Casino, Guichard-Perrachon S.A.

Welcome to the third quarter 2021 of Casino Group Conference Call. I now hand over to Mr. David Goubeck, Chief Financial Officer of Casino Group. Sir, please go ahead.

Thank you. Good evening, everyone. Thank you for attending our quarterly results conference call. For most of the past 18 months, until last July, the pandemic was a key factor in our environment. We had to adapt our operations And we did so quickly and effectively by leveraging our key strengths, convenience, urban stores, and our exclusive assets and partnerships in food e-commerce. We also took advantage of our technological capability to reduce our costs substantially in our stores and back offices, leading to a high level of profitability in all our banners, the bottom hypermarkets, and indeed at a positive level in hypermarkets. As a result, we have emerged from this situation in better shape, with more profitable food retail operations, an improved financial situation, and attractive growth opportunities in our new B2B businesses. As stated at the end of H1, our key goal now is to get back to growth in our core business, building on the strengths of our best format. Since this summer, our environment has started to shift away from the pandemic constraints with a successful rollout of vaccines. Restaurants, cafes, and entertainment venues have fully reopened for customers equipped with a pass-in there, which led to some headwinds for food retail as a result. Strong demand for various goods and services, coupled with temporary restrictions in logistics hubs, have also led to a return of inflationary pressures. In this environment, our priorities in France have remained the same. First, a return to growth in our food retail business with proximity and e-commerce leading it. Second, maintaining our high level of profitability so that additional sales fully translate into additional ABBA and cash flows. And third, taking full advantage of growth opportunities in our new B2B businesses. As you will see from the numbers published tonight, we are on the right track on all these points. First, sales. At group level, live phone sales were up plus 1% in Q3, an improvement of 5 points compared to Q2. The improvement is even higher on total sales, up plus 4%, that is 10.6 points above the future. The improvement is clear both in France and Latin America. Let's start with France and with our food retail business. The main takeaways of this quarter are first, the sequential improvement in our overall sales trends. the excellent dynamic of our food e-commerce operations, and third, the continued rollout of our new stores. First, sales trends. Our life-for-life sales trends in France have improved sequentially by four points on average between Q2 and Q3, and again by plus 1.6 points at the beginning of Q4 and October, with convenience, and Franprix now in positive territory. The total sales trend has improved even more by close to 8 points with a recovery of fewer sales and the positive impact of our new stores. We now have 8,125 stores in our French banners thanks to more than 450 new convenience format openings since the beginning of the year. Looking at market share data, Our performance has also improved consistently, from minus 1.2 points in May to almost stable in October, and positive, plus 0.1 points, excluding higher markets. All of this happened during relatively tough market conditions, especially during the summer. First, the reopening of restaurants led to a transfer from eating at home to eating out, particularly for urban formats. Hotels and restaurants' consumption was up for 59% during the summer after insane data. Second, the Parisian market was still soft with a lack of tourism and some transitory reduction of the inner Paris population. And third, the Passe Sanitaire affected traffic in hypermarkets. These conditions led to negative sales in Q3 at minus 4.3% in life-to-life, albeit much better than Q2 at minus 8.4%. These conditions have evolved as evidenced from the last four weeks, with all our banners improving again from the Q3 numbers. The average was minus 1.4%, excluding high-income markets, with Monoprix improving by 2.5 points and our convenience format, including Fonprix, now in positive territory. With the continuation of this normalization, the positive impacts of our extension plan and our food e-commerce performing extremely well, we should expect this trend to continue and bring most of our vanity prompts, especially our best format, back into positive territory in the next few months. This leads me to my second point, the exceptional performance, once again, of our food e-commerce operations. Based on our unique mix of strong brands, and technology partnerships. Sales of home delivery in the greater Paris area, boosted by the Monoprix Plus offer, were up but 72%, 40 points above the market trend in France. These are profitable e-commerce operations based on the strength of our banners and our unique deals with Ocado and Amazon. Our partnership with Ocado has been strengthened adding Naturalia, our pure organic food banner, to Monoprix and Casino. We now offer more than 35,000 SKUs on Monoprix Plus, 26,000 SKUs on Casino Plus, and over 4,000 on Naturalia Marché Milieu. This is an offer that is truly unique in breadth and reliability. Of course, the success of these partnerships with the best players in their field is based on the attractiveness of our banners. We are pleased to announce our new groundbreaking partnership with the leading and innovative quick commerce player, Gorillaz. This deal will include three parts. First, Casino Group will provide national brand and Monoprix products to Gorillaz in France. Second, Gorillaz will prepare and deliver orders for Monoprix and Franprix customers in 10 minutes. And third, Casino Group will be associated to value creation through stake in Korea, in France, and at group level in Germany. This is a very exciting new step for us. Once more, it shows that having the best families in the best areas allows us to build unique, exclusive partnerships that will create long-term value. We now have such partnerships at all levels of their home delivery markets. With the Cadre, we have a unique edge in the next-day delivery. With Amazon, a unique edge for same-day delivery. And with Korea, the unique edge in 10-minute delivery. Of course, each of our banners has also developed its own specific offer. One of the banners which has some particularly impressive numbers is Grand Prix. Grand Prix has its own e-commerce offer with a dedicated app and fast delivery from its uniquely dense network of stores in the Paris area. Franprix recorded triple-digit growth in its e-commerce operation this quarter. Another noteworthy development was the rollout of a new offer from our convenience store anywhere in France through a dedicated website, giving access to over 1,250 stores, adding to our convenience store e-commerce capacity. This comes on top of our Uber Eats and Deliveroo partnerships. This leads me to my third point, our extension plan. We have 8,125 stores in our French bank. This is already the widest network of stores in France, and we have added more than 450 convenience format stores since the beginning of the year. We have hundreds more in our pipeline, and we've put in place an extremely efficient team of developers who work in close coordination with our franchise partners to secure the best locations for our proximity formats. Having this organization in place, with our mix of brands, Monop, Naturalia, CasinoShop, Dival, Star, CasinoHashtag, and others, gives us a clear edge in a market that is moving fast with new space appearing from former non-food stores. Our view is that market share will continue to move from hypermarket store proximity and expanding quickly will allow us to capture this shift. Our goal was to secure 750 new locations this year and based on the 454 new stores opened at the end of Q3 and our pipeline, we are on track to reach these targets. One business unit of particular interest is Franprix, our premium, innovative banner catering to urban needs. Franprix has added 20 more stores this quarter. On an annualized basis, this represents a growth of the store base of almost 10%. We now have 906 Franprix stores, and we see this expansion accelerating in the coming quarters, with a high attractiveness of this banner for franchisees and the strong development team put in place. Hockey's DNA is innovation and customer satisfaction in the Greater Paris area first, but also now in other booming urban centers. They have recently extended their partnership with Decathlon to complete their offer. Hockey's unique density in the Greater Paris area makes it particularly valuable for business partners and suppliers. With the impact of new stores and with the sales trend now back into positive life-for-life territory and the triple-digit growth in its e-commerce operations, We expect Fronty to perform well in the coming quarters. Another key business unit for our expansion program is the casino convenience. We have added 373 stores to our base since the beginning of the year, bringing this network over the 5,500 stores mark. This is the largest network of proximity stores in France. We have opportunities for further profitable expansion in franchise, both in urban centers with Cuisine Shop and CuisineHashtagToutBret, and in rural areas, notably with a design panel. Again, a very strong asset that we see growing further in the coming quarters. So overall, three levers for sales growth. First, trends improving regularly in stores life-for-life. Second, high growth food e-commerce, thanks to our exclusive networks and partnerships. And third, significant expansion of our storways in proximity. Moving now to my second highlight in France, the high profitability of our food retail banner. In the past few years, we have transformed our operations significantly, boosting the bottom line of all our banners into strong cost-saving initiatives. One key development which has allowed us to realize this cost saving while increasing our NPS, have been the successful digitalization of the business. Our autonomous stores and self-checkout solutions, powered by our smartphone apps, have led to a sharp reduction in our cost of operation. These apps allow for both efficient checkout by the customer and for targeted coupons and promotions with better ROI than standard promotions and better monetization to suppliers. All of this while reducing our carbon footprint with less reliance on paper catalog. We now have 640 stores equipped with autonomous solutions, up from 613 at the end of June, and the share of checkouts done automatically has reached 65% at Géant and 61% at casino supermarkets. As evidenced by our Q3 numbers, these cost-cutting initiatives are still bearing fruit. The BDM margin in our food retail balance stands at 8% in Q3, same level as last year. Most of the impact of sales lost during the quarter were compensated by our cost savings. Looking forward, we expect to maintain the high level of profitability reached in all our formats except hypermarket, and for hypermarkets to also remain profitable. This means that the return to sales growth should translate into higher absolute EBITDA. For the full year 2021, we confirm our objective of an edgy growth at the perimeter of the French food retail business. Finally, my third highlight in France relates to our high-growth businesses. We have three businesses operating in markets posed to benefit from secular megatrends. CityScouts in e-commerce, digital marketing and marketplaces, Greenyellow in energy transition, and relevancy in data and retail tech software as a service. First, CityScout, which has already published its key three numbers, and I will focus on the main takeaways. It was a relatively tough quarter for non-food e-commerce, in the particular context of the reopening. Tougher than what was expected. In this context, CityScout performed relatively well, with GMB growing by 8%, marketplace revenues up 8%, and digital marketing revenues up 31%. CityScout also registered a new increase in its base of loyal customers, with CityScout advertising subscribers reaching 2.4 million customers, an increase of 11% compared to last year. This was achieved thanks to CityScout's strong offer and some targeted price investments in direct sales during the quarter, which weighed on its margin in the short term. Also of most importance for its future growth potential Simscout's B2B offering is ramping up nicely. C-Logistic, which builds on Simscout's unparalleled logistic capabilities in France to offer fulfillment, kick-and-collect delivery solutions to various corporate customers, has already landed 15 contracts and has a strong pipeline. Octopia is also developing very nicely. Octopia offers a full-fledged, turnkey marketplace solution to any retailer, including software, vendors, products, and fulfillment solutions. Octopia has signed five new contracts in the quarter, including some major e-commerce players. We are fully convinced that Octopia has access to CityScout's unmatched pool of 14,000 vendors and 100 million FPUs. And the 10 years of experience coming from the operation of its own marketplace gives this new business a key edge in addressing a €600 billion fast-growing markets. The current pipeline of new customers, particularly of the merchant-as-a-service offer, which is a unique offer in today's market, is extremely convincing. As mentioned by Sinova and its Q3 communication, due to temporary market conditions and despite strong interest from potential investors, its fundraising initiatives have been postponed. This will not prevent CityScout from accelerating its new B2B businesses in the next month, given the investments already realized and funded by the cash generation of Cities County's highly profitable activity in marketplace and digital marketing. Within the next few quarters, we'll demonstrate the strength of Octopia and Sea Logistics' unique offers, which will also help suit your fundraising as soon as conditions permit, and in turn, accelerate its growth even more. A few words about Green Yellow, our business unit dedicated to decentralized energy transition. In the context of COP26, the urgency of acting to reduce human carbon footprint is more than ever obvious. Grignolo, by combining decentralized solar power and decentralized energy saving solutions in 16 countries, has again performed well with a strong series of new customers and projects. Among the key achievements of this third quarter A new project in Vietnam for 7 megawatts for the industrial textile group Canaplex, which is the 55th project signed by Piniello in the country. In South Africa, a new solar program of 2 megawatts for food retailer Truckbite completes the first installation that went into operation in September. Other significant programs can be mentioned in Brazil with the extension of the partnership with OIT Telecom for 3.5 megawatts, a new project for 6 solar plants generating 7.7 megawatts with a distributor of construction materials and the signature of an energy efficiency contract for 4.1 gigawatt hours with a leading media player. In all its relevant geographies, Grignolo is developing fast. Its new model, which entails keeping the project on its boots to be a wide base of cash flow generating assets, will include the raising of new funds. This project is very much active and given the interest we have seen for this business from various parties, we are quite confident that it will be completed either through public markets or through a private deal. Finally, a few words about Relevancy, our data monetization and retail tech software as a service business. Relevancy is ideally positioned to take advantage of the move to digitalize retail, having first tested its solutions on millions of customers through our own values. Among the recent developments, the most important is the launch of Infinity Advertising, our subsidiary in partnership with Atamashi. It will leverage the data from 17 million loyalty cards, combining our various values, and will work with suppliers to sell personalized promotion, e-commerce activation, retargeting and games around promotions. This is an extremely promising business. Other recent developments include a strong start for our Brazilian subsidiary, with 20 new contracts signed since last June, and the fast development of InNeed, which was acquired in the first quarter. InNeed, which specializes in digital marketing for brick-and-mortar networks, has already signed 15 clients. Before moving to Latin America, a few words on our financial position in France at the end of Q3. We have a comfortable liquidity position at the end of September with 2.1 billion euros of cash on hands-on credit lines. As you can see from our quarterly update on debt and cash position, net cash flow during Q3 was consistent with the usual seasonality of the business. Compared to 2020 Q3, net debt variation in the French perimeter, excluding green-yellow and disposals, actually improved by 17 million euros despite our sales due to our strict monitoring of OPEX and CAPEX. Our continents are again comfortably met this quarter, with a margin above €179 million on our bid year. We remain fully committed to cash flow, management and control, and to our €4.5 billion disposal plan in France. Our most recent disposal was the disposal of our stake in Thuramont, signed in July. This deal will generate an immediate cash-in of 180 million euros, plus an amount, and it's progressing towards its treasury, as planned. As usual, we do not comment on ongoing processes before they are ready for announcements. Now, a few words about Latin America. GPA, AFCI, and Exito have already published their results, so I will concentrate on the main takeaways. Main events in the quarter. is a major project initiated by ASSAI and GPA, which we think will create a lot of value in the next two years. GPA will sell 71 extra hypermarkets to ASSAI to be transformed into cash-and-carry stores, and will turn the rest of its hypermarket into Bondi Asuka and Mercado Escar supermarkets. Hypermarkets are losing ground in Brazil to cash-and-carry quarter after quarter. With this deal, GBA will be able to monetize a lot-making and structurally challenged business and contemplate its development on a unique land of profitable premium and flexibility segments such as Fond d'Essoukara, Minito, Mercado de Sardana and on leading Omnicanal solutions. For our side, this transaction will allow an acceleration of its expansion plan in uniquely well-positioned locations. After a conversion process, that will take one year to complete. ASSAI has significant experience in this matter, having done 26 such hypermarket conversions already in previous deals with GPA. Based on this strong track record, we expect sales from former hypermarkets to triple, from R$9 billion to R$25 billion under the ASSAI banner, and to deliver an ABA margin above the average ABA margin of ASSAI. Our site now aims for clear leadership in the Brazilian cash and tariff market with a 100 billion rail of sales in 2024, that is 2.5 times 2020 sales. This is clearly a win-win deal that will benefit both companies and by extension should allow a significant revaluation of our Latin American assets, which have already gained significant value after the spin-off of us. A few words now about our lab and business results in Q3. First, sales showed a good dynamic overall, with plus 11.5% total growth and plus 3.9% like-for-like. Compared to Q2, like-for-like growth improved by 4 points and total sales growth improved by 13 points. This was notably driven by the strong recovery in Colombia. Acai then had an excellent quarter with 18% sales growth in local currency and an impressive 66% over two years, driven by the success of its expansion plan and solid life-alike performance in the relatively top market for food retail in Brazil. At GPA, excluding hypermarkets, which will be discontinued by the end of 2021, GPA Brazil sales were stable year-on-year and plus 8.4% over two years. Convenience, a distinctly strong suit of GPA Brazil, with its neutral palm crowns, recorded a very strong 12% like-for-like growth. And GPA's leadership in omnichannel solutions was again confirmed with impressive numbers in online operations. 46% year-on-year and 393% growth over two years. Online sales accounting for 9.3% of total sales in the third quarter of 21, up from 6.3% in the third quarter of 20. At Pondia Total, our premium banner, online sales accounted for an average of 15% of total sales, reaching peaks of 20% in the bottom. This confirms the soundness of the company's strategy to focus on its clear, distinctive advantages, urban, premium, proximity, and e-commerce in a consistent ecosystem. Group-wide results were still a very strong performance, with like-for-like sales of 16%, boosted by the strong economic recovery in Colombia and the end of pandemic-related restrictions. Exito has also been at the forefront of a new channel, with online sales accounting for 12.2% of total sales in Colombia in the last nine months. Among recent developments, the partnership with Rappi has been enhanced to implement TurboFresh, a 10-minute delivery service in Colombia, with the shipments of products from Colombia stores. And 320 stores in Colombia also offer sales via WhatsApp an innovative service that grew 2.3 times year-to-date, accounting for 20% of omnichannel sales. As for the profitability of our businesses, the BPA was up 36% at our site, driven by sales growth and the wrap-up of recently opened stores. The BPA was up 42% at Exito, driven by strong sales growth as well, and at GTA Brazil, a big decrease, mostly due to price investment in high-end markets, second facing a difficult market and which will be discontinued by the end of the year to conclude this has been a part of transition for our group from an environment mostly affected by the pandemic to a progressive normalization we had to deal with some temporary headwinds with the immediate impact of reopening weighing on e-commerce and food retail markets In this context, our business units delivered a good performance and our strategic priorities, which have been clearly outlined and have arguably been shown to be even more relevant, remain the same. In France, our goal is to maintain the high level of cross-stability reached in our bandwidth and get back to growth, building on the strength of our urban and proximity format and the fast development of our home delivery operations. We have unique assets which allows us to build efficient partnerships, the latest example being our groundbreaking deal with Gorillaz. Growth in our food retail operations is expected to come from a combination of several factors in the next few months. The normalization of like-for-like trends in our different banners, an ambitious and efficient expansion plan in convenience format, and the fast transit of our e-commerce operations. Recent trends in Q3 and at the beginning of Q4 confirm that we are moving in the right direction. Of course, these are all profitable channels, and we expect sales growth in the coming months to translate as well into a VTA. We also aim to take full advantage of our unique assets in secular high growth markets, as evidenced again in this quarter. High B2C loyalty and a strong B2B offer for city towns, a unique blend of decentralized energy transition services for Brunello, and a wide offer of state administration and retail tech services for relevancy. These three companies started as small in-house operations and now operate at a global scale. Finally, regarding our lifetime operations, we have high confidence that the recent deal announced in Latin America will generate significant value both for our site and CPA, while Exito should continue to deliver at the forefront of the omni-channel transformation of retail. With the right levels of success still in place, we stand ready to continue to execute on our strategy and strengthen our leading positions in the coming months and quarters. Thank you for your attention, and I'm ready to take your questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. So it's 01 on your telephone keypad. First question is from Mr. Arnaud Joly from Société Générale. Sir, go ahead.