LAVAL, Quebec — Despite inflationary pressures and high gas prices, Alimentation Couche-Tard Inc. recorded a strong first quarter of its 2023 fiscal year. The company's convenience stores saw "healthy same-store sales," according to President and CEO Brian Hannasch, and "generated robust fuel margins."
"In this period of high inflation and fuel prices, we remain focused on delivering a strong and consistent value to our customers, maintaining cost discipline in our operations, and making progress on our strategic priorities," he said during Couche-Tard's earnings call on Sept. 1.
For the quarter, Couche-Tard reported net earnings of $872.4 million, compared to $764.4 million for the first quarter of its 2022 fiscal year. Adjusted net earnings were approximately $875 million, compared to $758 million for the year-ago period.
Total merchandise and service revenues for the quarter came in at $4.1 billion, an increase of 0.1 percent. Same-store merchandise revenues increased by 3.5 percent in the United States and by 2.8 percent in Europe and other regions, and decreased by 1.3 percent in Canada.
On the forecourt, same-store road transportation fuel volumes decreased by 4 percent in the U.S. and by 3.7 percent in Europe and other regions, and increased by 0.4 percent in Canada. The company reported road transportation fuel gross margin of 49 cents per gallon in the U.S., an increase of 12.25 cents per gallon.
Initiatives & Rollouts
Even in a challenging economic environment, Couche-Tard continues to move forward with several initiatives.
According to Hannasch, its Fresh Food, Fast program is hitting sales and rollout targets, and the company is "seeing very strong double-digit growth in our private label brands as consumers look for value at these times."
"Across the network, our Fresh Food, Fast program continues to grow and drive incremental sales and profit to our stores. Sales of our new chicken items continue to accelerate, and we've launched additional new items into our assortment this quarter," the chief executive said. "We're happy that sampling is back and we've expanded it across all regions as a way to introduce our new products to our customers."
Couche-Tard launched several promotions to drive awareness of the program. "Our operators continue to work hard to improve store execution, allowing us to make notable progress in our food journey and the long-term development of our food culture," he added.
The convenience store operator is also hitting the right notes in the dispensed beverages category. This spring, Circle K teamed up with PepsiCo Inc. for the exclusive release of Mtn Dew Purple Thunder, a new beverage that combines blackberry and plum flavors. To date, the retailer has sold more than 5 million Polar Pop cups containing the exclusive flavor, Hannasch pointed out.
In addition, its U.S. Sip & Save subscription offering continues to drive trips, enhance baskets, and attract new users. The retailer improved its online enrollment experience and doubled online subscribers this quarter.
Circle K launched the Sip & Save beverage subscription program on May 5. U.S. customers can get one daily Polar Pop fountain drink, Froster slushy, coffee or tea of their choice for $5.99 a month.
The parent company of the global Circle K brand is also bringing smart checkout technology to its convenience stores with plans to install 10,000 units in 7,000 stores over the next three years.
Other ongoing initiatives include:
Localized Pricing: Couche-Tard is increasing its focus on customer elasticities in the current inflationary environment, with the goal of improved speed of decision-making and execution of changes to enhance its ability to respond to changing conditions.
Rollout of Assortment Optimization in North America: The company is taking a category-by-category approach across its U.S. business units. "This work will allow us to leverage and learn from our own network to identify top-performing items, get them into our stores more quickly, while conversely spotting trends on lesser-performing items and ensuring they're removed from our shelves more quickly than we have in the past," Hannasch explained.
Circle K Fuel Rebranding: The company's focus during the latest quarter was on ongoing promotions and developing campaigns to raise awareness of the brand, as well as on payment programs to increase ease and provide discounts to loyal customers.
Laval-based Couche-Tard operates in 24 countries and territories with almost 14,100 stores, of which approximately 10,700 offer road transportation fuel. With its Couche-Tard and Circle K banners, it is one of the largest independent convenience store operators in the United States, and is a leader in the c-store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, as well as Ireland. It also has a presence in Poland and Hong Kong SAR.