Castorama France

June 2008

2

The History of Castorama …

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100110120130

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Castorama actual

7

15 Briker

1992

1969 1971

197720 stores

Castorama + storestransferred to BD

32 stores transferred to BD

Number of stores

Brico DépotPoland

Italia

3

A winning concept until the end of the 90’s,which no longer fits the market in 2002

Historic Strengths

Brand image• Strong brand awareness : legitimacy (as a

pioneer, a leader), seriousness• Still leader in overall “Brand Capital”

Communication • Remember ‘Chez Casto, y a tout ce qui faut’

(‘At Casto’s, there’s everything you need’)

Range / Products /Prices

• Leader in Hardware• Leader in Gardening• Competitive in Building• Wide range of products• Quality

Stores / Merchandising

• Fast development• International development

Consequences

• Masculine & technical identity• In a market undergoing ‘feminisation’ and

tending towards decorative & showroom

• Has not followed the evolution of the clientele, which has moved on from just ‘home repairs’ to ‘home improvement projects’

• Weaker Decorative• Weaker Showroom

• Lack of clarity in the structure of the ranges• Bad price positioning

• Heterogeneous store portfolio• Lack of investment and maintenance

4

In this context, in 2003, it was decided to change our way of running the business …

Use the strength of the Castorama brand and its know-how

Take into account the market evolution and customer trends :Development of a more feminine market (decoration, showroom)Development of discount retailers (reinforce price issues since 2002)

Transform the business model and reposition Castorama :PriceOfferOrganisationEconomic model

In order to not simply regain lost ground but move forward and become again a brand of reference on the home improvement market

5

… beginning a major and ambitious transformation programme…

6 strategic main lines :

3 phases :

1 aim :

Revenues

Price

Store Investment Programme

Evolution of Products and Services Offer

Productivity

Efficiency

Supply Chain

CPR

Structuring the organisation, the teamsRe-acquisition of the basics through strong actionsAdjustment, optimisation and continuity

Launch ambitious medium/long term projects while upholding business performance versus 2002

6

… needing a high level of investment …

Efficiency

Supply Chain

Price

Range

Store Investment

CPR

Redefine principlesand organisation design

Return to basics / High Investment

Improvement /Return

on Investment

INVESTMENT

RETURN

2003 2004 2005 2006 2007

7

… while upholding business performance

Price

1st on the DIY Traditional players

>€100mil investment Product Offer

40% families of product renewed

< 50% turnover100% stores = ‘A range’

Retail Operating Profit

New concept

40% redeployed storesoutperforming sales growth

Property : € 1,2billon

ROP constantly superior to that of 2002

(average growth: double-digit)Organisation

88%

12%3%

97%

2002 2007

+36%

€/F

TE/€

per w

orke

d ho

urs

Supply Chain

x2 of m² (eg. Chatres 60 000m²)Direct from 58,2% to 50,1%New cross-dock warehouses

IT roll out

8

The first results of the strategy are obvious

6,0%

10,7%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Market

Castorama

June-Oct.

4,4%2,5%

Oct.- Jan.

4,6%0,6%

Fev.-May

7,8%5,8%

> > >

Castorama CSMarket

Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Fev-08

9

Price A necessary investment, a rapid image improvement

Strong price focus:Entry price productAggressive promotionsCheck on competitors

CPR development

Range restructuring:Definition of rangesPrice scalesLaunch of catalogues

Margin optimisation:Own brand developmentLocal price promotionsNew pricing tool

2003 2004 2005 2006 2007Redefine principles

and organisation designReturn to basics / High Investment

Improvement /Return on Investment

Third traditional DIY player on pricesA convincing price position to be maintained

10

Price A necessary position to maintain

BASIC DRIVER

BONUSSECONDARY

Price

Price

Positive Impact

NegativeImpact

11

But price is simply not enough to make the difference in the market…

It is the performance of the economic model that will make the difference between retailers :

Free up resources in order to invest in price positioning Develop key business to generate margin

12

… which confirms the relevance of the strategic range programme

Define strategies and align organisation:

Redefinition of Product strategies (GPS)Clarification of head office and store responsibilities

Build the offer and begin roll out:

New product hierarchyMarketing principlesABC rangeBlueprints and planogrammes1st range reviews

Range roll out and optimisation:

ABC range in stores Performance analysisOptimised range review

2003 2004 2005 2006 2007Redefine principles

and organisation designReturn to basics / High Investment

Improvement /Return on Investment

13

Offer A driver to accelerate performance

BASIC DRIVER

BONUSSECONDARY

Product Product

Positive Impact

NegativeImpact

14

Two main axes to develop offer

1. Offer modernityFeminisationStyles and storiesFrequency of range renewalsSustainable development solutionsNew technologies

2. Easy access to offerPriceSelf-serviceSales supportsOwn brand

15

OfferImproving the legibility of the offer through Own Brand

OB Core

OB SelectionPrice Price

QualityNew : April 2006QualityOld : April 2005

1st Price

Own brand sales are increasing

Profitability is better with own brand products

Coverage of all levels of price scales

16

OfferClarification of Own Brand territories

Categories 1st Price OB Core OB Selection Brands

DecorationWall, floor, windowsLighting, panelling

Interior showroomBathroom, kitchen, storageInternal carpentry

Comfort ProductsHeating, airconditioningWater & air treatmentAutomation, security

Exterior showroomGarden furniture, swimming pool, barbecue, lighting, external fit out

ToolsHand tools, garden tools

Power toolsHandheld drills, motorised gardentools

Supp

lier B

rand

s

17

OfferDevelopment of brand legitimacy : the example of paint

Range restructuringBrand creation and repositioningRedefinition of Merchandising

Feb-May 06 June-Sept. 06 20 07

SalesAverage transaction valueFootfallAverage selling price

18

OfferSuccessful repositioning : the example of wooden flooring

2004 : Aggressive price positioning

Avg Price of goods sold :

-24%

Laminate

Quantity :Sales :

Margin :

2005 : Range restructuring

Parquet

Avg Price of goods sold :

+11%

Quantity :Sales :

Margin :

2006 : Range restructuring

Parquet / Laminate

Avg Price of goods sold :

+4,3%

Quantity :Sales :

Margin :

Create footfall and legitimacy Develop the business Trigger leadership

19

OfferAcceleration of the frequency of changes : the example of curtains

2005 : Aggressive price positioning and range structuring

2006/07 : Increase frequency of range reviews

2 collections a year

Range optimisation

Through homogenous merchandising

Continue development of Direct Sourcing

Curtains

Avg Price of goods sold : -9%

Quantity :Sales :

Margin : 2003 2004 2005 2006

Sales

Margin

Quantity

Create footfall and develop business on key categories

Reinforce legitimacy of the whole department

20

OfferStyles and stories

21

OfferStyles and stories

22

Histoire Contemporaine

23

Histoire Technicolor

24

Histoire Charme

25

Histoire Authentique

26

Sustainable developmentFrom behaviour to business

BASIC DRIVER

BOOSTERSECONDARYSustain.Devlpt

Sustain.Devlpt

89% of French people feel concerned€7,5Bil spent by customers on energy saving productsNew European legislation

Environment preservation

Energy savings

Origin

Health risk

Base : customers who buy

DIY products (100% ) = 970

Quality of the product

Price

Promotion

97%

94%

93%

84%

83%

80%

39%

Total: important

Source : Audirep jan 07, IFOP may 06

Sustain.Devlpt

Positive Impact

NegativeImpact

27

OfferSustainable development : From behaviour to business

Develop partnership

Develop products

Co-label : 1700 products

28

OfferSustainable development : From behaviour to business

R&D and advice

Communication

+2008 : New catalogue

29

OfferSustainable development : better communication

Visuel maison Eco + aide au choix

30

OfferSustainable development : better communication

31

Store revitalisation programme :4 new stores, 16 relocations and 13 revitalisations since 2003

2003 2004 2005 2006 2007

% roll out 3% 13% 24% 33%

19.0

12.9

40%

Average age if no action 16.0 17.0 18.0 20.0

Average age of Casto portfolio 15.4 14.7 13.3 12.4

32

Economic modelCost reduction to sustain the transformation

Evolution of the € / FTE / worked hours

€pe

r w

orke

d ho

urs

2nd

targ

et a

gree

d in

200

5

Practical training …

84%

16%

48%

16%

52%84%

3%

97%

68%

32%

+36%

% of stores20042002 2005 2006

48,5% 53,0% 53,7% 55,2% 56,9%

% staff available for customers

2003

88%

12%

2007

58,2%

E-learning …

Staff costs 2007 < 2002 in €mil+9,7pts of staff available for customers

33

Change CurveSerenity

LucidityBlindness

Concern

Phase 1 : 2003Hénin

Phase 2 : 2006 Englos

Phase 3 : 2008La Défense

34

La Défense : Stakes and first lessons

35

4 million inhabitants150 000 business centre staff 55% of medium & superior socio-professional groups

36

9500 m² on two levels in the ‘4 Temps’ Shopping Centre

200 staff

153000 till receipts in 2 months

37

The stakes of the store at La Défense

1. A question of image for Castorama and the GroupClientsSuppliersPress

2. A commercial stakeInvent a new store organization to correspond to customers projectsBoost sales through a cross-disciplinary offerGive a unique buying experienceSimplify access to the product ranges

The store at La Défense is a new step of the evolution of

38

Image of Castorama and the GroupSuppliers’ Conference

384 people

For 84% of them, this conference met their expectations

A conference, which gave a new image of Castorama on The evolution of the store concept Its vision of the marketIts role

39

Image of Castorama and the Group Press Conference

115 journalists of whichAll the Home specialistsLes EchosLe FigaroLe ParisienLibération…

40

Image of Castorama and the Group Effect in the Press

60 so far

Many effects: TV, written press, radio

41

The stakes of the store at La Défense

1. A question of image for Castorama and the GroupClientsSuppliersPressAnalysts & Investors

2. A commercial stakeInvent a new store organization to correspond to customers projectsBoost sales through a cross-disciplinary offerGive a unique buying experienceSimplify access to the product ranges

42

Invent a new store organization to correspond to customers projects

From a store organised by department …

… to a store organised by project

43

Organization of our offer according to the customers’ projectsI find the light!

National rankingTurnover (tax inc.)

LA DEFENSE 1X 3Avg in France

1st product family of the store : 5 % of total Turnover

44

Organization of our offer according to the customers’ projectsI set up my workshop

National rankingTurnover (tax inc.)

X 2,2LA DEFENSE 2

Avg in France

45

Organization of our offer according to the customers’ projectsI maintain my house

National rankingTurnover (tax inc.)

X 3LA DEFENSE 1

Avg in France

46

Boost sales through a cross-disciplinary offerDeco Story corner

Turnover (tax inc) : 5,5 % of the Decor Turnover

2,2 % of the store turnover

47

Boost sales through a cross-disciplinary offerBathroom accessories

National rankingTurnover (tax inc.)

X 2,8LA DEFENSE 1

Avg in France

48

Boost sales through a cross-disciplinary offerOrganise products per style : Frames

National rankingTurnover (tax inc.)

X 4,9LA DEFENSE 1

Avg in France

49

Boost sales through a cross-disciplinary offerOrganise products per style: Textiles

National rankingTurnover (tax inc.)

X 4,2LA DEFENSE 1

Avg in France

50

Give a unique buying experience A store which puts products in their global project

51

Give a unique buying experience A pleasant store

Dynamic visual communication

Olfactive Merchandising

Musical background

Coaching

52

Give a unique buying experienceA store which supports the customer

53

Simplify access to the product rangesSustainable development

«The Eco House», a sustainable development

message, through product offers in every

department of the store

54

Simplify access to the product rangesElectric Bulbs

National rankingTurnover (tax inc.)

X 2,6LA DEFENSE 2

Avg in France

55

Simplify access to the product rangesMultichannel – Web Site - Desks

Castorama France

June 2008