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Interview with Jean-Charles Naouri

15 June 2010

How has Groupe Casino weathered the crisis?
I said last year that Casino was not immune to the crisis and that we would inevitably be affected. And that’s what happened in 2009, which makes our performance even more remarkable.

Our revenue was nearly as high as in 2008 and our operating margin was the same at constant exchange rates and scope of consolidation. Consequently, we’re in a position to recommend a slight increase in the dividend. These are solid results given today’s very challenging economic environment.

“Despite the severity of the crisis,

our margin was virtually unchanged,

further demonstrating

the resilience of our business model.”

Your trading profit declined in 2009 however, which is unusual. Is this a cause for concern?
Not at all. Given the severity of the crisis, the contraction in trading profit was a limited 2.5% at constant scope of consolidation and exchange rates. Moreover, as a percentage of revenue it was virtually unchanged, further demonstrating the resilience of our business model. In retrospect, we can see that Casino outperforms the market in a favourable economic environment and holds up better in periods of crisis. This shows the validity of the choices we’ve made over the past ten years.

In France, we’ve deployed a multi-format strategy, building solid positions in convenience outlets, with Monoprix, Franprix, Casino, Petit Casino, Spar and Vival, and in the discount segment with Leader Price.
Outside France, we’ve developed a significant presence concentrated in highly promising markets in which we’ve established leadership positions: Brazil, Colombia, Thailand and Vietnam.

These countries, which account for one-third of our business, held up especially well to the crisis in 2009 and enjoy strong growth potential for the years ahead. We should bear in mind that these markets represent a total of 400 million people with ever-greater access to consumer goods.

“In Brazil, the Group has doubled in size
in less than two years, while generating
revenue of more than €15 billion.”

Your operations in Brazil have expanded very quickly in recent years. What does this country represent for Groupe Casino?
Because of its size and fast-developing economy, Brazil is naturally an important component of our growth strategy. Grupo Pão de Açúcar (GPA) is Brazil’s leading retailer with revenue of more than 40 billion reals if we include full-year contributions from recent acquisitions Ponto Frio and Casas Bahia.

This means that in less than two years we’ve doubled in size while generating revenue of more than €15 billion. The country’s largest private employer, GPA operates a portfolio of more than 1,800 stores and enjoys considerable growth prospects for the years ahead.

Aren’t you disappointed in the underperformance not only of Leader Price but also of your hypermarkets, despite your efforts to improve the format?
We firmly believe that the transformation we’ve undertaken in our hypermarkets will produce results. Already, we’re pleased to see that our cost-reduction efforts have partially offset the decline in sales.
We’re attentively managing retail sales space in our hypermarkets, taking into account the shift in food revenue towards convenience stores, where we hold an edge, and in non-food revenue towards e-commerce, a segment in which we’re the French market leader with Cdiscount.

French hypermarkets now represent just 10% of our trading profit. As for Leader Price, like all discount chains, it was adversely affected in 2009 by the decline in spending among its customers most directly impacted by the crisis. However, the banner defended its market share and we believe more than ever that this retail segment will continue to develop.
What’s more, we intend to introduce new price investments in 2010 to make both Leader Price and Géant Casino more competitive.

“In 2010, we intend to introduce
new price investments to make both
Leader Price and Géant Casino
more competitive.”

In addition to the current economic uncertainties, retailing is confronted with major sociological upheavals. How are you gearing up to meet these challenges in France?
We’ve been adjusting actively and far upstream to new consumer trends. Our portfolio of concept and brands, which focuses on convenience formats and innovative private labels, positions us to take full advantage of these developments.

In France, we’re the market leader in private labels. With Casino, Monoprix and Leader Price, we have three very powerful private labels that account for the bulk of our product assortments. We also have unrivalled expertise in the fast-growing natural food segment, through our own brands and through our all-organic Naturalia banner, which is expanding rapidly.
Lastly, with Cdiscount, we’re able to capture a significant share of the revenue generated by online non-foods sales, another high-growth market segment.

You’re taking a very aggressive stance for 2010, but are you sure you have the resources needed to attain your goals?
Yes, we have them. We’ve considerably enhanced our financial flexibility, on the one hand by generating significantly higher free cash flow in 2009 and on the other by completing twothirds of our plan to dispose of €1 billion in assets by year-end 2010. We achieved our objective of reducing net debt-to-EBITDA to 2.2x one year ahead of schedule.
This shows that Casino has fully integrated the strategic acquisitions made over the past decade. In addition to our solid financial position, our objectives are supported by very active expansion programmes. Our goal is to develop in the promising convenience and discount formats in France and in all formats in international markets, from hypermarkets to convenience stores, which appeal to an everlarger number of customers.
Looking to 2010 and beyond, we’re well positioned to take advantage of new, targeted growth opportunities.

In 2009, the French government presented Casino with its Diversity Label. What does this award mean to you?
We’re the first – and so far the only – retailer to have received this award, and everyone at Casino is rightfully proud. It reflects the breadth and the depth of our long-term commitment to combating discrimination and ensuring equal opportunity in our hiring and promotion practices.

With more than 200,000 employees around the world – of which 76,000 in France – Casino brings together a rich diversity of skills, styles and cultures. This represents a key success factor for our Group, which nurtures diversity not only in its portfolio of products and services but in its personnel management practices as well.>