Couche-Tard Moves Past Unsuccessful Hess Bid
LAVAL, Quebec –- Despite suffering a setback stemming from its unsuccessful attempt to purchase Hess Corp.’s 1,256-store retail division, Alimentation Couche-Tard Inc. is in an excellent position to make acquisitions in the near future, President and CEO Alain Bouchard said Monday during the company’s 2014 fiscal fourth-quarter earnings call.
“We are actively looking to acquire stores,” he said. “We have passed on some deals, but discipline is important. Not making particular deals allows us to keep leverage.”
While Bouchard never specifically mentioned Hess during the call, it is highly likely he was referring to that potential acquisition as a deal the retailer opted to pass on. At an event in late May, the CEO acknowledged that Couche-Tard was in the running for Hess' retail assets, which are ultimately being purchased by Speedway LLC, the retail division of Marathon Petroleum Corp., for a total consideration of $2.87 billion.
Raymond Paré, Couche-Tard’s chief financial officer, stressed that despite two recent industry transactions -- most definitely the Hess acquisition as well as Energy Transfer Partners LP’s recently announced purchase of Stripes parent Susser Holdings Corp. -- at prices that were considered high multiples to some Wall Street analysts, deals will still get done.
“Some multiples were [above] our expectations, but deals can be done at reasonable [valuation] levels,” Paré said, adding that Couche-Tard will aggressively seek acquisitions in the United States, Canada and Europe.
A STRONG QUARTER FOR CIRCLE K
Net earnings at Couche-Tard’s Circle K division in the U.S. were strong for the fourth quarter ended April 27, with a couple of exceptions on the fuel side. Total U.S. revenues increased 2 percent during the quarter to $8.95 billion, compared to the same quarter in 2013.
Merchandise and service gross profit in the U.S. was especially strong in the quarter, rising by 6.9 percent year over year to $371 million. A 4.4-percent increase in merchandise same-store revenues was a main driver for the increase, led by fresh food offerings.
On the negative side, U.S. fuel margin gross profit declined 15.6 percent to $159.4 million. “But that tends to normalize on an annual basis,” stressed Bouchard.
Also on the downswing were U.S. gross margins per fuel gallon, which dipped 23.1 percent year over year to 14.85 cents per gallon.
Companywide, Couche-Tard earned a net profit of $145.1 million for its most recent quarter, a 0.9-percent decline year over year. However, for all of fiscal 2014, the Laval, Quebec-based company earned a net profit of $812.2 million, a 41.8-increase year over year.
“It’s the sixth consecutive year we’ve had a strong increase in net earnings,” Bouchard remarked.
As of April 27, the company operated 8,499 convenience stores throughout the world , including 6,234 company-operated sites.
During Monday’s conference call, Bouchard did not discuss his upcoming transition from the CEO role to the chairman role, which will take place Sept. 24 during the company’s annual meeting. At that time, current Chief Operating Officer Brian Hannasch will become CEO. But as a sign of things to come, Bouchard asked Hannasch and Paré to answer all questions posed by analysts during the question-and-answer session.