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Continued Strong Results for Couche-Tard

LAVAL, Quebec -- It was another record-setting quarter for Canadian c-store operator Alimentation Couche-Tard Inc., as the company reported its results for the 12-week period ended July 17, 2005.

"We are very pleased with the achievement of this strong performance. We are particularly pleased with the increases of 9.6 percent in our merchandise and service revenues, of 10.5 percent in related gross profit and of 13.5 percent in the motor fuel volume in our U.S. markets,” said Alain Bouchard, president and CEO. “These results reflect our efforts in improvements to our in-store marketing and merchandising and the selective competitive pricing in our motor fuel business. We generated cash of US$42.1 million after investing US$33.1 million in fixed assets and ended the quarter with US$294.8 million in cash and cash equivalents. We have started fiscal year 2006 in a strong position and we expect to continue these efforts throughout the year."

During the quarter, Couche-Tard experienced further increases in the retail price of motor fuel in its U.S. markets, primarily attributable to the volatility in the world prices for crude oil. The average retail price of motor fuel in its U.S. markets amounted to $2.18 per gallon for the 12-week period ended July 17, compared with $1.92 per gallon for the same 12-week period a year ago.

Although the motor fuel gross margins can be volatile quarter to quarter, they generally average out to more normal levels on an annual basis. For each of the four quarters commencing in the second quarter of fiscal 2005, motor fuel gross margins for the company-operated stores in the U.S. markets stood at 12.44 cents, 16.30 cents, 11.26 cents and 14.86 cents per gallon respectively -- with an average of 13.90 cents per gallon for the year ended July 17, 2005, compared with 14.30 cents per gallon for the previous twelve month period ended July 18, 2004 (including Circle K's historical

Motor fuel gross margin in the company's U.S. markets was 14.86 cents per gallon for the first quarter this year compared with 16.24 cents per gallon for the same period last year. If the motor fuel gross margin for the first quarter this year was the same as for the same period last year, motor fuel gross profit would have been approximately $6.2 million higher.

For the 12-week period, Couche-Tard achieved revenues of $2.18 billion, compared with $1.83 billion for the same period in fiscal 2005, an increase of 19.1 percent or $347.7 million. The company recorded 76.2 percent of
its revenues in the United States, essentially the same as 76.3 percent in the first quarter last year.

In the United States, revenues totaled $1.66 billion, an increase of 18.8 percent, or $263.1 million. Growth of same-store merchandise revenues was 5.6 percent over the same period last year. The growth of same-store merchandise revenues reflects the efforts to increase revenues and gross margins through price optimization, changing product mix, the results from investment in Store 2000 Concept and the increase in tobacco tax with the resultant increase in the selling price of tobacco products. This growth is slightly below last year, reflecting the different stages of execution of the various programs, including price optimization strategy, in Couche-Tard's U.S. divisions. The growth of same-store motor fuel volume of 10.3% reflects the positive impact of certain pricing strategies adopted, particularly in the southwest markets.

"With the integration of Circle K operations successfully completed last year,” Bouchard said, “we are focused on our priorities as set out in our last annual report -- namely to invest in our existing store base, adding approximately 400 stores with our Store 2000 Concept, approximately 60 QSRs and approximately 100 new store locations through new store development and small acquisitions.

“Additionally, we will also focus on executing our plans for improvement to sales and margins through a variety of actions, including price optimization. With the successful integration of Circle K behind us and considering our strong financial position, we will seek out a larger-scale acquisition opportunity and, as stated previously, we will continue to assess the possibility of participating in the development of the Circle K network of international licensees," he said.

In other news, the company signed a master franchise agreement for the Circle K Brand with a subsidiary of Grupo Kaltex, S.A. de C.V. (Kaltex), a Mexico-based company. The agreement provides for the opening of 250 Circle K stores in the next five years throughout Mexico.

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