder through credit cards managed by third parties.

(c) Liquidity risk

The Management monitors ongoing forecasts of the Company's liquidity requirements to ensure that it has sufficient cash to meet its operating needs. This forecast takes into account the Company’s debt financing plans, compliance with clauses, compliance with the internal targets of the balance sheet quotient and, if applicable, external or legal regulatory requirements, such as currency restrictions. The treasury invests excess cash in interest-bearing bank accounts, term deposits, short-term deposits and securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient margin, as determined by the aforementioned forecasts.

The table below analyzes the non-derivative financial liabilities of the Group and the derivative financial liabilities that are settled on a net basis by the Group by maturity bands corresponding to the period remaining between the balance sheet date and the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of cash flows.


Parent Company

Less

than one

year

Between

one

and two

years

Between

two and

five

years

Above

five

years

On December 31, 2018

Suppliers 2,967,313 - - - Loans and financing and debentures 1,813,347 909,929 7,176,038 2,288,88 6 On December 31, 2017 Suppliers 2,699,348 - - -

Loans and financing and debentures 1,671,945 2,676,598 6,535,376 472,012

Consolidated

Less

than one

year

Between

one

and two

years

Between

two

and five

years

Above

five

years


Suppliers 4,973,577 - - -

Loans and financing and debentures 2,556,208 3,416,684 11,721,692 3,149,317

On December 31, 2017 Suppliers 4,466,623 - - - Loans and financing and debentures 3,418,275 3,778,579 11,560,304 494,777

(d) Additional sensitivity analysis Sensitivity analysis of swap transactions

The swap transactions recorded by the Company and its subsidiaries were contracted simultaneously with the foreign currency loan operations, including maturities, rates and equivalent amounts, exchanging exchange exposure of the loans with the CDI exposure. The Company and its subsidiaries gross debt in USD was represented as follows:


December 31,

2018

December 31,

2017 December 31,

2018

December 31,

2017

Loans in foreign currency - USD (Note 18 (a))

615,050

667,194 1,299,141

1,632,204

Loans in foreign currency - EUR (Note 18 (a))

- - 484,193 -

USD rate at closing date 3.8748 3.3080 3.8748 3.3080

EUR rate at closing date - - 4.4390 -

USD estimated final rate, published by Bacen

3.8000

3.3400 3.8000 3.3400

EUR estimated final - - 4.4825 -

The scenarios I and II were estimated with a deterioration of 25% and 50%, respectively, above the probable expectation, as shown in the table below:

Parent Company:


Scenario I - Scenario II - Probable 25% 50% Operation Risk Scenario Deterioration Deterioration US Dollar Exchange rate on December 31, 2018 3.8748 3.8748 3.8748 Estimated exchange rate for 2018 3.8000 4.7500 5.7000

Loans in foreign currency (variation US$) 11,873 138,921 289,715

Swaps (Active End in Foreign Currency) (variation US$) (11,873) (138,921) (289,715) Net Effect Null Null Null

Consolidated: Scenario I - Scenario II - Probable 25% 50% Operation Risk Scenario Deterioration Deterioration US Dollar Exchange rate as of December 31, 2018 3.8748 3.8748 3.8748

Estimated exchange rate for 2018 3.8000 4.7500 5.7000

Loans in foreign currency (variation US$) 25,079 293,437 611,952 Swaps (Active End in Foreign Currency) (variation US$) (25,079) (293,437) (611,952) Net Effect Null Null Null

Scenario I - Scenario II - Probable 25% 50% Operation Risk Scenario Deterioration Deterioration Euro Exchange rate as of December 31, 2018 4.4390 4.4390 4.4390

Estimated exchange rate for 2018 4.4825 5.6031 6.7238

Loans in foreign currency (variation EUR) 4,745 126,979 249,214 Swaps (Active End in Foreign Currency) (variation EUR) (4,745) (126,979) (249,214) Net Effect Null Null Null

Sensitivity analysis to CDI rate variation The Group maintains a big portion of its debt, approximately 90%, and its cash and cash equivalents indexed to the CDI variation, considering the foreign currency debt swap due to CDI variation with traditional swaps. The net debt was represented as follows:


December 31,

2018

December 31,

2017 December 31,

2018 December 31, 2017

Net debt: - Cash and cash equivalents 3,693,154 2,029,213 6,813,846 3,567,545 - Securities 1,227,258 3,015,768 3,295,849 6,517,532 - Loans and funds (4,316,068) (4,767,190) (10,964,064) (11,220,801) - Debentures (4,716,773) (4,403,958) (4,716,773) (4,403,958)

(4,112,429) (4,126,167) (5,571,142) (5,539,682)

CDI rate on the closing date 6.40% 6.89% 6.40% 6.89%

CDI rate final estimated 6.50% 6.74% 6.50% 6.74%

In addition, Management performed sensitivity tests for adverse scenarios, deteriorating the CDI rate


by 25% or 50% higher than the probable scenario (judged by Management), as shown in the table below:

Parent Company:

Scenario I - Scenario II - Probable 25% 50% Operation Scenario Deterioration Deterioration Annual effective CDI rate in 2018 6.40% 6.40%

6.40% Net debt 4.112.429

4.112.429 4.112.429

Estimated annual CDI rate in 2019 6.50 %

8.13 % 9.75 %

Annual effect on net debt:

Reduction -

-

-

Increase

4,112

70,939

137,766

Consolidated: Scenario I - Scenario II - Probable 25% 50% Operation Scenario Deterioration Deterioration Annual effective CDI rate in 2018 6.40% 6.40% 6.40% Net debt 5,571,142 5,571,142

5,571,142 Estimated annual CDI rate in 2019 6.50 % 8.13 %

9.75 %

Annual effect on net debt Reduction -

-

-

Increase 5,571 96,102 186,633

4.2 Capital management

The objective of the Group in managing its capital is to ensure the continuity of its operations to offer shareholder returns and benefits to other stakeholders, as well as maintaining an ideal capital structure to minimize the associated costs. The Company and its subsidiaries monitor the levels of indebtedness through the Adjusted Net debt / Adjusted EBITDA ratio, which represents, more appropriately, its debt metrics, since it reflects the consolidated financial obligations net of immediate cash and cash equivalents, considering its generation operating cash flow.

4.3 Fair Value Estimate

It is assumed that the balances of accounts receivable from customers and accounts payable to suppliers at their book value, less impairment in the case of accounts receivable, are close to their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the prevailing market interest rate that is available to the Group for similar financial instruments. The Group uses a market approach to assess the fair value of its financial instruments. The Group applies CPC 46 / IFRS 13 to financial instruments measured in the balance sheet at fair value, which requires disclosure of fair value measurements at the following hierarchy level: (Level 1) quoted (unadjusted) prices in active markets for identical assets or liabilities, which the

entity may have access on the measurement date; (Level 2) information that is observable for the asset or liability, either directly or indirectly, except

quoted prices in level 1; (Level 3) information (inputs) are unobservable data for the asset or liability.


The table below shows the assets and liabilities of the consolidated view measured at fair value as of December 31, 2018. Consolidated

Balance

As of June 30, 2018 Level 1 Level 2 Level 3 total

Assets

Fair value through profit or losses

Assets that compose the FIDC wallet (F. Fênix) - - - -

Assets that composse the FIDC wallet (F. Fenícia) 12,044 12,044

CDB - 9,363,961 - 9,363,961

Derivatives used for hedge - swap - 429,040 - 429,040

Commitment debentures and fixed income fund quotas - 56,364 - 56,364

Total of assets - 9,861,409 - 9,861,409

Liabilities


Loans and Financing (Foreign Currency) - 1,783,334 - 1,783,334

Derivatives used for hedge - swap - 143 - 143

Total liabilities - 1,783,477 - 1,783,477

The table below shows the assets and liabilities of the consolidated view measured at fair value as of December 31, 2017.

Consolidated

Balance

Level 1 Level 2 Level 3 total

Assets


Assets that comprise the FIDC (F. Fênix) 40,146 458,320 - 498,466

CDB - 4,285,439 - 4,285,439

Commitment debentures and fixed income fund quotas - 5,052,262 - 5,052,262

Total of assets 40,146 9,796,021 - 9,836,167

Liabilities


Loans and Financing (Foreign currency) - 1,632,204 - 1,632,204

Derivatives used for hedge - swap - 53,816 - 53,816

Total liabilities - 1,686,020 - 1,686,020

5 Financial instruments by category Amounts presented free of funding costs:


Consolidated

Loans and receivables

Fair value through profit

or loss Total As of December 31, 2018 Assets, according to the balance sheet Marketable securities - 441,084 441,084

CDB - 9,363,961 9,363,691 Derivative financial instruments - swap - 56,364 56,364 Accounts receivable from clients and other accounts receivable, excluding prepayments 3,002,248 - 3,002,248 Cash and cash equivalents 248,286 - 248,286

3,250,534 9,861,409 13,111,943

Consolidated Fair Value

through profit or loss

Amortized

Cost

Total As of December 31, 2018 Liabilities, according to the balance sheet

Loans

National currency - 9,307,018 9,307,018

Foreign currency 1,783,334 - 1,783,334

Derivative financial instruments - swap 143 - 143

Suppliers and other obligations, excluding legal obligations

- 5,487,719 5,487,719

Debentures - 4,749,473 4,749,473

1,783,476 19,544,210 21,327,687

Consolidated

Loans and receivables

Fair value through profit

or loss Total As of December 31, 2017 Assets, according to the balance sheet Marketable securities - FIDC - 498,466 498,466 Marketable securities - 5,052,262 5,052,262 CDB 4,285,439 4,285,439 Accounts receivable from clients and other accounts

receivable, excluding prepayments 3,113,845 - 3,113,845 Cash and cash equivalents 248,910

- 248,910

3,362,755 9,836,167 13,198,922

Consolidated


Amortized Cost

Total


Balance on 31 December 2017 Liabilities, according to the balance sheet

Loans

Local currency - 9,643,860 9,643,860

Foreign currency 1,632,204 - 1,632,204

Derivative financial instruments - swap 53,816 - 53,816

Suppliers and other obligations,

excluding legal obligations - 4,974,643 4,974,643

Debentures - 4,424,030 4,424,030

1,686,020 19,042,533 20,728,553

6 Credit quality of financial assets

The Company's financial assets consist mainly of the balance of cash and cash equivalents, securities and receivables from credit cards. The Company's cash is invested in the largest financial institutions in Brazil - all first-tier institutions - and the receivables of the Company and its subsidiaries are essentially with the main credit card companies, which have low levels of credit risk.

The Group's exposure to the use of interest rates and sensitivity analysis for financial assets and liabilities are disclosed in Note 4.1 (d). There are no material restrictions on the ability to recover or use the assets mentioned above.

7 Cash and cash equivalents


December 31,

2018

December 31,

2017

December 31,

2018

December 31,

2017

Cash resources 150,614 149,030 150,691 149,068 Bank resources 88,059 27,052 97,595 99,842 Certificates of Deposit Banking

CDBs and Debentures (i) 3,454,481 1,853,131 6,565,560 3,318,635

3,693,154 2,029,213 6,813,846 3,567,545

(i) Remunerated at an average CDI rate of up to 101.4% as of December 31, 2018 (CDI rate of up to 101.0% as of December 31, 2017). The CBD’s and

Debentures classified as cash equivalents have immediate liquidity without risk of change in value in case of early redemption.

8 Marketable securities



December 31,

2018

December 31, 2017

December 31,

2018

December 31, 2017

Fair value through profit or loss Investment Funds (FIDC) - - - 498,466 Junior Quota (FIDC) - 26,066 - - Senior Quota (FIDC) - - 12,044 Derivatives used for hedge – swap (iv) 52,386 - 56,364 - Certificates of Bank Deposit – CDBs

(i)

1,151,494

616,378

2,798,401

1,490,746 Fixed income funds (ii) 23,378 22,129 38,515 39,348 Committed Debentures (iii) - 2,351,195 390,525 4,488,972

1,227,258 3,015,768 3,295,849 6,517,532 (i) – Remunerated at the average CDI rate of up to 101.4% on 12/31/2018 (up to 101.0% as of 12/31/2017). (ii) - Composed of 8,609,023.37 quotas and 14,178,497.02 quotas as of 12/31/2018 (8.692.215,75 quotas 14.315.509,41 quotas as of 12/31/2017), parent company and consolidated, respectively. Managed by a leading financial institution, which basically applies to federal government securities, debentures and bank deposit certificates, and can be traded at any time. (iii) – At the average (CDI rate of up to 101.0% as of 12/31/2018 and 12/31/2017), parent company and consolidated. Classified as fair value through profit or loss, and may be traded at any time. (iv) – Transactions in foreign currency are hedged against foreign exchange fluctuations through swap derivative financial instruments (note 4.1).

(a) Fênix - Investment Fund in Retail Credit Rights (FIDC) In June 2018, the transactions carried out through the Fênix Investment Fund in Retail Credit Rights "FIDC" were closed. These operations had the specific purpose of acquiring the credit rights held by the Company and the subsidiary B2W ("Assignee").

The "FIDC" operations began in February 2011, with the first issuance of senior and mezzanine subordinated quotas and final amortization term of 5 years. However, its operations were expanded in June 2013 with the second issue of senior quotas and mezzanine subordinated quotas, postponing until June 2018 the final amortization period, when its operations were closed.

For the year ended in December 31, 2018, the result of the Fund was R$ 39,043, arising from operations carried out in the period from 01/01/2018 until 06/25/2018, the date of its extinction. At December 31, 2017, the income was R$ 6,013.

(b) Fenícia - Investment Fund in Credit Rights (FIDC) – B2W Subsidiary

The purpose of the Fund is to raise resources for the application mainly of Credit Rights, in accordance with the investment policy, composition and diversification of the Fund's portfolio. The Fund is constituted in the form of a closed condominium, so that its quotas will only be redeemed according to the redemption dates defined in the respective supplements or by virtue of liquidation of the Fund. The purpose of the Fund is to provide the Shareholders with the appreciation of their Quotas, through the application of the Fund's resources, mainly in the acquisition of Credit Rights. The Fund will have a term of indefinite duration, and may be settled by resolution of the General Meeting in accordance with the Regulations of the fund.

(c) Changes in financial assets at fair value through profit or loss


On January 1, 2017 janeiro de 2017 2,015,887 3,838,947 Additions 9,343,517 18,972,463 Disposals (6,780,296) (13,472,263)


Transfers to cash and cash equivalent (note 7) (1,853,131) (3,318,635)

Net gain and losses 289,791 497,020

On December 31, 2017 3,015,768 6,517,532

Additions 8,567,057 21,827,997

Disposals (7,121,499) (18,898,343) Transfers to cash and cash equivalent (note 7) (3,454,481) (6,565,560) Net gain and losses 220,413 414,223

On December 31, 2018 1,227,258 3,295,849

9 Accounts Receivable


December 31,

2018 December 31,

2017

December 31,

2018 December 31,

2017

Credit Cards (i) 1,712,285 942,851 1,815,356 1,046,440 Investment fund in creditory rights (FIDC) (Note 8(a))

- 572,998 - 789,290 Electronic debits and checks 13,197 58,022 13,346 58,022 Other accounts receivable (ii) 8,718 7,882 109,135 139,255 1,734,200 1,581,753 1,937,837 2,033,007 Adjustment to present value (Note 2.17) (iii)

(19,844) (18,445) (21,785) (19,803)

Allowance for accounts (966) (1,007) (45,971) (35,342) (19,844) (18,445) (21,785) (19,803)

1,713,390 1,562,301 1,870,081 1,977,862

(i) - The credit card transactions can be split up, usually within twelve months. The credit risk of the Company and its subsidiaries is minimized as the receivables portfolio is monitored by the credit card management companies. (ii) – The other accounts receivable represent, mainly, sales made to corporations through corporate operations, by the subsidiary B2W, loyalty projects and other commercial agreements. (iii) - The adjustment to present value was calculated on the accounts receivable net of the FIDC anticipations.

The aging list of trade accounts receivable is composed as follows:

Parent Company

Consolidated

December 31,

2018

December 31, 2017

December 31,

2018

December 31,

2017

Due 1,734,200 1,581,753 1,904,565 1,981,487 Due Up to 30 days - - 8,225 16,013 From 1 until 60 days

- - 1,693 6,153 From 61 until 90 days

- - 781 9,358 From 91 until 120 days

- - 696 586 From 121 until 180 days

- - 496 1,652 > 180 days - - 21,381 17,758 1,734,200 1,581,753 1,937,837 2,033,007

There are no overdue installments at the parent company, as credits receivable are maintained with credit card operators. In the Consolidated, the amount of expected losses on doubtful accounts is based on the Management’s analysis of expected losses on loans due and overdue.

The changes in the provision for estimated credit loss is shown below:


Parent Company

Consolidated

Balance as of January 1, 2017 (2,192) (28,559)

Additions/Reversals 1,185 (6,783)

Balance as of December 31, 2017 (1,007) (35,342)

Additions/Reversals 41 (10,629)

Balance as of December 31, 2018 (966) (45,971)

10 Inventories


December 31,

2018 December

31, 2017 December 31,

2018 December 31,

2017

Goods:

In stores 1,898,612 1,695,422 1,898,612 1,695,422

In distribution centers 720,684 743,449 1,598,777

1,5981,598,779

1,961,720

Adjustment to Present value (Note 2.17)

(29,024) (49,585) (30,661) (63,292)

Supplies and packaging 18,284 11,582 21,600 14,601 Advance to suppliers 18,350 - 18,350 - 2,626,906 2,400,868 3,506,678 3,608,451

The accounts above are presented by the net amounts of the provision for inventory and obsolescence losses. The changes in the provision for losses are shown below:

Parent Company

Consolidated

Balances as of January 1, 2017 (40,036) (113,253)

(Additions) write-off (10,962) (18,310)

Balances as of December 31, 2017 (50,998) (131,563)

(Additions) write-off (2,532) 6,688 Balances as of December 31, 2018 (53,530) (124,875)

11 Recoverable Taxes


December 31,

2018 December 31,

2017 December 31,

2018 December 31,

2017

Tax on the Circulation of Goods and Services and Services - ICMS:

Marketing of goods 604,681 430,952 787,334 557,179 Property, plant and equipment 23,399 21,625 23,399 21,625 628,080 452,577 810,733 578,804 Withholding Tax Return - IRRF 18,601 16,144 87,169 44,530 PIS and COFINS 152,668

228,832 1,369,591

1,336,062

Income Tax Legal Entity (“IRPJ”) and Social Contribution on Net Profits (“CSLL”)

- - 279,957 271,051 Others 5,801 - 15,141 11,466

805,150 697,553 2,562,591 2,241,913


Current portion 404,919 408,889 906,836 811,098

Non-current portion

400,231 288,664 1,655,755 1,430,815

Below is the estimate of realization of the main recoverable taxes as of 12/31/2018:


In

PIS and COFINS

IR and CSLL

ICMS

PIS and COFINS

IR and

CSLL

ICMS 2019 152,668

230,952

18,601

230,952

119,041 376,217 172,296 208,545 2020 - - 239,676

341,393

60,341

324,907

2021 - - 112,797

516,235

30,411

112,797 2022 to 2025 - - 133,167

135,746

104,078

141,805

152,668 18,601

604,681

1,369,591

367,126

787,334

The Company constantly evaluates the recovery of its tax credits and maintains the net balance of the recovery expectation in the balance sheet. - PIS and COFINS: The subsidiary B2W expects to recover R$ 223,549 in 2019 and R$ 990,055 in up to 3 years (2020 through 2022) through debits through calculation and offsetting with other federal taxes. In addition, B2W filed a request for compensation from the Federal Revenue Service in the amount of R$ 360,103. - IRPJ and CSLL: The subsidiary B2W expects to recover R$ 316,126 in up to 5 years (2019 to 2023), through a request for restitution and/or compensation with other federal taxes. - ICMS: The subsidiary B2W expects to recover ICMS credits with its own operations in the amount of R$ 89,504 in 2019 and R$ 85,231 in 2020. The studies were carried out by the Company and its subsidiary's management, aiming at realizing the ICMS credit balance arising from commercialization carried out technical studies based on the normal course of its commercial operations for the coming fiscal years. This study was carried out based on current operations and future expectations, always backed by the Group’s long-term strategic business plan.

12 Income and social contribution taxes

(a) Breakdown of deferred income and social contribution taxes


December 31,

2018 December

31, 2017 December 31,

2018 December

31, 2017

Tax losses - - 681,298 580,399

Negative bases - - 245,271 208,943

Tax credit of subsidiaries abroad 71,398 73,891 71,398 73,891

Temporary differences:

Contingencies 31,747 29,437 50,957 59,427

Surplus exchange variation unsettled swap transactions

30,622 40,557 59,317 63,790

Adjustment to present value credits

and obligations 3,954 3,932 49,718 50,781


Provision for inventory losses and estimated credit loss

18,528

17,681 68,019 65,055

Interest and leasing depreciation 49,020 37,653 49,020 37,653

Others 37,596 24,509 177,796 100,615 Asset 242,865 227,660227,6

60 1,452,7941,452,

794 1,240,5541,24

0,554 Temporary differences

Review of the useful life of the property, plant and equipment and intangible assets

153,499 133,732 154,510

134,566

Capitalization of interest - - 32,153 48,216

Expenses with leasing 62,997 44,059 62,997 44,059

Others - - 5,354 1,688

Liability 216,496 177,791 255,014 228,529

Net deferred tax 26,369 49,869 1,197,780 1,012,025

The Group reiterates confidence in its Business Plan, which has made the operational structure of business development platforms more robust, and will continue to monitor internal and external indicators as a way to better evaluate the evolution of its estimates.

(b) Expected realization of deferred income and social contribution taxes

The Group presents a history of projections of taxable income, taking into account various financial and business assumptions considered in technical studies carried out at the end of the year ended December 31, 2018. With respect to tax credits, it is estimated that they will be recoverable, as follows:

In Parent Company Consolidated

2019

57,400 64,937

2020 40,785

77,561

2021

52,918

146,133

2022

10,990

172,882

2023 11,586

239,574

2024 13,242

300,349

2025 12,964 336,069

2026 to 2028 43,980 115,289

242,865 1,452,794

(c) Changes in deferred taxes

The changes in deferred tax assets and liabilities during the year, without taking into account the offsetting of the balances, are as follows:

Parent Company

Credits of

subsidiaries abroad

Provisions Unpaid Swaps

Adjustment to the

present value

Interest and depreciation

leasing

Others Total

Deferred tax assets


On January 1, 2017 75,715

40,347

23,520

6,285 26,396

13,038

185,301

(Credited/(debited) to the income statement

(1,824)

6,771

17,037

(2,353) 11,257

11,471

42,359


73,891

47,118

40,557

3,932 37,653

24,509

227,660

(Credited/(debited) to the income statement (2,493) 3,157 (9,935) 22 11,367 13,087 15,205 On December 31, 2018 71,398 50,275 30,622 3,954 49,020 37,596 242,865

Parent Company

Useful life property, plant and equipment

Leasing expenses

Total

Deferred tax liability On January 1, 2017 115,881 29,999 145,880 Debited to income statement 17,851 14,060 31,911 On December 31, 2017 133,732 44,059 177,791 Debited to income statement 19,767 18,938 38,705 On December 31, 2018 153,499 62,997 216,496

Consolidated

Tax losses

and negative

basis

Credits of subsidiaries

abroad

Provisions Unpaid Swaps

Adjustment to the

present value

Interest and depreciation

leasing

Others Total

Deferred tax assets

On January 1, 2017 652,384 75,715 102,239 49,706 47,364 26,396 32,393 986,197 (Credited/(debited) to the income statement

136,958 (1,824) 22,243 14,084 3,417 11,257 68,222 254,357

Em 31 de dezembro de 2017

789,342 73,891 124,482 63,790 50,781 37,653 100,615 1,240,554

Indirect Subsidiaries - - - - - - (1,663) (1,663) (Credited/(debited) to the income statement

137,227 (2,493) (5,906) (4,473) (1,063) 11,367 78,844 213,903


926,569 71,398 118,976 59,317 49,718 49,020 177,796 1,452,794

Consolidated

Property, plant and equipment

Capitalization of interest

Leasing expense

Others Total

Deferred tax liability

On January 1, 2017 122,398 60,887 29,999 3,477 216,761 Debited to income statement

12,168 (12,671) 14,060 (1,789) 11,768

On December 31, 2017 134,566 48,216 44,059 1,688 228,529 Debited to income statement

19,944 (16,063) 18,938 3,666 26,485

On December 31, 2018 154,510 32,153 62,997 5,354 255,014

(d) Reconciliation between nominal and effective rates

The reconciliation between income tax and social contribution at the nominal rate, in addition to the actual amounts in income, is shown below:



December 31,

2018 December 31,

2017 December 31,

2018 December 31,

2017

Income (loss) for the semester before income tax, social contribution and participation in subsidiaries

912,906 631,489 328,128 36,083

Nominal tax rate 34% 34% 34% 34% (310,388) (214,706) (111,564) (12,268)

Effect of (additions) or exclusions to accounting profit

Costs attributable to the public offering of shares

- 27,477 27,477

Interest on own capital 40,800 40,800 40,800 40,800 Employee participation 7,684 - 7,684 -

Other permanent net exclusions (additions) (6,635) (8,948) (14,938) (10,858)

Tax return and social contribution

at the effective rate (268,539) (155,377) (78,018) 45,151 Current (245,039) (165,825) (265,436) (197,438)

Deferred (23,500) 10,448 187,418 242,589

Income tax and social contribution (268,539) (155,377) (78,018) 45,151

Effective rate 29.4% 24.6% 23.8% 25.1%

Lojas Americanas S.A. Notes to the Financial Statements on September 30, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise provided

13 Related party transactions

Balances Transactions

Receivable (payable) Sales Purchases Revenues (expenses)

Transactions December

31, 2018

December 31, 2017

December

31, 2018

December

30, 2017

December

31, 2018

December

31, 2017

December

31, 2018

December

31, 2017

a) Operations of the Parent Company with direct and indirect subsidiaries:

B2W Companhia Digital (iv) - Rental of headquarters, distribution centers and sundry 3,148 3,491 - - - - 20,211 20,429 - Resale Goods - sale 13,213 328,311 64,382 448,076 - - - - - Resale Goods - purchase (19,786) (9) - - 19,906 398 - - - Operations in kiosks (i) (7,501) (10,883) - - - - 26,759 29,822 (10,926) 320,910 64,382 448,076 19,906 398 46,970 50,251

ST Impostações Ltda. / QSM

- Goods for resale (16,297) (181,410) - - 859,889 860,508 - -

Other operations with subsidiaries

- BWU Comércio e Entretenimento S.A. 839 (1,962) - - - - - - - Klanil Services Ltda.

- Current Account - 426 - - - - - - - Louise Holdings Ltda. - Current Account 1 13 - - - - - - - Cheyney Financial S.A - Current Account 381 - - - - - - - - Anchal Investments S.A - Current Account 136 - - - - - - - - Click - Rodo Entregas Ltda. - (92) - - - 2,409 - - - Direct (7,968) (10,813) - - 31,675 22,868 - - - Bit Services (5,822) (1,699) 19,649 15,591 - - - Posto Vicom Ltda. - 2,945 - - - - - - - Freijó Administrações e Participações Ltda. 228 136 - - - - - -

Non-current asset 20,971 324,430 - - - - - - Non-current liability (60,399) (195,976) - - - - - -

b) Operations of the direct subsidiary B2W Companhia Digital

- Management remuneration (ii) - - - - - - (7,715) (6,146) - Debentures (iii) (200,246) (200,265) - - - - 16,119 25,243

(i) - In order to increase brand synergy, Americanas.com installed kiosks in the Company’s commercial premises. The amounts from this transaction are fully transferred to B2W, net of the costs incurred by the company with the operation; (ii) - Payment of a member of the board of directors One of the members of the Board of Directors of B2W, until April, 2018, Mr. Love Goel, appointed to this position by the Administration, holds a stake in GVG, which is the CEO, who provides project development services related to customers’ shopping experience on the subsidiary B2W Companhia Digital. The choice of the company by the subsidiary was based on the need for B2W and through benchmarking; (iii) - On 7 December 2010, at a meeting of the Board of Directors of the subsidiary B2W, the first private issue of simple, non-convertible debentures of the subordinated type, in a single series, in the amount of R$ 200,000, eliminated in the consolidation of the Company. The debentures were subscribed by BWU, as described in note 18 (c); (iv) - Licensing of the use of the Americanas.com brand and similar trademarks - The subsidiary B2W has entered into a license agreement for the use of the Company's trademark, where the trademark licensing will be free of charge as long as the Company has a relevant equity interest in the Subsidiary.

Lojas Americanas S.A.

Notes to the financial statements December 31, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise stated

14 Investments - parent company

Parent company

December 31, 2018

December 31, 2017

Participation in subsidiaries 2,585,120 2,814,314

Goodwill on the acquisition of BWU 173,160 173,160

Goodwill on the acquisition of B2W 201,432 201,432

2,959,712

3,188,906

(a) Changes in investments in subsidiaries

B2W BWU Freijó Louise Klanil

JSM

Total

As of January 1, 2017 2,114,758 442,307 2,333 104,330 1,408 - 2,665,136 Capital increase 752,163 - - - - - 752,163 Profit sharing (255,056) 16,052 - 3,571 (3,051) - (238,484) Direct adjustment to shareholders’ equity of subsidiaries

10,703 - - 1,758 (163) -

12,298

Transfer to provision for investment losses - - - - 1,806 - 1,806 Dividends

- (4,013) - - - - (4,013)

Balance as of December 31, 2017 2,622,568 454,346 2,333 109,659 - - 3,188,906 Capital increase - - - - - 52 52 Profit sharing (244,447) 1,372 351 4,900 (3,453) - (241,277) Direct adjustment to shareholders’ equity of subsidiaries

(1,102) - - 10,023 (6,331) -

2,590

Transfer to provision for investment losses - - - - 9,784 - 9,784 Dividends - (343) - - - - (343) Balance as of December 31, 2018 2,377,019 455,375 2,684 124,582 - 52 2,959,712



(b) Investment information in subsidiaries As of December 31, 2018 Liquid

% Share Shareholders

’ Profit Interest capital equity (loss) Direct subsidiaries BWU Comércio e Entretenimento S.A. 100 17,753 282,215 1,372

B2W - Companhia Digital 61.51 5,742,330 3,537,115

(397,427) Freijó Administrações e Participações Ltda. 100 5 2,684 351 Louise Holdings Ltd. 100 506,213 124,582 4,900 Klanil Services Ltd. 100 65,320 (11,590) (3,453) JSM Global 100 52 52 - Indirect subsisdiaries Posto Vicom Ltda. 100 4,129 1,589 (392) Submarino Finance Promotora de Crédito Ltda. 61.51 12,005 87,102 7,301 ST Importações Ltda. 61.51 4,050 76,461 14,561 BFF Logistica e Distribuição Ltda. 61.51 163,198 181,398 21,342 Mesaexpress 61.51 275 - - QSM 61.51 5,000 29,528 6,706 BIT Services (Antiga Ideais) 61.51 170,013 191,746 7,923 Click-Rodo 61.51 44,928 12,346 (1,131) Direct 61.51 237,755 82,593 2,232 Digital Finance 61.51 500 10,573 9,584

Rental 61.51 2 (23,238) (107) Infoprice 36.90 - - (1,218)

As of December 31, 2017 Liquid

% Share Shareholders

’ Profit Interest capital equity (loss) Direct subsidiaries BWU Comércio e Entretenimento S.A. (1) 100 17,753 281,186 16,052 B2W - Companhia Digital 61.99 5,709,151 3,905,713 (411,450) Freijó Administrações e Participações Ltda. 100 4 2,330 - Louise Holdings Ltd. 100 297,235 109,659 3,571 Klanil Services Ltd. 100 44,900 (1,806) (3,051) Indirect subsisdiaries Posto Vicom Ltda. 100 65 (2,083) (347) Submarino Finance Promotora de Crédito Ltda. 61.99 12,005 79,802 13,882 ST Importações Ltda. 61.99 4,050 61,504 11,777 B2W Chile 61.99 267 77 (46) BFF Logistica e Distribuição Ltda. 61.99 163,198 160,252 (4,509) B2W México 61.99 839 88 (68) Mesaexpress 61.99 275 - (12) QSM 61.99 5,000 22,011 6,526 BIT Services (Antiga Ideais) 61.99 170,013 184,798 10,646 Click-Rodo 61.99 44,928 13,477 (7,031) Direct 61.99 237,755 80,361 3,134 Digital Finance 61.99 500 989 188

Rental 61.99 2 (24,050) (272) Infoprice 37.30 472 (625) (749) B2W Argentina 61.99 463 239 14



(c) Subsidiaries

(i) BWU Comércio Entretenimento S.A.

As of December 31, 2018, the subsidiary has R$ 246,595 in cash and cash equivalents and securities (R$ 276,097 at December 31, 2017).

(ii) B2W - Companhia Digital

Capital Increase At the Extraordinary Shareholders' Meeting held by subsidiary B2W, on March 25, 2017, a capital increase of R$ 1,210,000 was approved, through the private issuance of 110,000,000 registered common shares at the price of R$ 11.00 per share. The capital increase was approved at a meeting of the Board of Directors of the subsidiary, held on May 24, 2017. The Company subscribed a total of 68,378,511 shares corresponding to the Company's proportionate shareholding in the subsidiary, of the notice to the shareholders of the capital increase, the amount of R$ 752,163. Find below the movement that occurred in the period:

Non-

Controlling shareholders

Controlling shareholders Total

Balances as of December 31, 2017 - net of goodwill 2,421,136 1,484,577 3,905,713

Result for the period (244,447) (152,980) (397,427)

Change in ownership interest (18,833) 18,833 -

Capital increase for stock issuance plan 10,411 6,516 16,927

Direct adjustment to shareholders’ equity 7,320 4,582 11,902

Balances as of December 31, 2018 - net of goodwill 2,175,587 1,361,528 3,537,115

Number of common shares 281,261,673 176,019,131 457,280,804

Interest % 61.51% 38.49% 100%

In 2018 and 2017, the Company did not acquire B2W shares in the market.

(iii) Financial investments in subsidiaries abroad The subsidiaries Louise and Klanil have investments in foreign securities in the amounts of R$ 14,625 and R$ 84,533, respectively. These financial investments generated remuneration of R$ 1,576 recognized as financial income in the consolidated income statement of the Company.

(iv) Further information on subsidiaries

ST Importações Ltda.

The subsidiary is engaged in the import, export, storage and trading of electronic products, electronics, car accessories, tools, technical assistance parts, household goods, toys, gifts, hygiene products,



cosmetics, perfumes, commercial representation and business advisory. B2W has a 100% interest in such subsidiary.

QSM Distribuidora e Logística Ltda.

The purpose of the subsidiary is the wholesale trade in goods in general, logistics organization of freight transportation, maritime agency and warehousing for third parties. B2W has a 100% interest in such subsidiary. BIT Services Inovação e Tecnologia Ltda. (formerly known as Ideais Tecnologia Ltda.)

The Company acquired on October 9, 2013, provides computer programming services, development and operation of e-commerce services, digital advertising, development, support and consulting for networks, software, internet and information technology in general. B2W has a 100% interest in such subsidiary. Digital Finance Promotora de Crédito Ltda.

The Company created in partnership with the Cetelem group with the purpose of providing promotional services, marketing development and offering of credit products, being able to receive and forward proposals for credit and debit cards, loans and financing, analyze credits and registrations.

The beginning of its activities is not related to a business combination, which presupposes an acquisition of assets not held by B2W to enable the development of a new business. B2W has a 100% interest in such subsidiary.

Infoprice On November 13, 2018 B2W, together with its subsidiary BIT Service, entered into a termination agreement with Infoprice shareholders. As a result, all the shares issued by Infoprice, held by the Founding Shareholders, were transferred to Infopar and the founding shareholders left the Shareholders' Agreement.

Fair value of the consideration 2,032

Write-off of investment 1,105

Write-off of goodwill (242)

Gain on disposal of investments 2,895

B2W Chile, B2W Argentina Mexico

In the fourth quarter of 2018 B2W Chile, B2W Argentina México were write-off. The sale of these companies aims to focus the Company even more on e-commerce, logistics, distribution and customer service and Marketplace operations.

Fair value of the consideration 71

Write-off of investment (1,483)

Write-off of goodwill 437

Loss on disposal of investments (974)

BFF Logística e Distribuição Ltda. The subsidiary has as its corporate purpose the participation in other civil or commercial companies, as partner shareholder or a quota holder. B2W's ownership interest in this subsidiary is 100%.



15 Property, plant and equipment

Parent Company Installations

and

Machinery and

Improvements

furniture and equipment in real estate Land and

fixtures computing of third-party (i) buildings Others Total

Balance as of January 1st, 2017 539,737 563,400 1,061,601 114,033 68,838 2,347,609 Acquisitions 159,028 258,052 404,205 - 2,679 823,964

Withdrawals (7) (8,612) (21,120) - (119) (29,858)

Depreciation/Amortization (i) (56,090) (127,349) (130,893) (5,396) (11,202) (330,930)

Balance on December 31st, 2017 642,668 685,491 1,313,793 108,637 60,196 2,810,785 Acquisitions 170,632 249,016 382,444 - 20,960 823,052

Withdrawals (2,752) (4,948) (5,675) - - (13,375)

Depreciation/Amortization (i) (80,590) (146,179) (167,994) (5,394) (8,663) (408,820)

Balance on December 31st, 2018 729,958 783,380 1,522,568 103,243 72,493 3,211,642

Balance on December 31st, 2018 Total cost 1,039,041 1,449,335 2,483,285 134,862 141,294 5,247,817

Depreciation / accumulated amortization (309,083) (665,955) (960,717) (31,619) (68,801) (2,036,175) Residual value 729,958 783,380 1,522,568 103,243 72,493 3,211,642

Balance on December 31st, 2017 Total cost 871,161 1,205,267 2,106,516 134,862 120,334 4,438,140

Depreciation / accumulated amortization (228,493) (519,776) (792,723) (26,225) (60,138) (1,627,355) Residual value 642,668 685,491 1,313,793 108,637 60,196 2,810,785

Weighted average annual depreciation rates 4.5% 6.7% Term of agreements. 4.0%

(*) Depreciation calculated based on the respective terms of the lease contracts.

Consolidated



Installations Machinery

and

Improvements and

furniture

equipment in real estate Land and and utensils computing of third-party buildings Others Total

Balances as of January 1st, 2017 609,930 955,358 1,092,234 121,833 108,986 2,888,341 Acquisitions 159,368 260,569 404,769 - 3,162 827,868 Withdrawals (9) (9,136) (30,514) - (187) (39,846) Transfers (216) 1,224 2,049 - (3,057) - Depreciation/Amortization (i) (64,289) (172,771) (139,810) (5,396) (11,051) (393,317) Balance on December 31st, 2017 704,784 1,035,244 1,328,728 116,437 97,853 3,283,046 Acquisitions 171,918

267,938

383,006

- 26,412

849,274

Withdrawals (2,873)

(5,247)

(5,756)

- (1,515)

(15,391) Transfers 117

245

4,874

(1,782) (3,454)

-

Depreciation/Amortization (i) (88,390)

(191,439)

(175,134)

(5,394)

(8,852)

(469,209)

Balance on December 31st, 2018 785,556

1,106,741

1,535,718

109,261

110,444

3,647,720

Balance on December 31st, 2018 Total cost 1,146,634

2,018,110

2,547,889

140,880

309,647

6,163,160

Depreciation / accumulated amortization (361,078)

(911,369)

(1,012,171)

(31,619)

(199,203)

(2,515,440)

Residual value 785,556

1,106,741

1,535,718

109,261

110,444 3,647,720

Balance on December 31st, 2017 Total cost 977,472 1,755,174 2,165,765 142,662 288,204 5,329,277

Depreciation / accumulated amortization (272,688) (719,930) (837,037) (26,225) (190,351) (2,046,231) Residual value 704,784 1,035,244 1,328,728 116,437 97,853 3,283,046

Weighted average annual depreciation rates - % 4.5% 6.7% Term of

agreements. 4.0%

(i) In the consolidated, in the exercises ended December 31, 2018, the depreciation of the Direct fleet, in the amount of R$ 2,511, was accounted in the merchandise sold cost.



As of December 31, 2018 and December 31, 2017, no assets are pledged as collateral. Pursuant to Technical Pronouncement CPC 01 (IAS 36), items of property, plant and equipment and intangible assets, which show signs of higher costs than their recovery amounts, are reviewed annually to determine the need for a provision for reduction of the balance carrying amount. The smallest cash-generating unit determined by the Group to assess the recovery of tangible and intangible assets corresponds to each of its stores. The Management did not identify changes in circumstances or signs of technological obsolescence, as well as evidence that its assets used in its operations are not recoverable in view of its operational and financial performance and concluded that, as of December 31, 2018, there was no need to register any provision for loss on its property, plant and equipment and intangible assets. In Consolidated, likewise, the property, plant and equipment and intangible assets of subsidiary B2W were analyzed in relation to their recovery amounts and it was not necessary to record a provision for losses.



16 Intangible assets

Parent Company

Right of Law Studies use of use of software Mining(*) Others Total

Balance as of January 1st, 2017 297.565 69.556 7.806 374.927 Additions 112.639 - 3.244 115.883

Amortization (89.186) (7.724) (6.324) (103.234)

Balance on December 31st, 2017 321.018 61.832 4.726 387.576 Additions 126.111 - - 126.111 Amortization (79.326) (7.724) (4.280) (91.330) Balance on December 31st, 2018 367.803 54.108 446 422.357

Balance on December 31st, 2018 Total cost 791.890 95.945 63.228 951.063 Accrued Amortization (424.087) (41.837) (62.782) (528.706) Residual value 367.803 54.108 446 422.357

Balance on December 31st, 2017 Total cost 723.244 95.945 67.271 886.460 Accrued Amortization (402.226) (34.113) (62.545) (498.884) Residual value 321.018 61.832 4.726 387.576

Annual taxes of amortization 20.0% 8.0% 5.00%

(*) – Repurchase of the right to use the Lojas Americanas brand in the sale of financial products (Lojas Americanas credit card and others)

upon the termination of the FAI - Financeira Americanas Itaú agreement.



Consolidated Premium in Right of Law Studies Development acquisitions of use of use of of websites investments software mining and systems Others Total

Balance as of January 1st, 2017 930,022 350,839 81,106 2,246,548 26,129 3,634,644

Additions - 177,614 - 311,061 3,244 491,919 Withdrawals - (30) - - - (30)

Amortization of indirectly controlled capital gains – BIT Services (889) - - - - (889)

Amortization - (104,465) (9,044) (251,664) (11,126) (376,299) Balance on December 31st, 2017 929,133 423,958 72,062 2,305,945 18,247 3,749,345 Additions 195

158,916

- 318,013

2,902

480,026

Withdrawals - - - - - - Amortization of indirectly controlled capital gains – BIT Services (889)

- - - - (889)

Amortization - (114,322)

(9,044)

(329,904)

(11,991)

(465,261)

Balance on December 31st, 2018 928,439

468,552

63,018

2,294,054

9,158

3,763,221

Balance on December 31st, 2018

Total cost 1,022,521 1,171,350 112,445 3,597,697 93,893 5,997,906 Accrued Amortization (94,082) (702,798) (49,427) (1,303,643) (84,735) (2,234,685) Residual value 928,439

468,552

63,018

2,294,054

9,158

3,763,221

Balance on December 31st, 2017

Total cost 1,022,326 1,012,434 112,445 3,279,684 90,991 5,517,880 Accrued Amortization (93,193) (588,476) (40,383) (973,739) (72,744) (1,768,535) Residual value 929,133 423,958 72,062 2,305,945 18,247 3,749,345

Annual taxes of amortization - % Undefined 12.7% 8.0% 12.17%



(a) Goodwill on acquisitions of investments

The Group evaluates the goodwill on a yearly basis to verify probable impairment, the last valuation being carried out in the year ended in December 31, 2018. These goodwill is recorded in acquisitions of investments and mergers, resulting from expected future profitability based on projections of future results for a 10-year period using a single discount rate of 12% to discounted estimated future cash flows, besides minus or surplus value of the assets and liabilities in a business combination. The business model adopted by the Group corresponds to a vertical structure, thus, the consolidated balances represent, in a more adequate way, the only cash-generating unit (CGU), which is considered for the impairment test. The balances of goodwill calculated on the acquisition of equity investments are supported by technical studies supported by the expectation of future profitability and the company monitored the assumptions used and did not identify any indicative loss or need for a new valuation as of December 31, 2018. As of December 31, 2018 and December 31, 2017, goodwill on investment acquisitions was represented as follows:

Parent Company

Consolidated

December 31, 2018 December 31, 2017


Accumulated

Accumulated

Cost amortization Net Net Cost amortization Net Net

Investments goodwill

B2W 233,369 (31,937) 201,432 201,432 233,369 (31,937) 201,432 201,432

BWU 173,160 - 173,160 173,160 173,160 - 173,160 173,160

TV Sky Shop - - - - 136,912 (55,473) 81,439 81,439

BIT Services - - - - 263,414 (5,476) 257,938 258,632

Click Rodo - - - - 19,426 - 19,426 19,426

Direct - - - - 195,038 - 195,038 195,038

Outros 310 (307) 3 3 313 (307) 6 6

1,021,632 (93,193) 928,439 929,133 1,021,632 (93,193) 928,439 929,133

(b) Goodwill on subsidiaries - B2W

The Company assessed for impairment the goodwill calculated on the acquisition date of B2W, as shown below:

Amount of B2w's shares held by the company 281,261,673

Market value of the share (weighted average of 12 months) 28.202335 Market value of the participation in B2W 7,932,236

(-) Company's investment in B2W 2,175,587

(-)Goodwill on acquisition of B2W net of amortization 201,432 Sufficiency 5,555,217

(c) Development of websites and systems/right to use software



They represent, expenses with e-commerce platform (development of technological Infrastructure, content, applications and graphic layout of the sites), expenses with ERP system implementation and development of own systems, being amortized in a linear way considering the stipulated term of use and benefits. Following its innovation trajectory, B2W continues to invest in new functionalities with the main objective of improving the purchasing experience, increasing the conversion rate and reinforcing the brand positioning, as well as implementing new operational functionalities of the Company. Among the recently launched projects are: • New Shoptime: site with new layout and more optimized for desktop and mobile; • Store in store Pet Love: largest online pet shop in Brazil; • Visualization of products at the time of payment: customers can visualize which products they are buying, avoiding flow avoidance and abandonment of purchase; • Insurance and service portal: installation of air conditioning, robbery and theft insurance for mobile devices, PET health plan, Extended Warranty; • Store in Store Centauro Submarino: MarketPlace of sports products, Centauro exclusive products and customized navigation experience; • Media Center Shoptime: Experience the web TV, live and last seen on TV; • Sou Barato Card: platform for card applications optimized for desktop and mobile (responsive); • Marketplace Rating - Americanas.com: Customers can evaluate the experience of buying in the marketplace by helping in the customer's buying decision; • Insurance Platform - Shoptime: insurance recommendation during the purchase flow of the site and pilot with sale of insurance theft and robbery of cellphones (breakage, loss or theft of cellular); • TV Shoptime in APP: TV programming in the pocket; • Americanas.com - improved filters using automatic data extraction and increased assortment display; • Activation of promotional coupons during Black Friday; • Submarino.com - improvement in the books department homepage, organization in the navigation, prominence of the authors, literary lists and official stores; • "Best seller" for readers - Automatic page with customized showcase to highlight the best selling books in the last 15 days in Brazil and the Submarino.com website. The Company used the same assumptions in item (a) above for the impairment test of the intangible asset and did not identify a provision for losses.



(d) Capitalized borrowing costs

17 Suppliers Parent Company Consolidated

December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Suppliers of goods, supplies and other

4,000,442

3,627,590

6,344,820

5,721,456

Commercial agreements (995,026) (882,166)

()

(1,320,304) (1,197,632) () Adjustment to Present value (Note 2.17) (38,103) (46,076) (50,939) (57,201)

2,967,313 2,699,348 4,973,577 4,466,623

The commercial agreements are receivable, defined in partnership agreements entered into with suppliers. In financial transactions, when foreseen in a commercial agreement, settlements are made at the time of payment of invoices, to suppliers, by the net amount.

December 31, 2018 December 31, 2017 Interest of capitalized loans 28,165 65,000

Fee – CDI weighted average borrowed by the Company 120.00%

114.00%



18 Loans and financing (a) Breakdown


Final

Annual charges Maturity December 31, 2018


December 31, 2017

In local currency

BNDES (i) TJLP + 1.4% p.a. 4.0% p.a. 04/13/2025 703,135 195,582 1,360,933 468,056

BNDES (i) Interest of up to 6% p.a. 04/13/2025 30,479 40,594 39,942 54,418 BNDES (i) Selic + up to 3.68% p.a. 09/15/2022 475,396 370,779 826,071 761,166

FINEP Interest from 3.5% to 7.0% p.a. 12/05/2025 139,265 58,353 318,076 271,725

Working Capital 109% to 140% of CDI 04/25/2022 1,159,515 1,750,958 5,522,187 5,711,760

Commercial Promissory Notes (iv) 112.0% to 115.3% of CDI 06/28/2022 1,239,809 1,154,371 1,239,809 1,154,371

FIDC Quotas Interest from 108.9% to 157.0% of

the CDI 06/14/2018 - 572,998 - 1,222,364

In foreign currency (ii) Working capital (iii) USD + interest of up to 9.15% pa. 11/12/2019 615,050 667,194 1,299,141 1,632,204

Working capital (iii) EUR + 17.647% pa. 01/18/2023 - - 484,193 -

Swap operations Interest from 115.7% to 141.0% of

CDI

01/18/2023 143 (9,556) 143 53,816 Cost of borrowing (IOF and others) (46,723) (34,083) (126,430) (109,079) 4,316,068 4,767,190 10,964,064 11,220,801 Installments non-current portion 1,080,543 1,120,943 1,807,611

3,096,484

Current portion 3,235,525 3,646,247 9,156,453 8,124,317

i) Financing of BNDES related to the FINEM program (opening and remodeling of stores, logistics and technology), FINAME (acquisition of machinery and equipment) and PEC (Working Capital). ii) The transactions in foreign currency are hedged against foreign exchange swaps, through derivative financial instruments (note 4.1). iii) Funding pursuant to Resolution 2,770 of the Central Bank of Brazil (BACEN). iv) Commercial Promissory Notes, with a nominal value of R$ 1,000, issued on 12/27/2016, with maturity on 12/27/2019 and 1,800, with a nominal value of R$ 500, issued on 06/29/2017, with maturing on 06/28/2022, remunerated at rates of 112.0% pa and 115.3% pa., respectively, of the DI rate, based on 252 business days, with payment of the interest payable at the final maturity.



(b) Long-term loans and financing by maturity year


December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

2019 - 1,576,666 - 2,542,136

2020 459,971 681,695 2,707,174 3,121,713

2021 422,972 292,061 1,620,104 1,086,062

2022

1,314,660 1,085,903 2,708,700 1,352,645

2023 413,583 4,156 1,002,146 12,515

2024 491,572 2,883 872,281 6,363

2025 112,623 2,883 188,144 2,883

From 2026 onwards

20,144

-

57,904

-

3,235,525 3,646,247 9,156,453 8,124,317

The Company and its subsidiaries are subject to certain debt restriction clauses (Debt Covenants and Cross Default) included in the loan and financing agreements. These clauses include, among others, the maintenance of certain financial ratios, calculated based on the financial statements disclosed by Management. As of December 31, 2018 and December 31, 2017, all indexes were met.

(c) Guarantees


December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Letter of Guarantee 845,540 58,328 2,042,287 948,385

Promissory Notes 148,320 277,555 148,320 277,555

Completion Bond 26,316 - 26,316 -

1,020,176 335,883 2,216,923 1,225,940

(d) Available credit lines At December 31, 2018, the Group had credit facilities with several institutions, in order to use them in the necessary moments to drive the organic growth of the Company. The Group is subject to certain debt restrictive clauses (Debt Covenants and Cross Default) included in the loan and financing agreements. These clauses include, among others, the maintenance of certain financial ratios, calculated based on the individual and consolidated Financial Statements disclosed by the Management, adjusted according to CPC 48/IFRS 9. As of December 31, 2018 and December 31, 2017 all indexes were met.



19 Debentures (a) Breakdown

Parent Company and

Consolidated

Company Issuer

December 31,

2018

December 31,

2017

Lojas Americanas S.A. 4,749,473 4,424,030

Cost of Borrowings (32,700) (20,072)

4,716,773 4,403,958

Part of current 483,243 1,048,905

Part of non-current 4,233,530 3,355,053


Notes to the Financial Statements December 31, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise stated

(b) Issuance of debentures by the Company

Nature 4th issue

– Lame 14 (i) 6th Issue -

Lame 16 (ii) 6th Issue -

Lame 26 (ii) 7th Issue - Lame 27

8th Issue - Lame 18

8th Issue - Lame 38

9th Issue - Lame 19

9th Issue - Lame 29

10th Issue - Lame 10

11th Issue - Lame A1

11th Issue - Lame B1

12ª Issue - Lame A2

Date of Issuance

09/05/2011 01/26/2012 01/26/2012 12/21/2012 07/15/2013 07/15/2013 06/25/2014 06/25/2014 11/21/2016 04/15/2017 04/15/2017 04/20/2018

Maturity Dates 09/05/2020 01/26/2018 01/26/2018 12/21/2022 07/15/2018 07/15/2021 06/25/2021 06/25/2021 11/21/2019 04/15/2022 04/15/2024 04/20/2023 Amount issued 50,000 30,000 20,000 35,000 15,460 20,000 70,000 25,000 30,000 126,335 23,665 100,000 Unit value (In

Brazilian Reais)

BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000 BRL 10,000

Financial index for calculation

of covenants

Consolidated Net Debt /

EBITDA ≤ 3.5


EBITDA ≤ 3.5


EBITDA ≤ 3.5

Consolidated Net Debt / Adjusted EBITDA) ≤ 3,5




EBITDA ≤ 3.5


EBITDA ≤ 3.5


EBITDA ≤ 3.5


EBITDA ≤ 3.5


EBITDA ≤ 3.5


EBITDA ≤ 3.5 Annual

financial charges

113.5% of CDI 112% of CDI 112% of CDI 114.50% of DI

(base 252) 112% of DI (base

252) IPCA + 6.39% 113% of CDI 113% of CDI 112% of CDI 115% of CDI

IPCA + 7.0972% (base

252)

116% of CDI (base 252)

Convertibility simple, non-

convertible into shares

simple, non-convertible into

shares


shares


shares


shares


shares

simple, non-convertible into shares






Type and form nominative and

book entry nominative and





book entry nominative

and book entry

nominative and book

entry

nominative and book entry

nominative and book

entry



Amortization of principal

amount

09/05/2016 – 5% 09/05/2017 – 5% 09/05/2018 – 30% 09/05/2019 – 30% 09/05/2020 – 30%

Amortization on maturity


12/21/2021 - 50%

12/21/2022 - 50%

07/15/2017 - 50% and

07/15/2018 - 50%

07/15/2019 - 33.33%,

07/15/2020 - 33.33% and

07/15/2021 - 33.34%

06/25/2018- 25%

06/25/2019 - 25%

06/25/2020 - 25%

06/25/2021 - Balance of unit

face value

06/25/2018- 25%

06/25/2019 - 25%

06/25/2020 - 25%

06/25/2021 - Balance of

unit face value


04/15/2021-50%

04/15/2022- 50%

04/15/2023- 50%

04/15/2024-50%

Amortization in maturity

Payment of remunerative

interest

March 5 and September 5 of

each year (2015 to 2020)

Annual until 01/26/2016 and semi-annual as of 07/26/2016 until maturity

Annual until 01/26/2016 and semi-annual as of 07/26/2016 until maturity

June 21 and December 21 of each year (2017

to 2022)

January 15 and July 15 of each year (2014 to

2018)

July 15 of each year (2014 to

2021)

June 25 and December 25 of each year

June 25 of each year

May 21 and November 21 of each year

October 15 and April 15 of

each year

April 15 of each year (2018 to

2024)

Apri 20 and October 20 of

each year (2018 a 2023)

Guarantees Floating Unsecured

Loans Unsecured

Loans Unsecured Loans Unsecured Loans Unsecured Loans

Unsecured Loans

Unsecured Loans

Unsecured Loans

Unsecured Loans

Unsecured Loans

Unsecured Loans

Renegotiation does not have it does not have it does not have it does not have it does not have it does not have it does not have

it does not have

it does not have

it does not have

it does not have

it does not have

it



(i) Breakdown

Issuance

Date

Maturity Issuance

type

Outstanding

securities

Nominal value in issuance

Naminal value in

December 31, 2018

Encargos

financeiros anuais

Annual

financial charges

December 31, 2017

4ª Issuance (i) 09/05/2011 06/25/2024 Public 50,000 500,000 450,000 117.5% do CDI 450,390 461,812 6ª Issuance – Lame 16 01/26/2012 01/26/2018 Public 30,000 300,000 300,000 112% do CDI - 311,271 6ª Issuance – Lame 26 01/26/2012 01/26/2018 Public 20,000 200,000 200,000 112% do CDI - 207,514 7ª Issuance – Lame 27 12/21/2012 12/21/2022 Public 35,000 350,000 350,000 114.50% CDI 350,493 350,530 8ª Issuance – Lame 18 07/15/2013 07/15/2018 Public 15,460 154,600 77,300 112% DI - 80,445 8ª Issuance – Lame 38 07/15/2013 07/15/2021 Public 20,000 200,000 200,000 IPCA + 6.9% 206,778 209,005 9ª Issuance – Lame 19 (ii) 06/25/2014 06/25/2024 Public 70,000 700,000 700,000 117.5% do CDI 700,608 700,628 9ª Issuance – Lame 29 06/25/2014 06/25/2021 Public 25,000 250,000 250,000 113% do CDI 194,399 261,962 10ªIssuance – Lame 10 11/21/2016 11/21/2019 Public 30,000 300,000 300,000 112% do CDI 302,242 302,484 11ª Issuance – Lame A1 04/15/2017 04/15/2022 Public 126,335 1,263,350 1,263,350 115% do CDI 1,282,085 1,284,404

11ª Issuance – Lame B1 04/15/2017 04/15/2024 Public 23,665 236,650

236,650

IPCA +7.0972%

248,967 253,975

12ªIssuance – Lame A2 (iii) 04/20/2018 04/20/2023 Public 100,000 1,000,000 1,000,000 116% do CDI 1,013,511 - 4,749,473 4,424,030 Cost of borrowings (32,700) (20,072) 4,716,773 4,403,958 Parcela do circulante 483,243 1,048,905

Parcela do não circulante 4,233,530 3,355,053

(i) The meeting of the Board of Directors, held on June 28, 2018, approved the second amendment to the Private Instrument of Deed of the Fourth Issuance of Simple Debentures, not Convertible into Shares, unsecured species with Floating Securities. The following changes were approved: (a) maturity date of the Debentures for 06/25/2024 and; (b) interest rate of 113.00% between the date of issue up to 06/25/2015, 113.50% from 06/26/2015 to 06/25/2018, 117.50% from 06/25/2018 until the expiration date. (ii) The meeting of the Board of Directors, held on June 22, 2018, approved the addition to the Private Instrument of Deed of the Ninth Issue of Simple Debentures, Not Convertible into Shares, of the Unsecured Species. The following changes were approved: (a) maturity date of the Debentures for 06/25/2024; (b) amortization of principal, which will be paid in 3 installments due on 06/25/2022, 06/25/2023 and 06/25/2024; (c) First Series Remunerative Interest of 117.5% of the DI Over rate after payment due on 06/25/2018 until the due date; (d) total optional early redemption premium rates and partial optional amortization, which will be 1.00% for the period from 06/26/2016 to 06/25/2017, 0.80% for the period between 26/06/2017 until 06/25/2018, 1.00% for the period from 06/26/2018 to 06/25/2019, 0.80% for the period from 06/26/2019 to 06/25/2020, 0.60% for the period from 06/26/2020 to 06/25/2021, 0.40% for the period from 06/26/2021 to 06/25/2022 and 0.20% for the period from 26 06/2022 to 06/25/2024. (iii) 12th Lame Issue A2- Issued 100,000 debentures, with nominal value of R$ 10,000, in a single series, received on 04/20/2018. The debentures will have a maturity of five years from the issue date, and will be amortized in two equal installments as from the fourth year and will be entitled to remuneration interest of 116% of DI - base 252 business days, payable semiannually. The approval of the issuance of the single series of debentures took place in meetings of the Board of Directors held on April 4, 2018.

(i) Movement



4th Private

5th Convertibl

e

6th Issuanc

e

6th Issuanc

e

7th Issuanc

e

7th Issuanc

e

8th

Issuance

8th

Issuance

8th

Issuance

9th Issuanc

e

9th

Issuance

10th

Issuance

11th

Issuance

11th

Issuance

12th

Issuance

Issuance Issuance Lame 16 Lame 26

Lame 17

Lame

27

Lame 18

Lame

28

Lame 38

Lame

19

Lame

29

Lame

10

Lame

A1

Lame

B1

Lame

A2

Total

Balances as of January 1, 2016

497,822 135,700 319,618 213,079 150,576 351,407 165,388 48,581 214,993 701,606 269,835 305,005 - - - 3,373,610

Funding – 11th issuance - - - - - - - - - - - -

1,263,350

236,650 - 1,500,000

Conversion into shares (i)

- (129,157) - - - - - - - - - - - - - (129,157)

Amortization of principal (25,000) - - -

(150,000)

- (77,300) (45,400) (13,921) - - - - - - (311,621)

Amortization of interest (63,164) (18,238) (41,184) (27,456) (16,992) (40,589) (21,405) (6,435) (16,551) (78,175) (36,655) (35,394) (68,789) - - (471,027)

Financial Charges 52,154 11,695 32,837 21,891 16,416 39,712 13,762 3,254 24,484 77,197 28,782 32,873 89,843 17,325 - 462,225

Balances as of December 31, 2017

461,812 - 311,271 207,514 - 350,530 80,445 - 209,005 700,628 261,962 302,484 1,284,40

4 253,975 - 4,424,030

Funding – 12th issuance - - - - - - - - - - - - -

1,000,000

1,000,000

Amortization of principal - - (300,000

)

(200,000)

- - (77,300) - - - (62,500) - - - - (639,800)

Amortization of interest (44,395) - (13,027) (8,685) - (25,436) (6,144) - (17,000) (51,183) (21,080) (21,535) (94,452) (23,084) (34,518) (360,538)

Financial Charges 32,973 - 1,756 1,171 - 25,399 2,999 - 14,773 51,163 16,017 21,293 92,133 18,076 48,029 325,782

Balances as of December 31, 2018

450,390

-

-

-

-

350,493

-

-

206,778

700,608

194,399

302,242

1,282,085

248,967

1,013,511

4,749,473

(i) In 2017 converted 68,034 bonds into 12,866,027 preferred shares (Note 23 (b)).



(c) Issuance of debentures by subsidiary - B2W Companhia Digital (i) Breakdown

Type of Titles in Value on

the date of Financial

Charges June 30, December 31, Issuing Date Due Date issue circulation issue annual 2018 2017 1st private issue 12/22/2010 12/22/2022 Private 200,000 1,000 125.0% CDI 200,246 200,265

(ii) Movement

1st Issue

Private

On January 1, 2017 200,762

Interest amortization (25,243)

Financial Charges 24,746

On December 31, 2017 200,265

Amortization of interest (16,138)

Financial Charges 16,119

On December 31, 2018 200,246

(ii) Information on issued debentures:

The following are the descriptions of the debentures issued and which are in force on December 31, 2018.

Nature 1st private issue

Date of Issuance 12/22/2010

Maturity Dates 12/22/2022

Amount issued 200

Unit price R$ 1,000

Annual financial charges 125.0% DI

Convertibility Simple, non-convertible into shares

Type and form Nominative and book entry

Amortization of unit value Full on the due date

Payment of remunerative interest

December 22 of each year (2011 to 2022)

Guarantees Does not have it

Renegotiation

Permitted, provided that by common agreement between issuer and debenture holder



20 Taxes payables


December 31,

2018 December

31, 2017 December

31,

2018

December 31, 2017

ICMS 112.868

89.635

149.529

121.800 Withholding Income Tax - IRRF 3.795 18.267 4.561 23.546

Social Integration Program - PIS/Contribution for Social Security Financing - COFINS

1 2 12.848 5.945

Tax on services - ISS 1.180

3.665

5.336

5.736 Others 5.264

4.969

9.281

11.138

123.108 116.538 181.555 168.165

Current portion 123.108 116.538 181.555 168.165

Non-current portion - - 251 251

21 Provision for lawsuits and contingencies The Company and its subsidiaries are parties to lawsuits and administrative proceedings before courts and government agencies involving tax, labor, civil and other matters. The Management has a system for monitoring its judicial and administrative actions conducted by the internal legal department and by external lawyers. The Management, based on information from its legal counsel, analysis of pending legal claims and, in relation to labor claims, based on past experience with respect to amounts claimed, recorded a provision, in an amount deemed sufficient, to cover potential losses on the lawsuits ongoing. Certain lawsuits are guaranteed by letters of guarantee. The judicial deposits made in the year, the parent company and consolidated, basically derive from appeals in federal tax lawsuits.

(a) Judicial Deposits

When legally required, judicial deposits are made, which total:


December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017

320,490 279,843 404,679 335,159

Movement


At January 1, 2017 278,962 314,465

Additions 7,966 42,785

Reversals (7,085) (22,091)

At December 31,2017 279,843 335,159

Additions 42,751 77,437

Reversals (2,104) (7,917)

At December 31,2018 320,490 404,679



(b) Provisions recorded


December

31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Tax 41,659 45,550 82,442 87,135 Labor 38,596 26,937 96,702 109,388 Civil 13,017 13,996 66,082 99,720 Others 101 95 101 95 93,373 86,578 245,327 296,338

Current portion 33,650 26,702 33,650 26,702 Non-current portion 59,723 59,876 211,677 269,636

Tax

The main tax lawsuits of the Group, in the amount of R$ 82,442, are basically represented by the statement of ICMS ST reimbursement made in the book recording of the Distributions Centers of Rio de Janeiro and São Paulo in 2002 and 2005; collection of the difference between the ICMS ST collected by the Company and the calculated as due by the State Treasury Secretaries of Mato Grosso and Bahia in the years of 2012 and 2015 and by the difference between the magnetic file and the physical inventory bookkeeping in the inventory record book of establishments located in the States of Ceará and Bahia, in the years 2009 to 2012. In the consolidated, a significant part comes from the subsidiary B2W, which deals substantially with the lawsuits for an assessment notice drawn up for collection of alleged ICMS debit. Labor

The Company and its subsidiaries are also parts to lawsuits of a labor nature. None of these lawsuits refers to individually significant amounts and the discussions involve mainly overtime claims among others. Civil

The Company is a party, together with its subsidiaries, in lawsuits arising from the ordinary course of its operations and its subsidiaries, representing, as of December 31, 2018, the amount indicated as contingent liability referring to these matters. There is no individual action of significant value.

(c) Movement

Parent Company

Tax Labor Civil Others Total Balance at January 1, 2017 45,780 16,567 14,007 87 76,441 Additions 16,772 27,517 7,111 - 51,400 Payments (17,617) (18,798) (8,517) - (44,932) Reversions (10,846) - - - (10,846) Restatement 11,461 1,651 1,395 8 14,515 Balance at December 31, 2017 45,550 26,937 13,996 95 86,578 Additions 17,900 27,798 6,652 - 52,350 Payments (12,776) (16,568) (8,530) - (37,874) Reversions (12,220) (1,300) - - (13,520) Restatement 3,205 1,729 899 6 5,839 Balance at December 31, 2018 41,659 38,596 13,017 101 93,373

Consolidated



Tax Labor Civil Others Total

Balance at January 1, 2017 86,872 95,872 89,790 87 272,621 Additions 25,261 30,663 18,840 - 74,764 Payments (17,617) (18,798) (8,517) - (44,932) Reversions (18,842) - (5,319) - (24,161) Restatement 11,461 1,651 4,926 8 18,046 Balance at December 31, 2017 87,135 109,388 99,720 95 296,338 Additions 18,435 33,811 13,017 - 65,263 Payments (12,776) (16,568) (8,530) - (37,874) Reversions (13,557) (31,658) (40,184) - (85,399) Restatement 3,205 1,729 2,059 6 6,999 Balance at December 31, 2018 82,442 96,702 66,082 101 245,327

(d) Contingent liabilities not provisioned On December 30, 2018, the Group has administrative and judicial claims of a tax, civil and labor nature in the approximate amount of R$ 2,220,823 in Parent Company (R$ 2,413,881 as of December 31, 2017) and R$ 3,039,000 in the consolidated (R$ 3,192,559 as of December 31, 2017). Below we present the main administrative/judicial claims, classified by their legal advisors as "possible losses", on which no provision was recorded. The other demands, in significant volume and small individual value that make up the above balance are not being presented. In Parent Company:

Base date: December 31, 2018 Estimated

value

Glossary or tax credit contestation

Due to the credit utilization related to the unconstitutional increase of the percentage of ICMS, between 1990 and 1997, by the state of São Paulo.

118,510

ICMS tax on goods subject to the tax substitution regime. 27,250

Regarding the ICMS ST object of reimbursement, due to non-issuance of specific invoice.

Glossary of ICMS credit due to transfer of credit balance to centralizing establishment without legal protection.

355,057

19,369

ICMS requirements

Regarding to the quantitative difference between the quantity of inventory reported in the magnetic file and the physical inventory of the stores, registered in the inventory register, of some stores. 105,264

Due to the lower collection in the transfers from the Distribution Centers to stores in other states. Divergence of value taken as calculation basis or incidente rate.

Requirement of ICMS-ST due to lack of collection or lower collection of the taxo n the entrance of the merchandise in the State territory.

Due to the divergence between the tax burden applied and between the tax regime considered by the taxpayer and the tax authorities as the correct one.

75,487

166,312

23,663

Decree Law nº 1,455, of April 7, 1976

Substitute fine for lost goods, resulting from the disregard of the indirect importation in the purchases made by the Distribution Centers (DCs)

439,987

Tax on Corporate Income – IRPJ and Social Contribution on Net Income – CSLL

Tax requirement for calendar year of 2009 and 2010, as a result of a statement of expenses considered as not proven, due to the alleged lack of addition of goodwill amortized in the CSLL calculation basis, due to the absence of addition of the non-deductible cost or expense in the base calculation of CSLL, as well as the non-deductibility of non-deductible provisions in the CSLL calculation basis.

Tax requirement arising from the lack of homologation of the Clearing Statements, on the grounds that the claim sought would not be net and certain.

Tax requirement on Legal Income arising from non-compliance with the compensation limit of 30% of the IRPJ calculation basis.

49,235

80,832

91,381

PIS and COFINS



Glossary of tax credits arising from the Contribution for the Financing of Social Security – COFINS and

Contribution to the Social Integration Program – PIS declared in the Statement of Federal Tax Debits and Credits – DCTF and, supposedly, not carried out within the legal term.

271,591

PAES

Judicial collection of the tax credit determined in several CDA’s regarding the power of 10/1992 to

01/2023, coming from PAES Previdenciário. In response to this execution, the Company filed an

injunction with an insurance guarantee, obtaining an injunction that guarantees the suspension of the

liability of the debts. Currently awaiting the judgment of appeal filed by the National Treasury against

the decision that inadmissed its special appeal.

208,424

CPC 25 – Provisions, contingente liabilities and contingente assets

The Company has a fiscal position for federal taxes, based on legal counsel, classified as “possible losses with remote bias”

618,111

(e) Contingent liabilities not provisioned – B2W

On December 31, 2018, B2W has administrative and judicial claims of a tax, civil and labor nature classified by the legal advisors as "possible losses" and, for this reason, no provision was recorded. The approximate amount of tax proceedings is R$ 818,177 (R$ 778,678 as of December 31, 2017). Among the main tax lawsuits, classified as "possible losses", the following stand out:

(i) tax assessment notice drawn up for the collection of IRPJ and CSLL debt arising from allegedly undue use of tax loss carryforwards and negative basis of CSLL, since the limit of 30% for compensation was not observed, in the approximate amount of R$ 78,127;

(ii) infraction notice resulting from the attribution of responsibility for the payment of a fine, in the

approximate amount of R$ 277,410.

B2W has fiscal position for federal taxes, based on legal counsel, classified as "possible losses, with a bias of remote", in the amount of R$ 810,700 (R$ 556,413 on December 31, 2017).

22 Accounts Payable - Business Combinations

With the objective of business expansion and in accordance with the strategic plan, the B2W acquired companies with operations linked to digital services. Between 2013 and 2015, B2W acquired 19 companies operating in the areas of systems development, e-commerce operations and services, customer and product intelligence consulting, and 2 of Brazil’s leading e-commerce carriers. As of December 31, 2018, the balance payable referring to acquisitions of these companies was R$ 9,322 (R$ 28,329 as of December 31, 2017).

Consolidated - Current Consolidated - Non-current

December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Current

BIT Services (previous Ideais) 490 13,014 7,788 8,184

Click Rodo - 4,966 - -

Others 1,044 1,193 - 972

1,534 19,173 7,788 9,156

23 Antecipated Revenue – Subsidiary B2W



The subsidiary B2W sidned in October 18, 2013, Extended Warranty Secure Commercial Agreement with the insurer CARDIF do Brasil Seguros e Garantias S.A., with intervengency of TRR Securitas Corretora de Seguros Ltda., and Panamericano Administração e Corretagem de Seguros e de Previdência Privada LTDA., for a period of up to 5 years, aiming to explore the offer of Extended Warrant of purchases made by customers through the subsidiary sales channels. On account of this contract, B2W received in advance revenue the importance of R$35,000 which is being appropriated to the result by achieving goals. The amounts received and not yet settled are accounted, in the consolidated, in the liabilities, in the headings "Other circulating Liabilities" and "Other non-circulating liabilities".

Advance received 35,000

Suitable in 2013 (17,285) Suitable in 2014 (2,484) Suitable in 2015 (2,566) Suitable in 2016 (2,292) Suitable in 2017 (1,616) Suitable in 2018 (1,820) Appropriating 6,937 Current Part 2,489

Non Current Part 4,448

24 Shareholders’ Equity (a) Capital

The capital stock may be increased by the Board of Directors, regardless of statutory reform, up to the limit of 2,000,000,000 common and/or preferred shares. There is no preemptive right to subscribe for shares. The shareholding composition of the Company's capital as of December 31, 2018 and December 31, 2017 is as follows:


Ordinary

Shares

(ON)

Preferred

Shares

(PN) Total

Ordinary

Shares

(ON)

Preferred

Shares

(PN) Total

Carlos Alberto da Veiga Sicupira - 4.49% 2.98% - 4.50% 2.98%

Administrators 2.33% 5.58% 4.48% 2.33% 5.62% 4.51%

Cathos Holding LLC - 2.42% 1.60% - 2.43% 1.60%

S-Velame Adm. de Recursos e Participações S.A. 54.00% - 18.24% 54.00% - 18.28%

CEDAR TRADE LLC - 0.50% 0.33% - 0.51% 0.34%

LTS TRADING COMPANY LLC 0.03% 0.01% 0.02% 0.03% 0.01% 0.02%

BRC S.à r.l. (i) 7.85% 22.20% 17.35% 7.85% 22.27% 17.38%

Total of Controllers 64.21% 35.20%

45.00% 64.21% 35.34%

45.11%

Tobias Cepelowicz 6.06% - 2.05% 6.16% - 2.08%

Massachusetts Mutual Life Insurance Company - 9.52% 6.30% - 10.55% 6.98%

BlackRock - 6.19% 4.10% - 4.97% 3.29%



Others 29.73% 49.09% 42.55% 29.63% 49.14% 42.54%

Total Free Float 35.79% 64.80% 55.00% 35.79% 64.66% 54.89%

Total held in treasury 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

(i) On 19 June 2017, the Company received notification of BRC S.à rl, a limited company incorporated under the laws of the Grand Duchy of Luxembourg, informing that it incorporated the companies, Companhia Global de Varejo, Mercosul Internet and Companhia Preferencial do Varejo, and, as of this date, the new direct shareholder of the Company.

(b) Activity of capital shares Quantity of book-entry shares with no par value. Nominative Nominative Balance

common

shares preferred

shares Total in Brazilian

Reais On January 1, 2017 530,640,068 897,393,456 1,428,033,524 1,441,673 Capital Increase - Public offering 9,303,562 142,925,334 152,228,896 2,405,054 Capital Increase – Stock option plan - 4,303,324 4,303,324 43,474 Debenture Conversion (note 19 (b)) - 12,866,027 12,866,027 129,157 On December 31, 2017 539,943,630 1,057,488,141 1,597,431,771 4,019,358

Capital increase - Stock option plan 3,222,193 3,222,193 31,443 On December 31, 2018 539,943,630 1,060,710,334 1,600,653,964 4,050,801 Costs attributable to the public offering - - - (92,840) On December 31, 2018 – net of costs 539,943,630 1,060,710,334 1,600,653,964 3,957,961

At a meeting of the Board of Directors held on September 3, 2018 was approved an increase in the Company's capital stock with the issuance of 3,222,193 preferred shares, being 2,869,693 of these shares paid by capitalization of reserves, due to the exercise of the purchase options given in the Plan approved in the General Assembly on April 30, 2012 terms. (c) Treasury shares

Ordinary Preferred Balance

nominative nominative Total in Brazilian Reais

On January 1, 2017 - 2,300,719 2,300,719 44,545 On December 31, 2017 and 2018 - 2,300,719 2,300,719 44,545 Average acquisition cost on December 31, 2018 per share – R$ - 19.36

Market value on December 31, 2018 15.03 19.70 per share – R$

(d) Goodwill on transactions with shares of subsidiary



In 2018 and 2017, the Company did not acquire ordinary shares of B2W in the market. The shares acquired in the market as of fiscal year 2009 generated goodwill of R$ 93,978, recorded in shareholders' equity, in the "goodwill on capital transactions" account, as recommended by CPC 36. Because it is a capital reserve, "goodwill on capital transactions" may only be used to increase capital, absorb losses, redeem, redeem or purchase shares or payment of cumulative dividends to preferred shares. (e) Reserve for new developments The reserve for new ventures is constituted based on capital budgets, subject to the approval of shareholders at the General Meeting, and is intended for future investment plans of the Company and repurchase of own shares for subsequent cancellation. It was proposed to allocate retained earnings for the years 2018 and 2017, respectively, R$ 241,466 and R$ 105,746 to reserve new ventures. (f) Legal reserve The legal reserve is constituted annually as 5% of the net income for the year and may not exceed 20% of the capital stock. The legal reserve is intended to ensure the integrity of the capital stock and can only be used to offset losses and increase capital. (g) Dividends and interest on capital For the shareholders is guaranteed by the bylaws a minimum mandatory dividend corresponding to 25% of net income for the year, which may be offset against declared equity interests and will have the same gross amount per share, for both common (ON) and preferred (PN) shares. The Board of Directors has the competence to distribute more than the mandatory minimum. At the Extraordinary Meeting of the Board of Directors on 12/24/2018, the distribution of Interest on Own Capital calculated based on the variation of the Long-Term Interest Rates on Shareholders' Equity, verified in the period between 12/31/2017 and 12/31/2018, in the amount of R $ 120,000. The distribution will occur on 4/22/2019. The amount distributed may be attributed to the amount of the mandatory minimum dividend due, to be calculated on the result of the year in accordance with future resolutions of the Ordinary General Meeting (AGO). (i) Exercise of 2018:

December 31, 2018 Net income of the exercise 380,490 Legal reserve (5% of th net income of the exercise) (19,024) Basis for calculation of dividends 361,466 Minimum mandatory divident (25%) 90,366 Additional dividents to distribute 29,634 Dividends to distribute 120,000

Dividends distribution Interest on own capital RCA of 12.24.2018 (Integrals R$ 0.075077272 per share ON/PN) 120,000 Total of proposed dividends 120,000

(ii) Exercise of 2017: December 31, 2017



Net income of the exercise 237,628 Legal reserve (5% of th net income of the exercise) (11,882) Basis for calculation of dividends 225,746 Minimum mandatory divident (25%) 56,437 Additional dividents to distribute 63,563 Dividends to distribute 120,000

Dividends distribution Interest on own capital RCA of 29.12.2017 (Integrals R$ 0.075228929 per share ON/PN) 120,000 Total of proposed dividends 120,000

25 Share-based Payment

(a) Share Subscription Plan of the Parent Company (Lojas Americanas S.A.) The Company offered share subscription plans to its executives as of 2012 with the following characteristics:

executives have a fixed term to subscribe the Company's shares at a price that corresponds to 90% of the average stock price on the Bovespa in the month of approval of the Plan;

in this new plan, the beneficiary may choose to allocate from 70% to 100% of the profit received by the beneficiary in the year to the immediate exercise of options, thereby acquiring the corresponding preferred shares issued by the Company and the delivery of a substantial portion of the shares acquired

is conditional upon the Company being present for 5 years from the date of the exercise;

subscribers have the free availability of the portion of the cash dividends from the subscribed shares that corresponds to the dividend distributed over the adjusted net income in each year; and

the executives may only dispose of their shares, unless otherwise decided by the Committee, when conditions defined in the Plan are observed, such as assignment of employment relationship. The Company has preference in the repurchase of shares once the employment relationship has ceased.

For the plans granted to the Company's executives up to 2011, part of the share subscriptions made are financed by the Company. The balance financed on December 31, 2018 to these executives, recorded in non-current assets (accounts receivable from stockholders - Stock subscription plan), amounts to R$ 51,008 (R$ 47,722 at December 31, 2017), being the same monetarily adjusted by the IGP-M with interest of 6% pa. The executives' equity is the guarantee of the respective financing. At the meetings of the Stock Option Plan Administration Committee, stock subscription plans were approved. Below is the statement of the plans that were outstanding as of December 31, 2018 offered to the Company's main executives:

Plans 2017 2016 2015 2014 2013



Date of the Meeting of the Plan Administration

Committee

09.29.2017

03.10.2016 06.30.2015 06.30.2014 09.29.2013

Number of PN Shares Granted 1,759,081 2,566,039 2,048,525 2,564,378 1,637,428

Begin of the Vesting Period October 2017 July 2016 July 2015 July2014 September 2013

Finish of the Vesting Period October 2022 July 2021 July 2020 July 2019 September 2018

Subscription Share Value on the Granting Date 12.36 13.62 14.49 10.26 13.64

Market Share Value on the Granting Date 13.73 15.13 16.10 11.40 15.16

Benefit Value 1.37 1.51 1.61 1.14 1.52

Number of Shares estimated by the Company to be

issued and maintained after the vesting period

1,407,265

2,052,832 1,638,819 2,179,721 1,412,901

Granting Date 09.29.2017 03.10.2016 06.30.2015 06.30.2014 09.29.2013

Vesting Period 60 months 60 months 60 months 60 months 60 months

In these Plans, the benefits were measured by the "intrinsic value". The compensation costs of executives coming from the plans for the year ended in December 31, 2018 were R$ 36,551 in the Parent Company and R$ 53,447 in the consolidated in other operating expenses (R$ 32,277 in the parent company and R$ 60,411 in the consolidated in 31 of December 2017) and counterpart recorded in capital reserve, in the consolidated. The remuneration costs of the programs to be recognized (from 2019 to 2023) for the vesting period of the plans, considering the assumptions used, amount to R$ 64,723 in the Parent Company and R$ 96,814 in the Consolidated. Based on the shareholding composition of the capital stock as of December 31, 2018, the maximum percentage of dilution of participation to which the current shareholders will be subject if they are subscribed and maintained after the vesting period, all shares of the Plans are less than 3% in the parent company and less than 1% in the consolidated.

(b) Share Subscription Plan of subsidiary B2W In April 30, 2018 was approved by the management the subsidiary B2W Incentive Plan with Restrict Shares (“Restricted Shares Plan”) aiming to: (a) to stimulate the expansion, success and social objectives of B2W and the interests of its shareholders, with the granting of executives and employees of high level of right of receipt, for non-consideration, of shares issued by B2W, under the conditions, and in the manner provided for in this Restricted Shares Plan ("Restricted Shares"), thus encouraging the integration of these executives and employees in the subsidiary; (b) to enable B2W to obtain and maintain the services of high-level executives and employees, offering such executives and employees, as an additional advantage, to become shareholders of the subsidiary, under the terms, conditions and in the manner provided for in this Restricted Shares Plan.

The maximum limit for granting restricted shares, in the form of this Restricted Shares Plan, will be shared with the maximum limit provided in the stock option plan approved on December 13, 2006, as



amended and ratified ("Stock Option Plan"). In this way, the Restricted Shares Plan and the Stock Option Plan will be limited, together, to 5% of the total shares of the subsidiary's share capital existing on the date of its concession, considering, in this total, the effect of the dilution resulting from the exercise of all options granted and not yet exercised under the Stock Option Plan, as well as Restricted Shares that have not yet been effectively transferred to the Beneficiaries. The remuneration costs from the stock-based payment plan for the year ended December 31, 2018 was R$ 16,896 (R$ 28,134 on December 31, 2017). The remuneration costs have as a counterpart the record in shareholders' equity in reserve of capital - reserve of recognized options, since the options, when exercised, are settled by issuing new shares or use of shares kept in treasury. The cost of remuneration corresponds to the fair value of Plan B2W, calculated on the date of the grant, recorded during the period of service that starts on the date of the grant until the date on which the beneficiary acquires the right to the exercise of the option. The costs of remuneration of the Plan to be recognized by B2W for the remainder of the period (provision of services to take place) based on the assumptions used totalize approximately R$ 32,091 on December 31, 2018 (R$ 38,881 on December 31, 2017). Based on the shareholding composition of the capital on December 31, 2018, the maximum percentage of participation dilution to which will eventually be subjected to the current shareholders of the subsidiary in case of exercising all the options granted is less than 1%.

26 Net revenue


Planos 2018 2016 2015 2015

2015

2014

2013

Date of the Meeting of the Plan Administration Committee

10/10/2018 06/30/2016 06/11/2015 06/11/2015 03/11/2015 03/11/2014 07/10/2013

Number of PN Shares Granted 444,065 2,845,194 476,807 177,474 1,357,147 1,285,208 2,462,847

Initial Term for the Practice of Granting

oct/18 apr/16 jul/15 jul/15 apr/15 sep/14 nov/13

Final Term for the Practice of Granting

sep/23 mar/21 jun/20 jun/20 mar/20 jul/19 sep/18

Subscription Share Value on the Granting Date

22.7 8.46 11.87 17.37 18.41 20.49 6.7

Market Share Value on the Granting Date

31.13 9.4 25.82 25.82 20.46 22.77 7.44

Number of Shares estimated by the Company to be issued and maintained after the vesting period

222,033 1,422,597 238,404 88,737 678,574 642,604 1,231,424

Granting Date 10/10/2018 06/30/2016 06/11/2015 06/11/2015 03/10/2015 03/11/2014 07/10/2013

Vesting Period 60 months 60 months 60 months 60 months 60 months 60 months 60 months



December

31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Restated Restated Sales of goods and services (note 2.2) 12,959,410 11,626,481 20,842,775 19,249,488 Sales and services taxes (1,600,035) (1,425,698) (3,143,439) (2,895,567) Others (9,472) (8,329) (9,474) (8,332)

11,349,903 10,192,454 17,689,862 16,345,589

27 Expenses by nature

The Company chose to present its statements of profit or loss for the periods ended on December 31, 2018 and 2017 by function and presents the following breakdown by nature:


December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Sales Restated Restated

Personnel Occupancy (785,061) (662,262) (1,075,423) (927,971) Supplies (824,754) (725,983) (926,226) (839,065) Fees and commissions (33,369) (36,253)

(36,253) (52,598) (59,748)

Distribution (158,415) (144,325) (370,073) (292,014) Others (i) (34,113) (25,212)

(25,212) (62,628) (59,214)

(93,036) (163,014) (542,059) (405,556)

(1,928,748) (1,757,049) (3,029,007) (2,583,568)

Administrative and others Personnel (62,045) (50,408) (110,752) (91,859) Occupancy (282) (260) (11,280) (11,806) Fees (25,166) (25,049) (36,401) (36,084) Depreciation and amortization (500,150) (434,164) (932,690) (766,667) Others (ii) (26,613) (16,889) (80,396) (57,374)

(614,256) (526,770) (1,171,519) (963,790)

Other revenue income (expenses) (iii) (120,342) (97,072) (140,062) (137,951)

(i) Consolidated refer mainly to on-line and off-line media and outsourced customer service. (ii) In the Consolidated refers mainly to attorney's fees, advisory and consulting services and court indemnifications. (iii) As of December 31, 2018, in the Parent Company, referred basically to provisions for contingencies of R$ 51,637 (R$ 51,400 on December 31, 2017), expenses with a plan of action of R$ 36,551 (R$ 32,277 on December 31, 2017) and employees' participation of R$ 12,800 as of December 31, 2018.

28 Financial result




December

31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Restated Interest and monetary securities 220,413 289,791 414,223 497,020 Financial discounts received and restatement monetary 6,232 42,218 50,139 82,231 Adjustment to present value of accounts 89,518 146,951 264,842 369,466 Other financial income 21,477 1,909 39,156 33,965

Total of financial income 337,640 480,869 768,360 982,682

Interest monetary restatement on financing and anticipation of receivables (730,044) (1,038,135) (1,530,289) (1,920,498) Monetary restatement of fiscal liabilities (26,043) (43,689) (27,204) (47,220) Bank expenses, taxes on financial transaction taxes

and other financial expenses (216,453) (121,705) (217,362) (301,130) Adjustment to present value of suppliers (215,293) (312,073) (333,660) (312,073) Conditional discounts granted - - (73,362) (41,427)

Total financial (loss) (1,187,833) (1,515,602) (2,181,877) (2,622,349)

Net financial income (loss) (850,193) (1,034,733) (1,413,517) (1,639,667)

29 Earnings per share

Basic earnings per share are computed by dividing net income by the weighted average number of common and preferred shares outstanding during the year. There is no difference between classes in the distribution of earnings per share. The calculation of basic and diluted earnings per share is as follows:


December 31, 2018

December 31, 2017

December 31, 2018

December 31, 2017

Numerator

Net profit (loss) in the semester 380.490 237.628 227.510 81.234 Non-controlling - - (152.980) (156.394) Result attributable to shareholders 380.490 237.628 380.490 237.628

Denominator (in thousands of shares) basic

Weighted average number of outstanding shares 1.596.182 1.553.193 1.596.182 1.553.193

Basic Loss per share

Attributable to shareholders

0,238 0,153 0,238 0,153 Result per share (ON and PN) 0238

0,153

0,238

0,153

Denominator (in thousands of shares) diluted Weighted average number of outstanding shares 1,605,839 1,565,110 1,605,839 1,565,110 Net loss per diluted share

Attributable to shareholders

0.237 0.152 0.237 0.152 Result per share (ON and PN) 0.237

52 0.152

52 0.237

52 0.152

30 Insurance coverage



The Company and its subsidiaries have insurance coverage for inventory assets and property, plant and equipment, as well as for theft and theft of cash. As of December 31, 2018, the Company's hedges are as follows: Covered risks Coverage amount

Property damage 5,556,182

General liability Up to 40,000

Aircraft US$ 6,800

31 Undertaken commitments - Rental agreements

(a) Parent company As of December 30, 2018, the Company has 1,483 lease agreements (1,325 lease agreements as of December 31, 2017) for its commercial, logistics and administrative units. Currently these contracts are classified, in compliance with current corporate legislation and based on technical studies carried out, as operating leases. The Company, based on preliminary assessment, estimated the technical impacts with a view to adopting, as from January 1, 2019, the registration of these contracts in compliance with IFRS 16 - Leasing operations (note 2.3 (a)). The lease agreements of commercial units (stores), for the most part, provide for a variable rent expense, incident on sales, or a minimum amount, with the monthly obligation of the Company paying the higher of both, with a semiannual or annual calculation. The minimum values of the contracts are adjusted annually, according to the variation of the main inflation indexes. The lease contracts of the logistics and administrative areas have values fixed in contract, with annual adjustments, according to variation of the main inflation indexes. For the year ended on December 31, 2018, rent, condominium and other related expenses totaled R$ 641,584 (R$ 576,047 on December 31, 2017) in the parent company. Future commitments, based on the stores existing on December 31, 2018, with a 4.01% increase (IPCA projected for 2019) resulting from these lease agreements, are distributed as follows: 2019 2020 2021 2022 As of 2023

Rents

667,312

694,071

721,903

750,852

780,961

(b) B2W Subsidiary The B2W maintains a Private Instrument of Rental Agreement for Commercial Property and Other Covenants for all of its Distribution Centers. The rent is updated annually based mainly on the IGP-M and IPC-A indices (as of December 31, 2018 the monthly rental value was R$ 8,451). In the year ended December 31, 2018, B2W incurred R$ 97,222 (R$ 100,633 for the year ended December 31, 2017) in rental expenses and other related to real estate. B2W analyzed these contracts and concluded that these are included in the operating lease classification, and is conducting studies to evaluate the technical impacts with a view to adopting, from January 1, 2019, the registration of these contracts in compliance with IFRS 16 - Leasing operations. The future



commitments arising from these leases of properties in use at December 31 are as follows: The future commitments arising from these leases of the DCs in use at December 31, 2018 are as follows:

2019 2020 2021 2022 As of 2023

Rents 102,342 73,440 50,319 43,501 69,053



32 Segment information December 31, 2018 Physical trade E-commerce Others Total Eliminations Total

Net sales 11,349,903 6,488,473 8,151 17,846,527 156,665 17,689,862 Cost of goods and/or of services rendered (6,946,058) (4,813,573) (7,615) (11,767,246) 137,017 (11,630,229)

Gross profit 4,403,845 1,674,900 536 6,079,281 (19,648) 6,059,633

Depreciation and amortization (500,150)

)) (432,484)

)) (56)

)) (932,690)

)) -

)) (932,690)

)) Selling, general and administrative expenses

(2,042,854)

(1,220,247)

(841)

(3,263,942)

(3,894)

(3,267,836)

Financial revenue (expense) (850,193) (566,334) 3,010 (1,413,517) - (1,413,517) Interest in subsidiaries (241,277) - - (241,277) 241,277 - Other operational expenses (120,342) (45,007) 1,276 (164,073) 24,011 (140,062)

Operating income (loss) 649,029 (589,172) 3,925 63,782 241,746 305,528

Income tax and social contribution (268,539) 191,258 (737) (78,018) - (78,018)

Net income (loss) of the exercise 380,490 (397,914) 3,188 (14,236) 241,746 227,510

Net income (loss) of the attributable segment to the Company’s Shareholders

380,490 (397,427) 3,188 (13,749) 394,239 380,490

Interest of non-parent companies - (487) - (487) (152,493) (152,980)

31/12/2018 Current assets 10,304,692 7,032,072 377,638 17,714,402 (200,781) 17,513,621 Non-current assets 7,412,780

5,999,122

132,793

13,544,695

(2,753,660) 10,791,035

Current liability 5,192,108 3,209,425 1,977 8,403,510 (762) 8,402,748 Non-current liability 7,600,767 6,284,654 108,931 13,994,352 (378,569) 13,615,783 Net equity 4,924,597 3,537,115 399,523 8,861,235 (2,575,110) 6,286,125

Other information:

Investments in property, plant and equipment and/or intangible assets

949,163 379,975 162 1,329,330 - 1,329,330



December 31, 2017

Physical trade E-commerce Others Total Eliminations Total Restated Restated Restated Restated

Net sales 10,192,454 6,285,862 6,109 16,484,425 (138,836) 16,345,589 Cost of goods and/or of services rendered (6,145,341) (4,956,822) (5,611) (11,107,774) 123,244 (10,984,530)

Gross profit 4,047,113 1,329,040 498 5,376,651 (15,592) 5,361,059

Depreciation and amortization (434,164)

)) (332,481) (24) (766,669) - (766,669)

Selling, general and administrative expenses (1,849,655) (945,825) (801) (2,796,281) 15,592 (2,780,689) Financial revenue (expense) (1,034,733) (631,686) 26,752 (1,639,667) - (1,639,667) Interest in subsidiaries (238,484) - - (238,484) 238,484 - Other operational expenses (97,072) (39,738) (1,790) (138,600) 648 (137, 951)

Operating income (loss) 393,005 (620,690) 24,635 (203,050) 239,133 36,083

Income tax and social contribution (155,377) 208,940 (8,412) 45,151 - 45,151 Net income (loss) of the exercise 237,628 (411,750) 16,223 (157,899) 239,133 81,234

Net income (loss) of the attributable segment to the Company’s Shareholders

237,628 (412,050) 16,223 (158,199) 395,827 237,628

Interest of non-parent companies - (300) - (300) (156,694) (156,394) 31/12/2017 Current assets 10,022,613 6,959,525 399,339

17,381,477 223,271 17,604,748

Non-current assets 7,377,795

5,663,602 51,002 13,092,399 (3,160,762) 9,931,637 Current liability 5,519,766 3,697,406 9,765 9,226,937 428,150 9,655,087 Non-current liability 7,258,958 5,020,008 53,310 12,332,276 (557,239) 11,775,037 Net equity 4,621,684 3,905,713 387,266 8,914,663 (2,808,402) 6,106,261

Other information:

Investments in property, plant and equipment and/or intangible assets

939,847 379,940

- 1,319,787 - 1,319,787

Lojas Americanas S.A. Notes to the Financial Statements December 31, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise stated

33 Remuneration of employees and administrators Pursuant to the Brazilian Corporation Law and the Company's Bylaws, it is the responsibility of the shareholders, at the General Meeting, to determine the total amount of the annual compensation of the managers. It is the responsibility of the Board of Directors to distribute the amount among the administrators. At the Annual General Meeting held on April 30, 2018, the monthly compensation limit of the Company's Directors (Board of Directors and Executive Officers) was set monthly. In the years ended December 31, 2018 and 2017, the total compensation (salaries and profit sharing) of the Company's directors, officers and chief executives was R$ 61,390 and R$ 57,224, respectively (R$ 91,851 and R$ 87,622 in the consolidated), remunerations are within the limits approved in the corresponding Shareholders' Meetings. The Company and its subsidiaries do not grant post-employment benefits, termination benefits or other long-term benefits to the Management and its employees (except for the share plan described in note 24).

34 Other information (a) The registered office of the company is located at Rua Sacadura Cabral 102, Saúde, Rio de Janeiro - RJ, Postal code 20.081-902. The shares of Lojas Americanas S.A. are traded on the São Paulo Stock Exchange (LAME3 - ON and LAME4 - PN) and are listed on December 31, 2018 for R$ 15.03 ON and R$ 19.70 PN (R$ 13.13 ON and R$ 17.05 PN as of December 31, 2017). (b) The shares of B2W - Companhia Digital, a subsidiary of Lojas Americanas S.A., are traded by B3 in the special listing segment of the Novo Mercado under the ticker BTOW3 and are listed on December 31, 2018 for R$ 42.02 per share (R$ 20.25 per share on December 31, 2017). (c) Considering the Company's business activity, the costs of the goods sold are mainly comprised of inventory costs for resale.

35 Subsequent Events FÊNIX Investment Fund in Retail Credit Rights II – FIDC – Fênix FIDC of Retail II In October 2018, the Company's Management approved the structuring of the FENIX INVESTMENT FUND IN CREDITORIAL RIGHTS OF RETAIL II ("Fênix FIDC of Retail II"), with a term of twenty (20) years, whose objective defined in regulation is the acquisition of credit rights held by the Company, among others, originating through credit cards used in the purchase and sale of products and services, whose electronic transactions are captured and processed by the systems of accrediting merchants. The "Fênix FIDC of Retail II" will initially issue 1,100,000 shares with a unitary face value of R$ 1 (one thousand reais), of which 1,017,500 senior shares with target yield are corresponding to 106.50% of the DI variation and 82,500 subordinated quotas to be subscribed by the Company and B2W, totaling the senior quotas and subordinated to a Shareholders' Equity of R$ 1,100,000 of the "Fênix FIDC of Retail II". The total amount of the senior shares corresponding to the principal invested will be amortized/redeemed on a single date, on the business day corresponding to the end of the period of 5 (five) years from the date of issue. The value of the senior shares corresponding to the profitability plus the senior shares after their issue date will be amortized every six months, every six (6) months from the date of issue. The FIDC operations of Retail II will begin during the 2019 financial year.

Lojas Americanas S.A. Notes to the Financial Statements December 31, 2018 and 2017 In thousands of Brazilian Reais, unless otherwise stated

13th Issue of debentures At meetings of the Board of Directors held on January 18 and 22, 2019, with the second meeting adding to the first in relation to the number of securities issued and interest rate, the 13th issue of simple, non-convertible debentures was approved, of the unsecured class, in up to two series, for public distribution with restricted efforts, pursuant to CVM Instruction 476 of January 16, 2009. 100,000 debentures were issued, in two series, with nominal value of R$ 10, totaling R$ 1,000,000. On April 28, 2017, pro-rata temporis interest, as from the issue date, was received, R$ 996,659. The first series debentures will have a maturity of five years from the date of issue, being amortized in two equal installments as from the fourth year and will be entitled to remuneration interest of 115.0% of DI - base 252 business days, paid semi-annually. The second series debentures will have a maturity of seven years, counted from the issue date, and will be amortized in two equal installments as of the sixth year and will be monetarily restated by the accumulated variation of the IPCA and interest calculated on the value updated corresponding to the exponential sum of the percentage corresponding to the arithmetic average of the internal rates of return of the Treasury Notes + IPCA, maturing in 2023.

* * * *

Lojas Americanas S.A. · (a) CPC 06 (R2) / IFRS 16 - Leasing Operations The Group is required to...

Documents

Transcript of Lojas Americanas S.A. · (a) CPC 06 (R2) / IFRS 16 - Leasing Operations The Group is required to...