Acquisitions Aid Alimentation Couche-Tard

Same-store merchandise revenues up 3.4% in U.S.

Published in CSP Daily News

LAVAL, Quebec-- For its fourth fiscal quarter, Alimentation Couche-Tard Inc. has announced net earnings of $117.8 million, up $53.3 million or 82.6% from the comparable period of the previous fiscal year. The increase is mainly attributable to the growing contribution of merchandise and service sales, the contribution from acquisitions, higher motor fuel margins, Couche-Tard's management of expenses, a pre-tax gain of $17 million related to the acquisition of Statoil Fuel & Retail and more.

These items, which contributed to the growth in net earnings, were partially offset by the rise in expenses related to electronic payment modes stemming from the higher average retail price of motor fuel, among other factors.

"In light of the fourth-quarter results, I believe we concluded fiscal year 2012 on a very strong note," said Alain Bouchard, president and CEO. "We see positive trends in the quarter that make us very optimistic about fiscal 2013. These are in addition to the strong contribution we expect from our recent acquisitions of Statoil Fuel & Retail. During fiscal 2013, as usual, our North-American teams and now our European teams will focus on what they do best: growth and optimization of operations" (see related story).

In June, Couche-Tard acquired Statoil Fuel & Retail, a leading Scandinavian fuel retailer with more than 100 years of operations in the region. Statoil Fuel & Retail operates a retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania) and Russia with approximately 2,300 stores, the majority of which offer full and convenience products while the others are automated (fuel only) stations.

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In April 2012, Couche-Tard acquired 17 company-operated stores in Maine, from Dead River Co., Bangor, Maine. It also transferred two standalone quick-service restaurants to the corporation. Couche-Tard owns the real estate for 16 sites while it leases the other three sites.
In addition, during fourth-quarter fiscal 2012, Couche-Tard acquired four additional company-operated stores through distinct transactions for a cumulated total of 18 stores since the beginning of fiscal 2012.

In May 2012, Couche-Tard acquired 20 company-operated stores operating in Austin, Texas, from Signature Austin Stores. It leases the real estate for all sites.
Couche-Tard completed the construction of 12 new stores during the 13-week period ended April 29, 2012, for a total of 28 stores since the beginning of fiscal 2012.

Revenues were $6.1 billion in fourth-quarter fiscal 2012, up $1.3 billion, an increase of 28%, mainly attributable to acquisitions, to the increase in motor fuel sales due to higher average retail prices at the pump, to the growth of same-store merchandise and service sales in the United States and Canada.

For fiscal 2012, revenues were $23 billion, up $4.4 billion, or 24%, for similar reasons.

More specifically, the growth of merchandise and service revenues for fourth-quarter fiscal 2012 was $212.5 million or 15.1%, of which approximately $42 million was generated by acquisitions. As for internal growth, on a 12-week comparable basis, same-store merchandise revenues increased by 3.4% in the United States and 5.4% in Canada. In the United States, a cigarette manufacturer modified its supply terms and price structure, at the beginning of first-quarter fiscal 2012 in order to encourage retailers to decrease or maintain low unit prices on certain of its products, which has put a deflationary pressure on the corporation's cigarettes sales. Couche-Tard estimated that excluding tobacco products sales, its same-store merchandise sales in the United States increased by 6.1% on a 12-week comparable basis.

For fiscal 2012, the growth of merchandise and service revenues was $415.4 million or 6.7% for similar reasons, including an increase in same-store merchandise revenues of 2.7% in the United States and 2.8% in Canada on a 52-week comparable basis. Excluding tobacco products sales, the same-store merchandise sales in the United States increased by 5.3% on a 52-week comparable basis.

Motor fuel revenues increased by $1.1 billion or 33.4% in fourth-quarter fiscal 2012, of which approximately $527 million stems from acquisitions. The still fragile economy and higher retail prices at the pump have continued to put pressure on motor fuel consumption, which can explain the weak growth in same-store motor fuel volume in Canada and in the United States which amounted to 0.1% and 0.2%, respectively on a 12-weeks comparable basis.

For fiscal 2012, motor fuel revenues increased by $4 billion or 32.6%, of which approximately $1.1 billion stems from acquisitions. As for the same-store motor fuel volume, on a 52-week comparable basis, it stayed unchanged in the United States while it dropped by 0.9% in Canada. The higher average retail price of motor fuel generated an increase in revenues of approximately $2.4 billion.

The consolidated merchandise and service gross margin grew by $59.4 million or 12.6% in fourth-quarter fiscal 2012. The consolidated margin was 32.8%, a reduction of 0.8% compared with the same quarter of fiscal 2011. In the United States, the gross margin is down 0.7% to 32.8% while in Canada, it fell by 0.7% to 32.9%.

This performance reflects changes in the product-mix, the improvements Couche-Tard brought to its supply terms as well as its merchandising strategy in line with market competitiveness and economic conditions within each market. These margin reductions reflect more aggressive promotions in certain categories to protect store traffic as well as increases in the cost of certain products which Couche-Tard absorbed without passing it on to consumers; however, in terms of absolute dollars, the increase in same-store merchandise sales more than offset the decrease in margin percentage of these products, demonstrating that Couche-Tard's strategies paid off, it said.

For 2012, the consolidated merchandise and service gross margin grew by $109.7 million or 5.3%. The consolidated margin was 33.1%, a reduction of 0.4% compared with fiscal 2011. In the United States, the gross margin is down by only 0.1% to 33.0% while in Canada, it fell by 1.0% to 33.3%.

In fourth-quarter fiscal 2012, the motor fuel gross margin for Couche-Tard's company-operated stores in the United States increased by 2.92 cents per gallon, from 14.06 cents per gallon last year to 16.98 cents per gallon this year. In Canada, the gross margin increased to 5.60 cents (Canadian) per liter compared with 5.01 cents per liter for fourth-quarter fiscal 2011.

For fiscal 2012, the motor fuel gross margin for Couche-Tard's company-operated stores in the United States increased by 1.45 cents per gallon, from 15.54 cents per gallon in fiscal 2011 to 16.99 cents per gallon; however, taking into consideration expenses related to electronic payment modes, the net margin per gallon increased by only 0.81 cents per gallon. In Canada, the gross margin rose slightly to 5.45 cents (Canadian) per liter compared with 5.38 cents per liter for fiscal 2011.

As of April 29, 2012, Laval, Quebec-based Couche-Tard had a network of 5,803 convenience stores, 4,216 of which include motor fuel dispensing, as well as agreements for the supply of motor fuel to 350 independent operator sites. Couche-Tard's network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia (primarily under the Circle K flag), and four in Canada covering all 10 provinces (primarily under the Mac's and Couche-Tard flags).

In addition, under licensing agreements, about 3,990 stores operate under the Circle K banner in nine countries (China, Guam, Hong Kong, Indonesia, Japan, Macau, Mexico, Vietnam and United Arab Emirates). Following its acquisition of Statoil, Couche-Tard also operates a retail network across Scandinavia, Poland, the Baltics and Russia with approximately 2,300 stores.

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