Carrefour strategy update: Reinventing the

'En avant' Transformation Plan and strategy

It's been a little over a year since you presented your Transformation Plan to the . Where does stand now?

I think we can be very satisfied with the results so far. If you look into it, we started the Transformation Plan in June, July last year. Last year we delivered for instance 500m - 590m, even - in operational savings. This year we will save another 500m. If we then talk about purchasing savings, also then we're up to target and we will be up to target even this year.

In terms of stock reduction, we reduced more than two days last year so we really delivered what we said last year. And this year we are also on track in order to deliver the improvements. So I think it's very, very encouraging to see in terms of the cost improvements.

Now the other side, I also said that we need to enrich and renew the management team and here I'm pleased to say that we now have a complete Executive Board with some, I would say, exceptional international talents, and today we have a complete team. And I must say that it is the best team in my point of view that any retailer is putting up and it's for sure the team that will take Carrefour to the levels that we want to do. So I think it's very satisfactory to see that.

Now the last initiative, we had seven initiatives and one initiative that we so far haven't presented, is what we are doing today in this Analyst Day and where we're presenting the reinvention of the hypermarket. I remember when we were talking a year ago I got the question, is it really going to be a reinvention. And yes, it was a tough point that we took but I hope today that everybody sees that it's really about the reinvention of the hypermarket. Or should I say it's an invention of .

Carrefour Planet - the new concept

Hypermarkets as a format are losing ground across the board in mature markets. How do you plan to counteract this and to reinvent the hypermarket?

It is true if you look at in general in Europe that they have been losing ground, around 1-1.5 per cent in frequency over the last five to six years. I would say that these are things that can happen in any industry or in our industry now when you are not inventing. In fact we've been challenged about an environment that has been evolving where the hypermarket in itself has not been evolving at the same time. So really it's about lack of innovation in this format. And that's really what we are addressing with Carrefour Planet. It is a reinvention of the hypermarket where we are offering a complete new experience as such.

Now if you look into what is a hypermarket or what was a hypermarket in Carrefour, it was basically everything - as we said - everything under one roof. This is for me part of history. And when you look at the Carrefour Planet you can see now that this -- it's all about basically three different parts. It's about delighting the customer which means really enhancing the shopping experience; it is about getting greater efficiency, the way we are operating the hypermarkets; and it is about enhancing our culture and developing our people.

Now, delighting, that is to become the preferred retailer; enhancing our efficiency is to lower the cost in order to improve the profitability, hence become the preferred retailer also for the shareholders. And when you see what we are doing in order to get really our employees to embrace this reinvention, it is all about evolving our culture so it becomes a sustainable progress of what we are doing with the Carrefour Planet. And hence we should be the preferred employer as well at the same time.

You mention 'delighting the customer', how exactly will the transformation benefit customers?

Well Carrefour Planet, you can see it as three distinct offers under one roof. There is the multi-specialist where we have chosen in fact nine categories where we're going to be specialists and make the difference. Now that's been choices taken where we really know we can make the difference. That also means there are other categories that have to leave even the space or leave the stores completely. But that really, really is what's going to challenge the environment that has evolved around us.

On the other hand we have the fresh food. Well here we'll have the best quality, the best freshness wherever you can compare us with any one of our competitors. That will be the best in class in terms of quality and freshness.

And the third part is the dry grocery where we will be price competitive because this is often about manufacture brands and here we just have to be price competitive.

Now on top of that we have the Carrefour brand which will be expressed in the three areas. Now the Carrefour brand is a brand where we are known for the quality, we are able to sell it at a level of price which is about 15-20 per cent less than the producer brands. So this is also enhancing our competitiveness.

On top of that we are staffing up at this point in time so that we will be much more innovative. So we will come up with new products and not only products that exist already in the market. So the Carrefour brand is at the centre of this Carrefour Planet at the same time.

If you look then further down, further down or look further into the concept, you will see that we have added on a lot more services. Whether it is how you can get help to take care of your children while you're shopping for instance. We have put a lot more comfort in the store where the aisles are much larger so you can easier move around. We have taken down the height of the gondola so you can have a better view of the store and where you can find things. There is another signage so you know constantly where you are. There is another signage of pricing so it clearly tells you about the pricing. We will change the economic equation as well where you will have fewer promotions but much bigger promotions which also enhance the competitiveness.

So I'm absolutely sure that we have invented Carrefour Planet to become a destination shop again as it was, or used to be, years ago. But this is in the new area where I'm sure that this is going to be a destination shop. What have initial reactions from customers been?

They are very encouraging. As you know we have five pilot stores in , in and in . Now there are different results. First of all you have the qualitative where we are asking the customers about feedback. And I must say we are, on a scale to 10, we are at 9.5 out of 10 in terms of comfort, in terms of service, in terms of facility etc. etc. Very encouraging.

Then you are asking me probably what are the sales results because that is the proof of the pudding in a certain sense. And here we can say, if you take the fresh food for instance, well we have both experience here in Spain and in France, well the sales are up around 25 per cent. If I then go into the clothing, between 20 to 30 per cent. So if you take the different pilots and look into the different categories it is very, very encouraging results.

A store that has not been fully changed which is for instance Mont-St-Jean in Belgium where we basically put in two to three different poles, upgraded a little bit on the fresh food but it's far from being the Carrefour Planet, well the sales in Belgium in this store is up 8-9 per cent while the rest of the stores are unfortunately still negative. So if I take the difference it is a 10 per cent difference on this store.

So that just shows that some of these poles can already enhance the performance of the existing hypermarkets. So to conclude I would say very encouraging and very encouraging not only for short term, but thinking through what the rollout can give us.

Carrefour Planet - roll out and financials

The Carrefour hypermarket network is highly varied. Do you really think you can transform them all to Carrefour Planet? What's the scope?

It's true that they vary and we have today two categories, big categories. There are those that are going to be under the Carrefour Planet brand and there are those that are going to maintain the Carrefour brand. But they are all going to be changed as such. So of the universe of 500 stores about half of them will go under the Carrefour Planet and the other half will be, let's call them, remodelled where we are taking all the best practices but unfortunately we cannot put in all the services for instance or the hypermarket is not big enough to really be expressed in the nine major poles that we are putting in in France.

So all are going to be profoundly changed, and half of them are going to be under Carrefour Planet. Now all in all, when I say half of it you should know that those 250 stores that are going to be under Carrefour Planet represent more or less 70 per cent of the sales. So you can say the major part is going to be under the Carrefour Planet. And the rollout will start as from I would say second quarter of next year and we will finish the major part at the end of 2012. There will be some stores that will continue to be converted in early 2013 but I would say the major part is being done at the end of 2012.

And all these new services in stores are going to come with extra cost. How do you plan to offset these?

They are going to come with extra delightment I would say. They are going to delight the customers. That's been the driving thing. It's always been how can we really satisfy and even go further than satisfy, that's why we're saying delight, where the customer is going to say 'wow, this is really good'. So it is true that we have added on services, we have added on people in the store floor in order to assist. If you take the beauty area for instance which is going to be the best beauty shop in any of the towns where we are because we're going to have the surface, we're going to express the products, we're going to have the service around it.

That is true that that has added on cost. But you have to see the big picture here then. First of all the big picture is that yes, there are costs, but there is also a better margin mix because we will sell from the specialist poles so we will have an improved margin mix in the stores and that actually evens out. It evens out the extra costs we put in. So in terms of our margin, it will be the same.

But on top of that, on top of that we will have the efficiencies. And you remember I said we will delight, we will enhance the efficiencies or improve the efficiencies and we will enhance the culture. Now in terms of the efficiencies, they will take down the cost of the way we are operating the store, particularly in the back office. So if the margin is more or less stable, it's even a little bit improved through the mix, we're taking out the operational costs. So all in all this will be a significantly better profitable store in the future.

And the rollouts themselves will come with substantial cost. How do you plan to finance the conversions?

Well we will invest about €1.5b over the coming three years. In fact it's going to be -- most of it is going to be in the two years, but say two and a half to three years. Now that is a heavy investment or as I said it's really big bucks in our big box. But it is in order to generate two things. First of all to become the preferred retailer as we want to be and secondly to generate the growth because we are the preferred retailer.

So you have to see what is the equation in total of the volume growth that we will be able to generate, the fact that we will take down the operational costs. So all in all this is going to be a very, very I would say profitable project, both in terms of I would say bottom line but also in terms of return on invested capital that we will put behind these stores in the coming three years.

As you say, EUR1.5b is a big investment. What kind of returns you can expect on that?

First of all if I look into sales. We will look for a sales increase of around 18 per cent over the coming three to four years. So that is the big change because you remember what I said earlier, hypermarkets in general they were on a decline and we have specific problems within Carrefour. So going up to 18 per cent growth in the coming three to four years is a significant change of our performance. That is the first thing. If I then look into the ACDA, we will be able to generate 650m more ACDA which is our Activity Contribution. We will be able to have 650m more in these renewed stores. Only by the performance of the reinvention of the hypermarket. On top of that, as I said, we will improve the way we are operating our stores and that is the Transformation Plan that I've already presented for the €2.1b operational costs that will come out. And this is why the totality in improvement of our profit and loss is much more significant than that.

Carrefour Planet - execution So you've described your plans. How can you ensure these will be implemented successfully?

First of all I do have a new Executive Board today. I've chosen talents that have a very rich experience, not only in other retailers but I would say operational and leadership skills. And I think that is my first assurance that we now have the capability of getting through.

Second thing is if I look into what we did with , well we rolled out in 15 months, the Carrefour Market - changing from the into the Carrefour Market. And I must say it is a very good success. We can see that as first of all that we did it in 15 months. We got the growth out of it even though it's not at all the same scope of change because Carrefour Planet is a complete change but still it is to mobilise a specific team and take a rollout. In Carrefour Planet we will roll this out in the five countries so it is for Greece, it is for , it is for Spain, it is for France, it is for Belgium. It is James McCann and it's Vicente Trius who are really the managers that are responsible to roll it out. We have experience of how to do it and we have put specific teams in each country in order to ensure that this execution is going to be done in the best possible way.

So you're confident this new store format will deliver what you want? Reinvent the hypermarket, gain share for Carrefour and help you towards that goal of being the preferred retailer?

Listen, Carrefour Planet started with interviews and consumer customer data of 50,000 clients. We have had 150 people working on this project now for a year and the result you have seen now in two of the pilots but also the other three that we have opened up in the last couple of months. It is a profound change. All consumer feedback is very, very encouraging. The sales are very encouraging in the different poles and we are right now identifying the poles that we will put together in order to when we roll out to have the Carrefour Planet.

If I take El Pinar for instance which is not a completely Carrefour Planet but it's been running now for -- El Pinar in Madrid -- it's been running now for about three months. Well it has double-digit growth. Now that is a solid result that tells us that this is the right direction.

So, having the right people to execute it, having the right solution for the clients. Yes, I'm very, very confident that this is going to be a success, not only for as I said the consumer and the customer, also for our shareholders as well as for our employees. Update on Group targets

What's the outlook for Carrefour in terms of shape, growth and results?

What I see already now is that the renewal has begun. We are clearly in the transformation phase. We have delivered last year, we will deliver this year, and we are now putting Carrefour Planet in orbit which is actually showing in a sense everything that we do change, all the initiatives, because the seven initiatives that come together are being expressed in the Carrefour Planet.

So I would say we are now with renewed formats, be it in France with Carrefour Market, and now Carrefour Planet. We have a very solid position in the emerging markets, be it in China, be it in Latin America, be it in Indonesia etc. etc. So I think that we have now got everything together. And this is why for the first time I believe in Carrefour's history we are even going out and giving our vision and not only vision but targets for the coming years, in 2013 and 2015.

So if you look into the targets that we are now expressing to the market, it is about an organic growth of 6-8 per cent which is a strong growth in the coming years. We have also put down a target of our EBIT that is 3.5 in 2009, that it will go up to 5.3 in 2015 which is a significant jump. But we are very assured that this is not only feasible but that is what we will deliver.

I give you an example. We are still not on the top in the world but we know that we have a situation in France which is very, very competitive. Hence I prefer, when we do reach the 5.3 - 5.5, I prefer to reinvest in order to generate more growth. This is why we have actually capped our AC at 5.3 instead of going for an even higher target because I do believe that when we are at 5.3 we are amongst the best in class and I'm privileged here to drive the growth instead of going to reaching further margin.

And if you then look into the return on invested capital where we have not been good in Carrefour for the last 10 years, well we have a ROCE of around 10 per cent in 2009, that was our figure. Well in 2015 we should be able to deliver a 20-plus return on capital employed. So these are very exciting figures. And if I'm going out to the market today and saying that these are our targets it's because I'm convinced that we will be able to deliver this because we do have the team, because we do have the talents, we do have the solutions and we do have the actions in place today that delivers and that will deliver tomorrow.

Store visit

Carrefour Planet, that is our reinvention of the hypermarket. Giving the customer a completely new shopping experience. A shopping experience that is going to be much more friendly, much more fun, much more discovering - always with competitive pricing.

The first thing you notice in store is that it's better suited to the shopper's needs, organised into key areas, like 'home', 'fashion', 'baby' and 'beauty'.

Then you have the food offer that is split into the three areas. You have 'le marché', with a range of extremely fresh products; you have 'frozen food' where we have the renewed opportunity of really being a specialist in frozen food; and then we have the 'organic' or what we call 'le bio', where a large range of Carrefour branded and even other organic products are at a lower price so that everyone can enjoy the products.

And then we go into the wine cellar, where we have also an electronic sommelier that can help you with your choice!

Now when I talk about electronics, I must also talk about how we have enabled our store with web technology.

Then you will also see how the brands are being expressed. You will find Apple products: the iPod or the iPhone. You will find televisions from Sony, from LG, from Samsung. You will see how the products, and the manufacturer brands, are also being expressed in order to delight, innovate, and make a difference in the store. To further enrich the experience as you walk through the store, you will be able to try food products. We have a chef in the store, we have a sushi bar in the store as well. And you can also try the latest technology. You can even visit a hair stylist or get advice on your make-up. And if you prefer to go shopping without your kids, we have a nursery that takes care of your kids while you do your shopping.

And of course you will find the Carrefour brand being expressed - for instance in the Carrefour Discount. You will have hundreds of special deals and there will be special offers with the loyalty programme that is also reinvented, or renewed, with different levels of loyalty cards.

It is a completely different shopping experience. It is fun, it is convenient, it is discovery. It is a multi-specialist, it has all the freshest and the quality food, it is price competitiveness, it is a comfort. It is a destination store where you choose to go because you want to go there.