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Couche-Tard Executives Take Pay Cut

MONTREAL -- To control costs in a shaky economy, the senior executives and board of Alimentation Couche-Tard Inc. cut their pay by 10 percent, and the convenience store operator imposed an overall wage freeze, reported The Canadian Press.

The move is expected to save $20 million (U.S.) a year.

The Quebec-based North American convenience store giant expects to continue to face challenges in the United States, which accounts for 75 percent of its business.

“We expect some more tough times to come,” CEO Alain Bouchard told analysts. "Lately, we have seen some progress in Florida, Arizona and California, which are the divisions that have suffered the most, so we're very happy with the performance we have seen in the last few months."

Despite reduced fuel sale volumes in the United States, Couche-Tard's third-quarter profits surged nearly 41 percent to $71.1 million. The company, which reports its financials in U.S. dollars, said its net earnings increased to 36 cents per share for the period ended Feb. 1, compared to 24 cents a year earlier when profits were $50.5 million.

Total revenues decreased 14.8 percent to $3.9 billion, with American fuel sales decreasing 26 percent to $1.98 billion due to falling prices.

Same-store fuel sales increased by 6.5 percent in Canada, but decreased 6.2 percent in the United States.

Couche-Tard benefited from acquisitions, which contributed nearly $500 million to sales, higher merchandise sales, increased fuel margins in the United States and greater fuel sales in Canada.

It also took a $173 million hit from the weakening Canadian dollar.

Fuel margins increased 3.83 cents per gallon to 18.21 cents in the United States. In Canada, they decreased to Canadian $0.0438 per liter from $0.0503 cents in the year-ago period.

Bouchard said he is very satisfied with the results but remains "realistic" about the difficult economic situation in the United States.

"Despite this overall satisfying performance, we will keep our focus at optimizing our sales and margins and keep looking for cost reductions," he stated.

Although the business is seen as being recession-resilient with the sale of beer and tobacco, Couche-Tard said consumers are increasingly switching to value brands.

Bouchard said the company is in a strong position to make acquisitions as it continues to generate strong cash flows and meets all its bank covenants. It has $100 million in cash and access to $580 million of available credit.

"We would like to keep the advantage that we have today with our healthy financial situation in order to go through this challenging period to continue to be one of the strongest players in our industry."

Analyst David Hartley of BMO Capital Markets told The Canadian Press Couche-Tard has done a good job despite the challenging operating environment.

"I think it's going to continue to be tight, but what we're seeing here is potentially a bottoming on margins and same-store sales growth, and if that's the case, that's great news," he said in an interview.

Hartley added the executive pay cut will be seen positively by the market as management stepping in to share some of the pain.
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