Couche-Tard Maintains Same-Store Sales Growth Despite Lower Traffic

LAVAL, Quebec — One year after the COVID-19 pandemic began, Alimentation Couche-Tard Inc. continues to see solid results. Although traffic remained soft during its latest quarter, Circle K's parent company reported increased basket size due to trip consolidation, adapted product offerings, and new shopping options.

"Same-store sales growth was 2.9 percent in the U.S., 4.7 percent in Canada, and 2.8 percent in Europe and other regions as our customers continued to visit our convenient locations for their everyday needs," Couche-Tard President and CEO Brian Hannasch reported during the retailer's fiscal 2021 third-quarter earnings call, held last month. 

"In our fuel business, we achieved healthy margins despite a persistent increase in product costs during the quarter. Fuel volume results were highly variable with areas of renewed lockdowns showing very soft demand, while other areas strengthened," he added. 

During Q3, the Laval-based convenience store operator pushed forward with its global fuel procurement, pricing analytics and Circle K fuel rebranding efforts. Store-by-store pricing is now in place across nearly 60 percent of its network, and the company continues to expand its work to localize assortments and promotions.

"We continue to believe there is a very large prize to optimize locally," Hannasch said.

Alcohol, packaged beverages and tobacco showed particularly strong same-store sales growth during the third quarter despite renewed escalation of the pandemic's impact on business, according to Hannasch.

Couche-Tard used its loyalty initiatives, Smart Value program, gamification promotions, and a continued focus on its core value proposition to drive store visits.

Network Growth

The company shared several Q3 highlights regarding network growth. 

The retailer completed the construction of 13 new stores and the relocation or reconstruction of 10 sites during the quarter. A total of 61 stores have been built, relocated or reconstructed since the start of fiscal 2021. Another 66 stores were under construction as of Jan. 31. 

During Q3, the company also acquired seven company-operated stores from Pride C-Stores Inc. in Indiana, as well as five single-site acquisitions.

Couche-Tard's biggest international move during the quarter was the Dec. 21 closing of its acquisition of Circle K Hong Kong, a network of 341 company-operated stores and 32 franchised stores in Macau. This acquisition marked a significant milestone by providing a platform in Asia from which it plans to launch regional growth ambitions.

Additionally, while Couche-Tard dropped its bid to acquire French grocer Carrefour SA in mid-January, it has held preliminary discussions on a potential collaboration with Carrefour that could create value for both companies.

As of Jan. 31, Couche-Tard's network comprised 14,227 sites worldwide. In addition to its more than 7,100 U.S. sites in 47 states and more than 2,100 sites in Canada, Couche-Tard operates a broad retail network in Europe across Scandinavia, Ireland, Poland, the Baltics and Russia.

BY THE NUMBERS

Couche-Tard reported net earnings attributable to shareholders of $607.5 million for the third quarter of fiscal 2021. Adjusted net earnings were approximately $622 million, up from $581 million during Q3 of fiscal 2020.

"We maintained solid momentum during the quarter in the face of a challenging environment," said Claude Tessier, chief financial officer. "Our business continued to generate strong cash flows as we stay true to our usual cost discipline and focus on operating efficiency."

Total merchandise and services revenues increased 5.6 percent to $4.5 billion. Same-store merchandise revenues increased by 2.9 percent in the U.S., 2.8 percent in Europe and other regions, and 4.7 percent in Canada.

Company officials attributed this primarily to growth in basket size as customers consolidated their trips, which more than offset continued lower traffic. Approximately $83 million in contribution from acquisitions was also a factor.

Total road transportation fuel revenues were $8.5 billion, a decrease of $3.6 billion compared to the prior year. Same-store road transportation fuel volume decreased by 15.7 percent in the United States, by 10.3 percent in Europe and other regions, and by 19.9 percent in Canada.

"This decrease is mostly attributable to the decrease on fuel demand in relation with the work-from-home trends and increased restrictive social measures due to the COVID-19 pandemic; to a lower average road transportation fuel selling price, which had a negative impact of approximately $1.5 billion; as well as to the disposal of a portion of our U.S. wholesale fuel business," Hannasch explained.

During the quarterly earnings call, company officials also took the opportunity to praise the hard work of its employees at all levels during the past year.

"On the one year anniversary of the pandemic, I want to thank all of our team members, especially those in our stores, for their incredible resilience during these challenging times and for their continued commitment to the business and to making our customers' lives a little easier every day," Hannasch said.

He also commended the many team members who went "above and beyond" during the February winter storms that shut down much of the company's Texas operations.

"With millions without power and water, I'm proud to say that our Texas team worked day and night to keep our stores open, so we can provide essentials to our customers," the chief executive said. "At one point, we had over 50 percent of our stores closed, but were back in full operation within days."