Fitch Rts Controladora Comercial Mexicana 'BBB-'.

Business Editors

CHICAGO--(BUSINESS WIRE)--April 15, 2003

Fitch Ratings has assigned Controladora Comercial Mexicana, S.A. de C.V.'s (CCM) foreign and local currency senior unsecured ratings a 'BBB-'. The ratings apply to CCM's proposed issuance of $100 million senior unsecured notes, proceeds of which will be used to refinance existing debt. Fitch Ratings has also affirmed CCM's national scale ratings of 'AA(mex)'. The Rating Outlook is Stable.

CCM's ratings are based on the company's competitive position in the Mexican food retail industry, multiple format strategy and financial profile. CCM is the second largest Mexican food retailer in terms of revenues and has a market share of approximately 5% in a highly fragmented industry. Close to 80% of the company's selling space is located in Central Mexico (which includes Mexico City).

CCM has implemented several strategic initiatives designed to improve the company's long-term competitive position as the Mexican retail industry continues to evolve. In recent years, incumbent food retailers such as CCM have faced increased competition from Wal-Mart de Mexico, which has the largest domestic market share position. In addition, hypermarkets are replacing supermarkets as the format preferred by the majority of Mexican consumers. In response to these market trends, CCM has modified its product pricing strategy from deep discounts on targeted products to 'Everyday Low Prices.' In addition, CCM continues to focus on growing its larger store formats. CCM is expanding its Mega hypermarket format by opening new store locations and converting several of existing Comercial Mexicana supermarkets to Mega hypermarkets.

The recent acquisition of Auchan's Mexican operations, which include five hypermarkets, further augments CCM's market position in the hypermarket segment. CCM continues to open new locations of its Costco warehouse membership stores, which operate under a joint venture with U.S.-based Costco Wholesale Corp. CCM is also seeking to increase the efficiency of its distribution system by building a new centralized distribution center, which is expected to become operational by mid-2003.

CCM's strategic initiatives are expected to reverse the company's negative same store sales trend during the past two years. CCM's same store sales declined by 3.3% during 2001 and 10.3% during 2002. The large decline in same store sales during 2002 was primarily due to an initial large drop in customers as CCM changed its pricing strategy to 'Everyday Low Prices' during the second quarter 2002, and to a lesser extent due to the weak economic environment and increased competition. The same store sales trend has gradually improved since the second quarter 2002 as the new pricing strategy has attracted a stronger customer base. As a result, same store sales are expected to be slightly positive for 2003 as a whole.

CCM owns more than 75% of its current store locations and has acquired a portion of land sites targeted for future new store developments, which provides a competitive advantage in highly-concentrated areas such as Mexico City. Over the past several years, CCM has increased total selling space by an annual average of approximately 6% to 7%. Capital expenditures of $130 million in 2000, $125 million in 2001, and $72 million in 2002, were financed with internally generated cash flow. Going forward, CCM is expected to continue to open new stores at a similar pace. CCM's capital expenditure program is budgeted at $130 million for 2003 and will be financed with cash flow. Therefore, debt levels are expected to remain stable.

Despite negative same store sales over the past two years, CCM's credit-protection measures remain solid. EBITDA/Interest was 6.9(x) and EBITDAR/interest expense plus rents was 4.0X in 2002. CCM had $184 million in debt at 12/31/02. CCM is planning to issue $100 million senior unsecured notes, which will be used to refinance existing debt including $85 million senior unsecured notes due 2005 and a $15 million short-term bank loan. CCM's other debt components are a $30 million bank loan and $54 million peso-denominated debenture bonds. CCM's liquidity risk is low since it has no large upcoming maturities and $83 million in cash balances at 12/31/02.

CCM is a Mexican food retailer with sales revenues of $3.1 billion in 2002. At year-end 2002, the company operated a total of 170 stores, the majority of which are located in Central Mexico (which includes Mexico City). CCM operates five store formats: Comercial Mexicana, a service-oriented supermarket; Mega, a hypermarket, Bodega, a value-priced supermarket; Sumesa, a value-priced neighborhood supermarket; and Costco, a membership warehouse. In addition, CCM operates a chain of 55 family-style restaurants under the name Restaurantes California.