Couche-Tard to Makeover More Than 400 Stores

Published in CSP Daily News

Continues expansion of fresh-food focus

LAVAL, Quebec -- With half its 2012 fiscal year complete, Alimentation Couche-Tard yesterday outlined two primary goals for the remaining six months: integrating the more than 430 stores it has purchased recently into the chain's network and also continuing to expand on its commitment to fresh food.

"Couche-Tard intends to continue to focus its resources on the sale of fresh products and on innovation, including the introduction of new products and services, in order to satisfy the needs of its large clientele," the company stated in its quarterly earnings report yesterday.

“We will pursue our strategy aimed at maintaining our client base and improving the current trend in same-store merchandise sales while continuing to grow our fresh-food offering,” said Raymond Paré, vice president and chief financial officer.

He added, “We believe that the outlook for the second-half of the fiscal year is quite positive as we should benefit from the integration of our recent acquisitions,” which the company believes "should contribute to the increase in its sales and earnings significantly over the upcoming quarters.”

Net Earnings

For its second quarter, Couche-Tard reported net earnings of $113.5 million, up $5.3 million or 4.9% from the comparable period of last fiscal year. The increase is mainly attributable to the drop in financial expenses, to the increased contribution of merchandise and service sales, to the strengthening of the Canadian dollar, to the company’s management of its expenses, as well as the corporation’s lower effective income tax rate.

These items were partly offset by the slight decrease of the contribution of motor fuel sales net of expenses related to electronic payment modes.

“Consumers continue to be very price-sensitive, forcing us to maintain promotions on certain products to protect traffic, which we successfully have done since the beginning of the year,” said president and CEO Alain Bouchard. “Of course, this puts pressure on our margin percentage. But our teams have shown skill and the growth of same-store merchandise sales more than compensated for the decrease in our margin percentage.

“Once again, we were able to deliver an increase in earnings even though motor fuel margin net of expenses related to electronic payment modes has decreased.”

He added, “A more significant impact on earnings is the improvement of same-store merchandise sales in both Canada and the United States compared to the last quarter, which is that much more encouraging when you consider that the upcoming quarters should benefit from the incremental contribution of the stores we have recently acquired or that we are about to integrate.”

During the first half of fiscal 2012, Couche-Tard purchased more than 400 convenience stores, mostly in the United States. This includes 322 Southern California stores purchased from ExxonMobil in June. Deals announced since then include:

  • In September 2011, Couche-Tard signed an agreement to acquire 11 company-operated stores operating in North Carolina. Closing is scheduled for December.
  • In October 2011, Couche-Tard signed an agreement to acquire from Dead River Co. 19 company-operated stores operating under the "Dead River Convenience" banner in Maine. Closing is scheduled for December.
  • On Oct. 13, Couche-Tard acquired from Chico Enterprises Inc., 26 company-operated stores operating in the Mid-Atlantic area of the United States.
  • In early November, through its RDK joint venture, the corporation acquired from Supervalu Inc., 27 stores operating in the Chicago area, plus two vacant land parcels.
  • On Nov. 16 and 17, Couche-Tard acquired from ExxonMobil, 33 company-operated stores operating under the "On the Run" banner in Louisiana.
  • Also, during the second quarter of fiscal 2012, the corporation acquired seven additional company-operated stores through distinct transactions for a cumulated total of eight stores since the beginning of fiscal 2012.

Operating Results

Revenues amounted to $5.2 billion in the second quarter of fiscal 2012, up $1.0 billion, an increase of 24.2%, mainly attributable to an increase in motor-fuel sales due to a higher average retail price at the pump, to acquisitions, to the stronger Canadian dollar as well as to the growth of same-store merchandise and service sales in the United States and Canada. These items contributing to the growth in revenues were partially offset by the decrease in same-store motor fuel volume in Canada.

“Motor fuel sales volume remains a challenge considering the persistent economic uncertainty and the high price of the product,” Pare said. “Our performance in the United States is noteworthy when one considers that most market indicators seem to point to a decrease in motor-fuel consumption. As for the decrease in same-store motor fuel volume in Canada, we have nevertheless improved our gross margin per liter. Total volume for the quarter is up by 1.7% and we are working on strategies aimed at improving the trend in same-store motor-fuel volume.”

For the first half-year of fiscal 2012, revenues grew by $2.0 billion, an increase of 24.1% compared to the first half-year of fiscal 2011 for reasons similar to those mentioned for the quarter.

More specifically, the growth of merchandise and service revenues for the second quarter of fiscal 2012 was $68.0 million or 4.6%, of which approximately $23.4 million was generated by a stronger Canadian dollar. As for internal growth, same-store merchandise revenues increased by 2.5% in the United States and 3.3% in Canada. For the Canadian and U.S. markets, the variance in same-store merchandise sales is attributable to Couche-Tard’s merchandising strategies, to the economic condition in each of its market, as well as to the investments made to enhance service and the offering of products in the its stores.

Laval, Quebec-based Alimentation Couche-Tard Inc. is the leader in the Canadian convenience store industry. In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum Corporation or not) in terms of number of company-operated stores. As of Oct. 9, 2011, Couche-Tard had a network of 5,715 convenience stores, 4,107 of which include motor fuel dispensing. The network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia, and four in Canada covering all 10 provinces.