Report on the Financial Situation of Migros Group
Income Trend (Sales Trend)

The activities of the regional Migros Cooperatives, the Federation of Migros Cooperatives and the services of the Group’s logistics companies are combined in the strategic business unit Cooperative Retailing. The ten regional Cooperatives generated income of CHF 14.5 billion. This represents a decrease of CHF 505.3 million or 3.4% less than in the previous year. With negative inflation of 3.9%, this corresponds to real growth of 0.5%. At 15.2%, the market share is slightly below the previous year (15.4%). The decline in income for the supermarkets was 3.7%. While sales volumes were slightly higher than in the previous year, price reductions across the entire product range had a negative effect on sales. The effects of shopping tourism as a result of the exchange rate between the euro and the Swiss franc as well as increasing competition can also be clearly felt. Migros offers the best value for money as constantly confirmed by independent sources. Prices in the Fresh Produce segment were 4.4% lower, Meat retailing prices were down by an average of 3.6% and Fruit/Vegetables were 9.8% cheaper than in the previous year. According to the FSO, the increase in the cost of living in Switzerland was 0.2%. Specialist markets generated income of CHF 1.4 billion, 2.9% down on the sales figure for the previous year, despite a decline in prices of 4.4% on average. As every year, the regional Cooperatives ensured that sales areas remained attractive and customer-oriented by means of substantial investments in new or expanded stores. The weighted sales area increased by 2.2% over the previous year, while weighted area productivity decreased by 5.4% due to the decline in prices and the increase in sales area. With sales of CHF 204.3 million, retailing operations of the Migros Cooperatives abroad increased by CHF 3.0 million, despite unfavourable exchange rate effects. Sales in the local currency increased by 12.9%. Migros had one extra store abroad in 2011 (total: 8 stores).

The strategic business unit Commerce mainly includes the retail companies Denner, Migrol, Magazine zum Globus, Interio, Ex Libris, Office World and Le Shop as well as Depot (Gries Deco Group) as of 1 January 2011. The overall difficult market situation is also affecting retailers. The rise in income of CHF 302.5 million to CHF 6.4 billion is due to the full integration of Depot and Migrol (rising fossil fuel prices). Denner posted income of CHF 2'784.2 million in 2011 and reported real growth of 1.7%, adjusted for the effects of inflation. In nominal terms, however, zero growth was recorded. Denner was therefore able to further consolidate its position as the third largest Swiss retailer and increase customer numbers in the fiercely contended discount business (+2.0%). Denner reduced the prices of some 775 products; this corresponds to more than 40% of the entire range. Migrol posted another slight drop in sales of combustibles and fuels in cubic metres. The decline of 4.3% can mainly be attributed to the closure of six petrol stations. Migros maintained its market share. However, the significantly higher costs of fossil fuels resulted in sales of CHF 1'766.7 million, an increase of 3.7%. The «Depot» (Gries Deco Group) was able to clearly extend its market leadership in the area of home accessories. With almost 100 new stores opened in Germany and Austria, the company was once again one of the strongest growing non-food concepts in German-speaking countries in 2011. Sales rose by more than 35% to EUR 215.6 million. In like-for-like terms, Depot posted a pleasing 6.0% increase. The expansion of the new convenience shop format migrolino in the 2011 financial year went much more smoothly than in the previous year: At the end of the 2011 financial year, 174 migrolino shops were in operation, 14 more than in the previous year. These include 39 (+4) stand-alone stores, 81 (+8) Migrol-migrolinos and 54 (+2) Shell-migrolinos. The new format is generating pleasing sales. In the 2011 financial year, work focused, in particular, on pooling logistics activities at the logistics centre in Suhr. At CHF 788.1 million, Magazine zum Globus AG recorded a fall in sales of 2.0% (adjusted for Service Centre sales). The further strengthening of the modern ranges and the expanded brand range in women's fashion once again resulted in increased sales. Globus achieved the highest growth in this product category, with a rise of 4.3%. The Männerwelt concept (everything a man needs – clothes, accessories, shoes and perfumery) has proven a success at Herren Globus and is very popular with customers. In the 2011 financial year, the stores in Baden and Zug were refurbished and upgraded in line with the new concept, at a cost of over CHF 2.9 million. At CHF 168.7 million, Ex Libris posted income which was 11.4% down on the figure recorded in the previous year. In a very competitive market, due especially to aggressive online competition from abroad, market shares were gained, but the low EUR/CHF exchange rate, among other things, resulted in quite considerable negative inflation on the range which reached double digits. As Switzerland's biggest online supermarket, Le Shop preserved the record sales of the previous year, posting revenues of CHF 149.5 million and moving into profit. Following a good first half of the year, however, growth in the difficult retail climate slowed sharply during the second six months of the year. The option to order via iPhone was once again an important growth driver: 11% of all orders were placed using mobile end devices in 2011. Le Shop made deliveries to 106'000 households in 2011. The average order value continued to remain high: Le Shop customers spent an average of CHF 235 per order. In a conventional supermarket, the average order value is around CHF 31.

The strategic business unit Industry & Wholesaling includes 14 highly productive industrial companies in Switzerland, three foreign enterprises and two wholesalers, Scana Lebensmittel AG and Mérat AG. Despite considerable price decreases and negative foreign currency effects, income in this segment was kept in line with that of the previous year. Real growth amounted to 2.8%. Within the Migros business, M-Industry passed on productivity increases and the currency-related more favourable purchase prices in the form of lower prices. However, the increases in volume were unable to compensate for the fall in prices, which is why sales declined by 0.9%. Sales with Denner, Le Shop and migrolino performed above average. Pleasing growth of 6.8% was posted with Swiss third-party customers other than Migros. This is one result of the greater efforts made since last year to develop value-added concepts for gastronomy and large-scale industrial consumers, and to expand the requisite distribution. International business grew by 15.0% on a currency-adjusted basis. The currency performances of the euro, the British pound and the US dollar compared to the Swiss franc had a substantial effect on the result, yet growth in Swiss francs was 3.6%. On a currency-adjusted basis, export business advanced by 12.4%, while foreign companies reported an increase, in local currency, of almost 30%.

Despite price decreases of 2.8%, the industry segment of meat, fish and poultry was the domestic growth driver with sales rising by 2.6%. The catering business once again performed positively. The near food industry segment suffered greatly as a result of unfavourable exchange rates, resulting in a 5.6% fall in sales. In local currencies, clear growth was recorded at the UK location in particular. The innovative biochemistry arm, which continues to promise good opportunities for growth in the future, developed positively.

Foreign currency developments, the massive slump in the travel market in Arabic countries following the Arab Spring and reduced capacities shaped the business volume of the strategic business unit Travel unit during the reporting year. Following the lack of snow in winter 2011, the skiing holiday business in the UK, which was expanded in May 2010, was unable to offset these influences. Sales of the Hotelplan Group fell by 6.4% to CHF 1'408.7 million in 2011. Passenger numbers, however, rose by 3.6% to more than 1.3 million.

The strength of the franc caused a reduction in sales of CHF 80.0 million or 5.4%. At Hotelplan Italy and Hotelplan Suisse, the decline in sales due to the impacts of the Arab Spring amounted to approximately CHF 47 million. At Hotelplan Suisse, capacities in the area of long-distance travel were reduced and average sales prices recorded another fall. The areas of business travel and retailing recorded good results, whereas conventional tour operating suffered given the circumstances. In Italy, poor consumer sentiment and the restructuring measures carried out also had a negative impact on the sales of Hotelplan Italy. Capacity at ski tour specialist Inghams was cut significantly, especially to Canada. The UK ski tour business, which has expanded since May 2010, posted growth of GBP 32.0 million, despite the poor winter in 2011, reductions in capacity and the weak British pound. The online provider Travelwindow again grew sales strongly in the reporting year, already doubling sales in Austria in the first year following its launch. In autumn 2011, travel.se also commenced operations in Stockholm. Interhome, the leading agent for quality holiday homes, posted a drop in sales, caused primarily by the weak euro. In Russia, Ascent Travel increased sales amid an extremely competitive market climate but was unable to maintain its margins. Despite the rise in sales, the company generated a lower gross profit. Under the management of Hotelplan, Hotel Riviera Beach Club in the south of France last year generated sales matching the level of the previous year.